York Antwerp Rules
Abstract
The York-Antwerp Rules (YARs) govern general average cases by reason of being incorporated into contracts of carriage. First instigated by an international conference in York in 1864, their objective is to promote international uniformity in dealing with general average and to make the process involved commercially effective. The Rules are updated periodically under the auspices of Comite Maritime International (CMI), which is made up of national Maritime Law Associations. When the YARs were last updated in 2004 at Vancouver there was, for the first time, a lack of consensus between the main commercial stakeholders regarding many of the changes, with ship owning interests also taking the view that the proposed changes were premature, given that the 1994 rules were only a decade old. The 2004 YARs were therefore incorporated in relatively few contracts of carriage. CMI recognised that the position was unsatisfactory, and at the 2012 CMI Conference in Beijing an International Working Group (IWG) was set up to “carry out a general review of the York-Antwerp Rules and to draft a new set of Rules to meet the requirements of ship and cargo owners and their respective insurers.”
Introduction
The York Antwerp Rules are a set of maritime rules that were established with the aim of ensuring that there are clear guidelines when it comes to the apportionment of responsibility during transportation of cargo. These rules thus outline the responsibility of the ship and cargo owners and the law of averages strikes across when it comes to the apportionment of responsibilities and roles.
Inconsistencies in the realm of uniformity
The uniformity which the York Antwerp Rules seek to address is circumscribed as they do not embrace every angle of general average. The rules have been developed since mid-nineteenth century with a view to removing inconsistencies developed between municipal laws, and for reaching general matters of detail and principle. The York Antwerp Rules 1864, 1877 and 1890 dealt with matters of detail and the latter York Antwerp Rules have enshrined matters of detail and principle simultaneously. The ubiquity of the rules do not require their enforcement as a kind of customary law, specifically since the content is subject to revision and due to the fact that since more than one edition of the rules is used in practice, there exists a gap in uniformity to constitute a current custom. However, the wide recognition is reflected in its frequent annexation in charter parties, bills of lading and marine insurance in standard form clauses and the parties are at will to exercise the right to opt the desired edition of rules necessary to apply to their relationship.
The complexities which arise are three dimensional, the first of which relates to the fact that the parties who consent to be bound by the rules maybe obliged by more than one edition. Then again, the rules that are incorporated by the parties may be amended by them. The final part of this complexity is revealed when different relationship of parties entangled in the same maritime adventure is governed by different versions of the rules. It is a common phenomenon that parties are inclined towards familiar forms rather than undergo risk potential dubiety posed by new ones. A probable solution may be to draft a form with an inbuilt updating mechanism the effect of which is a question of construction.40 But on this account questions may be gathered whether it was updated according to the latest version when the form was drafted, when the contract was concluded, when general average act was accomplished, or when adjustment was made.
The Updated Rules-2016
On 5 May 2016, a new version of York-Antwerp Rules, the contractual regime governing the ascertainment of general average contributions, was settled at a conference convened by Comité Maritime International1. The new rules, entitled York-Antwerp Rules 2016, are the culmination of a drafting process which began in 2012. Having been approved by the shipowners’ association, BIMCO, these rules stand a good prospect of being adopted in place of York-Antwerp Rules 1994, the rules which are at present most commonly incorporated by reference into charterparties and bills of lading. In so doing, York-Antwerp Rules 2016 will fill the gap created by the failure of the 2004 Rules which, whilst promoted by cargo concerns, never found acceptance in the ship-owning community.
In reflection of the efforts made to resolve the controversy between ship and cargo, York-Antwerp Rules 2016 makes few, if any, ‘root and branch’ changes to the principles according to which general average is presently adjusted. Rather, the changes are mostly concerned with improving, from the point of view of both time and expense, the processes by which general average is adjusted and contributions collected, including through the prescription of a strict one-year timebar. In addition, two features of the 1994 Rules which were especially deprecated by cargo as outdated – the 2% commission on disbursements and the 7% fixed interest rate – have now been redressed through abolishing the former and by making the latter variable.
