Principle Behind Concept of General Average - Assignment Example

Principle Behind Concept of General Average Executive Summary The principle of general advantage has been around for many years dating to as far back as 3000 years. The principle states that in an effort to make a vessel to be light, merchandise may be thrown overboard. That which has been sacrificed for the benefit of all, shall be replaced by the contribution of all concerned parties. The use of this law had been associated with claims that were greatly varying. This generated a need to have a standard that guided the application of the law and calculation of the contributions. After consultations, the Glasgow Resolution of 1860 was realized. In 1864 the York Rules were developed and this was followed with the Antwerp York Rules of 1877. The York Antwerp Rules were the first codification of the General Average. The elements of the York Antwerp Rules include a common danger, voluntary jettison and effort to save must be successful. General Average has many applications including in marine insurance. Current issues with regard to the application of the General average relate to Piracy. The bone of contention is whether general average can be applied in a case of piracy. There exist guidelines that categorically state a situation in which piracy can be covered by the general average. History According to Tetley (2000), the principle of GA (General Average) dates to as far back as 3000 years ago. The Rhodian law that was in existence at around this time embodied the principle of general advantage. The principle read in part that in an effort to make a ship to be light, merchandise may be thrown overboard. It goes ahead to state that, that which has been sacrificed (given) for the benefit of all, then, it shall be restored by the contributions of every one. Currently, a record of the Rhodian law is inexistent. The Roman Law is the only source that captures the Rhodian law. The Roman law was captured, expanded and repeated in the Roles of Oleron. The first English decision that has been recorded in reference to the principle of general average was in the year 1799. The first American decision was in 1798 (Tetley, 2000). This was a maritime law concept both in practice and in origin and it had a very restricted application. With time, the evolution of commerce led to the use of general average as a form of marine insurance. There was sharing of losses and risks during maritime ventures. The cargo owner had a right to claim for losses. The ship owner was also allowed to make claims for compensation for the losses that could not be attributed to his fault. The parties made so many demanding claims that varied to a great extent. There was need to develop a standard that would then be utilized while calculating the contribution that each party was to make. This gave rise to the Glasgow Resolution (1860), in 1864 the York rules and the Antwerp/York rules (1877). The York/Antwerp Rules have undergone amendments with the latest amendments having being made in Sydney in 1994 at the general assemblies of the CMI (Comite Maritime International). Definition A General Average Act is said to occur when any extra-ordinary expenditure or sacrifice is reasonably and voluntarily incurred or made in time of peril for a single purpose of saving or preserving the property that is imperiled within the common adventure (CJA Marine, 2005). This essentially means that there may be a need to offload cargo from a vessel that has be grounded in order to keep it afloat. In such case there is voluntary offloading of cargo to reduce the vessel’s weight so as to save the vessel plus the remaining cargo. The cost or the losses that have been incurred by the offloading of the cargo have to be shared among all the concerned parties proportionately. As result, no single individual bears the sole burden of the loss that resulted from the offloading of cargo in order to save the vessel plus the remaining cargo. Essential Elements Although there exist minor differences between nations when it comes to the application of the general average, the general average act is fundamentally consistent across the world’s maritime community. In an effort to provide uniformity in the application of this act, the International Shipping Community found it necessary to create the York Antwerp Rules (Weiss, 2010). The York Antwerp Rules of 1890 were the first codification of the general average. Following this codification the Americans accepted the codification in 1949. The essential elements of the York Antwerp Rules that define the General Average Act include: A common danger: This is a danger that all the concerned parties (cargo, vessel, crew) participate. This is a danger that is considered to be inevitable and the only solution is by incurring the loss of a portion of the cargo in an effort to save the remainder of the cargo plus the ship and its crew. Secondly, in order to avoid the common peril, the peril/danger is transferred from the whole to a specific portion of the whole. In order to this, there is a voluntary jactus, casting away or jettison of a certain portion of the whole for the sole purpose of avoiding the imminent peril. Thirdly, the effort and the sacrifice that has been made in an attempt to avoid the peril must result in the intended purpose. This means that the effort must be successful and result in saving the vessel, remaining cargo and crew (Lex Mercatoria, 2010). General Average Act, Application and Examples Contrary to the belief held by many individuals with regard to the application of the General Average Act, this Act is not just limited to the cases that involve the jettison of cargo nor do the interests that have been sacrificed always have to be cargo. Essentially, it’s the owners of the vessel that seek contributions most of the time. There exists a wide range of expenditures/situations that are extra-ordinary in nature and require application of the general average law and contributions arising from the application of General Average Act being sought by the concerned parties. For instance, in one case a vessel may in danger of sinking and has thus been intentionally grounded. The grounding of the vessel will result in hull