For the first time, the new rules are also accompanied by a guidance document entitled “CMI Guidelines relating to General Average”. These guidelines, which are not intended to be of binding force, provide information as to the basic principles of general average adjustment and the collection of security. They also explain the roles of the average adjuster and the general interest surveyor and, in so doing, seek to set out best practice.
This following summary aims to review the main changes.
Expedition of procedures
Two principal changes have been made with the aim of reducing the time taken in adjusting general average and collecting contributions.
Since 1994, Rule E has afforded the adjuster the power to make assumptions as to the amounts of allowances and contributory values in order to fill in gaps in the information available. Where such assumptions are made, the status of the adjustment is no longer merely a matter of non-binding opinion, but instead of incontrovertible fact. The time limit which must elapse before this power arises has been tightened up in the new rules (particulars of value and particulars in support of a claim to GA contribution must be provided within 12 months failing which the adjuster shall be at liberty to make such estimations) and there is now also an express obligation to supply to the adjuster full particulars of any recoveries from third parties within 2 months of receipt of the recovery.
In addition, York-Antwerp Rules 2016 has taken up the time bar first contained in the 2004 Rules. This extinguishes rights to general average contribution unless an action is brought within a period of one year after the date upon which the general average adjustment is issued. There is then a “long stop date” for commencement of proceedings within six years from the date of termination of the common maritime adventure. This rule, which applies also to claims under average bonds and guarantees, marks an important departure from the current position. Not only does it impose a short one-year time bar, but the use of the “long stop date” foreshortens the limitation period which would otherwise be applicable to claims under average bonds and guarantees. Ordinarily, a six year time period, counting from the date of the adjustment, would otherwise apply to claims under GA security — The “Potoi Chau” [1984] 1 AC 226.
Treatment of salvage
It has been an especially vexed question whether or not to allow salvage remuneration in general average. Whilst salvage might seem the quintessential general average expense, there is a concern that, if the ship and cargo have already paid salvage separately (in particular under Lloyd’s Open Form of Salvage Agreement, or “LOF”) based on salved values at the termination of the salvors’ services, the allowance of salvage in general average, requiring re-apportionment over contributory values assessed at the termination of the adventure, may only give rise to additional cost and delay. Whilst, in the 1994 Rules, salvage was generally allowable, under the 2004 this allowance was radically curtailed.
In the 2016 Rules an attempt has been made to reach a compromise. If the parties to the adventure have a separate contractual or legal liability to salvors (i.e. under LOF or under the common law, but not under e.g. Wreckhire ’99 where payment is made solely by the shipowner) salvage remuneration will only be allowed in general average if one or more of certain stipulated criteria are fulfilled, and if they are significant. Despite attempts at the drafting stage, no definition has been provided of the word “significant”, which appears five times in the new rule. It is therefore anticipated that the adjuster will exercise his or her discretion when judging whether a criterion is fulfilled.
One of the criteria is the situation of so-called ‘differential salvage’ whereby ‘a significant proportionment of the parties have satisfied the salvage claim on substantially different terms’. That general average adjustment should seek to equalise advantages obtained by one party through the strength of its negotiating might seem surprising to some. Indeed, it was the subject of debate at the Conference. However, such equalisation was already a feature of adjustment under the 1994 Rules, and can come to the assistance of parties who are not in a position of parity as regards their powers of negotiation with salvors.
The intention of the new rule is clearly to avoid the cost of re-apportionment if the difference in result would not merit it. Whilst the wording is new, it has been suggested that the difference in practice will not be great. As the CMI Guidelines explain, many leading adjusters will, when appropriate, already propose to the parties that if re-apportionment of salvage as general average would not produce a meaningful change in the figures or would be disproportionately costly, salvage should be omitted from the adjustment. As such, the new rule serves primarily to approbate and regularize this practice.
Express recognition for the discretion of the adjuster
Rule VI, with its undefined references to “significance”, is by no means the only new rule which invokes the exercise of the adjuster’s discretion. The discretion of the adjuster is expressly alluded to on numerous occasions. The fortified power of the adjuster to make binding assumptions and estimations has already been noted above. In addition, it is now stated in Rule XVI that the average adjuster may deem the commercial invoice to reflect the value of cargo at the time of discharge irrespective of the place of final delivery under the contract of carriage – a provision which may assist in cases of multimodal bills where there is subsequent transportation by land. Even more significantly, under Rule XVI it is now provided, “Any cargo may be excluded from contributing to general average should the average adjuster consider that the cost of including it in the adjustment would be likely to be disproportionate to its eventual contribution” – an idea borrowed from the assessment of salvage awards under clause 15 of the Lloyd’s Standard Salvage and Arbitration Clauses.
Even if the exercise of discretion has doubtless been a feature of adjusting since time immemorial, adjusters have been afforded express powers under York-Antwerp Rules 2016 which were not mentioned in previous versions. A proposal that the Rules should therefore explicitly state that the adjuster must act impartially and independently was not adopted. Instead, such pronouncements have been left to the CMI Guidelines which state some best practices, including that the adjuster is “expected to act in an impartial and independent manner in order to act fairly to all parties involved in a common maritime adventure.”
Resolving points of uncertainty
As may be expected, the new rules additionally seek to resolve certain points of controversy, although the number of these clarifications is relatively few.
The most important concerns the operation of the cap (also known as the “Bigham clause”) on cargo’s contribution to general average allowances made under the Non-Separation Agreement element (“the NSA”) in Rule G. Whilst the NSA has the advantage of permitting cargo owners promptly to recover their cargo in circumstances where delay might otherwise ensue whilst at the same time obliging them to contribute to general average for as long as it would otherwise be owing, the Bigham clause places a cap on cargo’s contribution to such allowances by providing that they “shall not exceed the cost which would have been borne by the owners of the cargo if the cargo had been forwarded at their expense”.
As explained in the working papers produced for the CMI meeting in Istanbul on 6-7 June 2015, an issue requiring clarification was whether the cap should apply only to allowances made under the non-separation agreement wording, or else whether it should apply to both those allowances and to allowances under Rule F, such as the expense of forwarding cargo to destination aboard substitute tonnage.
By way of example, suppose a ship has put into a port of refuge, and it is estimated that repairs necessary for the safe prosecution of the voyage will last some considerable time. Instead of the cargo languishing during the period of the repairs, it is decided to forward it to destination. By virtue of the NSA in Rule G, the cargo owner will be obliged to contribute to general average as though the cargo remained in situ; such allowances could include detention expenses and cargo handling costs. In addition, the forwarding expenses would themselves be allowable in general average under Rule F, insofar as they avoid general average expenses which would otherwise have been incurred at the port of refuge. The question was whether the amount of cargo’s contribution to allowances made under Rule F and under the NSA in Rule G should be aggregated before applying the cap, or else whether the cap should only apply to cargo’s contribution to allowances made under the NSA. In the new wording it has been confirmed that the cap should apply only to the latter, endorsing the view which had been held by most British adjusters.
Financial matters
Principal amongst cargo’s complaints about the York-Antwerp Rules 1994 were the high interest rate (at a rate of 7 per cent per annum until three months after the date of issue of the general average adjustment) and the allowance of a commission for the provision of funds (2 per cent on general average disbursements).
York-Antwerp Rules 2016 has done away with the commission, which was considered by many to be an unnecessary anachronism and a boon for shipowners. As for the high level of interest, this has now been pegged at 4% above ICE LIBOR (or US Dollar ICE LIBOR where the adjustment is prepared in a currency for which no ICE LIBOR is announced) and is, as such, no longer fixed but floating. In addition, new provisions have been made for the treatment of cash deposits, in particular through the constitution by the average adjuster of a special account to be held separately from its own funds. This replaces the previous practice of setting up of joint accounts, a practice which was not routinely followed and which had been made more problematic by recent anti-money laundering legislation.