damage which in itself is general average. In such a situation, the parties that are involved in the marine adventure will each contribute towards the hull damage. The contribution is often shared proportionately among the concerned parties that include but not limited to the ship owner, the chatterer and other cargo interests. In another example, a vessel that is in distress may be in dire need of the efforts and skills of professional salvors. The salvage award that has been earned by the professional salvors will be shared by all the benefitted parties who were involved in the marine adventure. A ship or vessel may be faced with a danger of bad weather in its course. The owner of the ship in such a case is forced to call a nearby port in an effort to avoid the extremely bad weather. In taking this action, the ship owner incurs certain expenses that are aimed at safeguarding the safety of the ship, its cargo and crew. In such a situation, the concerned parties will all contribute towards the costs incurred by the ship owner as he/she made arrangements to get the ship to dock at a nearby port. The contributions are often determined by the comparison of the value that is associated with an individual’s interest that is on board the vessel and the overall valuation of the marine adventure as a whole (Weiss, 2010). Recently a critical issue has been the center of discussion with regard to the application of the General average Act. Due to the notable increase in the rate of piracy a main question arises. Can the principle of general average be applied to the case of piracy? In a good example, Wong (2009) gives an example of a ship that has been held hostage in the coast of Somalia by Pirates and a ransom is being demanded in order to release the cargo, crew and vessel. In this case can the general average principle be applied? The answer to this lies in the York Antwerp Rules and the Law of General Average. Where cargo is voluntarily given to pirates, the sacrifice made is subject to the contributions under the general average (Wong, 2009). The Law of General Average has also been applied in maritime insurance. In absence of evidence contrary to the contract, if a general average is incurred for the sole purpose of avoiding a specific peril that has been insured against, then the general average contributions and losses can be recovered from the respective marine insurers who are insuring the ship, cargo and freight. It is important to note that extent of the insurers liability for the contributions arising from the general average is the full amount provided the value to be contributed is not in excess of the value of the insured value (Singh, 2011). The Marine Insurance Act of 1909 section 72 fully recognizes the application of the General Average Act. The MIA recognizes the GAA and has given provisions that guide the contributions and payment of contributions with regard to general average (Commonwealth Consolidated Acts, 2007). Summary The general average has been around for many years dating back to the Rhodian Law. The codification of the general average was first done in the year 1949. The Americans recognized this codification in the year 1949. The act has been used by the world maritime community for many years but because of the differences that existed between the countries, there was need to create a standard. The International Shipping Community developed the York Antwerp Rules that were to guide the practice of the general average law. The general average has three elements that guide its application. Firstly, there has to be a danger that is imminent and requires a sacrifice of a part in order to the whole. Secondly, the action to jettison part of the cargo has to be voluntary. Thirdly, the attempt that has been made in an effort to avoid the peril must succeed. There exist various situations that require the application of the general average. The application of general average in marine insurance is a well recognized aspect of general average law and been captured in the Marine Insurance Act of 1909. This act contains provisions that guide the application of general average when it comes to maritime insurance. Conclusion The principle behind the General Average Act, simply put is that the losses that are incurred when an effort is made in order to save the ship from an imminent peril ought to be proportionately shared among the parties concerned. The effort made could include offloading cargo from a grounded ship in order to reduce its weight, hull damage, expenses incurred by a vessel owner in making arrangements for an emergency docking in case there is bad weather in the course of a ship. The parties include the vessel, vessel owner, cargo, crew etc. The elements of the York-Antwerp Rules that define the General Average Act include imminent danger, voluntary sacrifice and a success of the effort made to save the remainder. References CJA Marine Services, 2005.General average-A guide for surveyors.[online] Available at: http://www.cjamarine.com/publications/General%20Average%20for%20Surveyors.pdf [Accessed 15 April 2012]. Common wealth Consolidated Acts, 2007. Marine Insurance Act 1909-Section 72. [online] Available at: http://www.austlii.edu.au/au/legis/cth/consol_act/mia1909170/s72.html [Accessed 15 April 2012]. Lex Mercatoria, 2010. York Antwerp Rules 1994. [online] Available at: http://www.jus.uio.no/lm/cmi.york.antwerp.rules.1994/doc.html [Accessed 15 April 2012] Singh, K., 2011. What are the main types of general average loss. [online] Available at: http://www.preservearticles.com/2012040730020/what-are-the-main-types-of-general-average-loss.html [Accessed 15 April 2012]. Tetley, P., 2000. General average now and in the future. [online] Available at: www.mcgill.ca/files/maritimelaw/genaverage.pdf [Accessed 15 April 2012]  Weiss, A., 2010. General average clauses-Charter party law.[online] Available at: http://sealaw-usa.com/generalaverage.html [Accessed 15 April 2012]. Wong, T., 2009. Piracy does it give rise to a claim for general average. [online] Available at: http://www.seatransport.org/seaview_doc/SV_87/SV_87%20-%20Piracy%20-%20Does%20it%20give%20rise%20to%20a%20claim%20for%20General%20Average%20%281%29.pdf [Accessed 15 April 2012]. Read More