A drafting process of 3 ½ years’ duration, in which unprecedented access was granted to stakeholders via the CMI website, has concluded with the formulation of York-Antwerp Rules 2016. The new rules withdraw certain advantages from shipowners (in particular the old commission and interest rate) but they have also reinstated some of the allowances which had been restricted in the 2004 Rules (salvage under Rule VI; crew wages and maintenance during a general average detention at a port of refuge under Rule XI; and temporary repairs to accidental damage under Rule XIV). It is suggested that no radical change has been made to the principles according to which general average is adjusted, even when taking account of the important alterations to Rule VI. Rather, the achievement of this project has been to negotiate a compromise with which representatives of ship and cargo are in principle content. In so doing, advantageous changes have been made adjectivally which, it is hoped, will promote efficiencies in time and cost. It remains to be seen whether these rules will now become universally adopted.
The Principle of General Damage in York Antwerp Rules 2016
As defined in the York-Antwerp Rules, “There is a General Average act when, and only when, any extraordinary sacrifice or expenditure is intentionally made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.” A General Average act may be sacrifice or expenditure or both. It is an action taken to preserve all the interests involved in a maritime adventure when the adventure is threatened by a common peril. Provided that the action is successful, it is required that the owners of the sacrificed property and/or the people who incurred the expenditure shall be reimbursed by all parties involved in the adventure on the grounds that, but for the General Average act, the adventure would have been lost.
Whatever measures are taken by way of sacrifice and/or expenditure, they must be successful. If they are not successful the adventure is lost and the resultant losses suffered by the interests involved rest where they fall; since if no property survives then there can be no contribution from their part for any sacrifices or expenditure incurred. When a General Average act occurs on a voyage and the ship subsequently arrives safely at the port where the adventure is terminated, the ship is said to be “under average.” Apart from the ship owners personal interest in respect of any General Average damage to the ship/ expenditure incurred, they are also responsible for ensuring that any General Average damage sustained by cargo interests is made good. Generally an average adjuster will be appointed by Owners.
The average adjuster is tasked with collecting all necessary details and documentation relating to the adventure to reach the General Average adjustment. The adjustment is the statement showing the contribution each party with an interest in the voyage must make towards the General Average. The main contributors are generally the ship, cargo, and often freight. The total of the General Average amount (damage/loss + expenditure incurred) is known as the “amount to be made good” and each interest’s contribution is referred to as its “General Average contribution.” The amount of each General Average contribution is based on the value of the interest concerned, or the “contributory value.” The adjuster must determine the total amount to be “made good” and then apportion this figure over the contributory values of the interests involved in order to establish the General Average contribution of each interested party.
The contributory value of each interest is that interest’s net arrived value at the place where the voyage ends. Clearly then, the owner of a container carrying high value products will be expected to contribute more than the owner of a container carrying low value products. It is noteworthy that even the owner of the cargo which was lost is obliged to pay in towards General Average as the loss must be shared between all parties common to the adventure. The owner of the lost cargo will ultimately receive compensation out of the General Average fund for his losses. Once the vessel has arrived at a safe port and General Average has been declared, the ship owner has a lien over the goods which have been saved. In the circumstances, the ship owner may legally refuse to release the goods to their owner until such a time as security for the interest’s contribution to General Average has been provided.
Generally, the security required by the ship owner to release the goods will be a General Average Bond as well as one of a bank guarantee, underwriters guarantee or General Average deposit. The General Average Bond is signed by the receivers of cargo or other interest and the ship owner and confirms both parties agreement to the General Average and the adjustment being carried out. Additionally, the interest agrees to provide security as ship owner may require. A bank guarantee that the General Average Contribution will be paid on the completion of the adjustment is also required, or alternatively an Underwriters guarantee (under standard conditions of marine cargo insurance the underwriter is liable for the General Average contribution of the assured). If guarantees are unacceptable (or unobtainable, if, for example, the cargo is uninsured) the shipowner may require the cargo receiver to pay a deposit into a General Average fund.
In exchange for the contribution, a deposit receipt is given to the cargo owner or the other interest. When the adjustment is finalized, the holder of the General Average deposit receipt will be paid the difference between the deposit and the actual contribution. While General Average events do not occur very often, the sums involved when such an event does occur are generally very significant. A prudent shipper of goods will ensure that they have appropriate insurance cover in place for all of their shipments.
Analyzing the equitable idea underlying ‘common benefit’ contribution and distribution
The legitimate and equitable notion that intentional renouncement of common goods at time of imminent danger should be indemnified by common contribution is an impenetrable feature of general average. The contribution generates from the other parties whose property has been protected and those who have undergone losses, whereby the latter is indemnified to the position of the former. The ‘fault’ factor as inscribed in this concept has resulted in friction between English law and American law. However, the question is finally dealt with by the York Antwerp Rule D. The equitable factors embedded in the concept conclude with impartial distribution, in the light of criticism which may not pertain to be practical to effect an apportionment every time salvage costs benefiting several interests have been induced. However, it cannot be argued that it is equitable to extinguish this unbiased distribution.
In weighing both the concepts of natural justice it may be perceived that common benefit cannot be suited with common safety in the same platform due to the fact that common safety is chained to perceptible reality. A further analysis of ‘common interest’ investigates that the cessation of the voyage in accordance with various contracts of affreightment has the same implication and therefore, should be achieved by common contribution. Hypothetically if the ship-owner is considered to be a debtor, the distribution of common benefit expenses connote that the ship-owner is partly released from his obligations and suffices as a supplementary compensation for overcoming voyage hindrances due to average. It may be justified to come to the assistance of the debtor by transferring some risks of unforeseen hindrances to the other party. Nevertheless, this solution demands critical, extensive and above all unexpected obstacles to have been met. To furnish the ship-owner with supplementary compensation for every call at a port of refuge emancipates him from obligations to a greater extent than the general law of contract provides for. Apart from upholding the concept of equity, the common benefit distribution provides a bar for unnecessary sacrifice by the master. The master will attempt to reach safety with the least total costs as it is the only way out for the owners. The distribution of common benefit may also be interpreted from the point that, the apportionment of costs incurred at the port of refuge and for the purpose of completing the carriage makes it more easy to arrive at practical arrangements which are of equal interest to the ship-owner and to the cargo owner.
A complete abolition of the ‘common benefit’ principles would require that the ship-owner should be able to insure extra expenses which might be incurred in respect of termination of the transport on account of average which may technically be substituted by general freight cover. Abolishment whether it be the entire concept or partial is (depended) on how much the entire weight of the inner significance of general average can be shifted to other systems. But indeed this theory as propounded by authors with farsightedness can perceive the fact that abrogation of the general average system will bring a renaissance in the contemporary marine-industry.
Harmonization of the Rules. Why do we Need it?
The integration of the rules related to the general average was achieved by the York-Antwerp rules. The International Law Association adopted the rules in 1890 from a draft issued by the British Average Adjustment Association. The rules were amended in 1924 and again by Comet Maritime International in 1950 and 1974. They are attached by reference to time and travel charters and lodging bills. They provide uniform rules, regulate the contribution of shipping, cargo and cargo to good voluntary sacrifices made for public safety and public average expenses. They are not generally enacted into law and they are not adopted by the international conference, but they are regulated globally as a result of a standard merger by reference.
The York Antwerp Rules state three clear principles, all of which must be met in order for the rule to be applied. The first stipulation is that danger to the ship must be imminent. Second, there must be a voluntary jettison of a portion of the ship’s cargo in order to save the whole. Third, the attempt to avoid the danger must be successful. If a situation meets all the stipulations, all parties involved in the maritime adventure must share proportionately in the financial burden of the losses incurred to the owner or owners of any of the cargo that was jettisoned in order to save the vessel.
The York Antwerp Rules are a codification of a principle called the law of general average. Though the York Antwerp Rules are quite old themselves, the law of general average is a much older maritime principle with roots that go back to Ancient Greece. The law specifies that all parties involved in a sea venture must proportionately share in any losses that result from sacrifices made to the cargo to save the remainder. In a life-threatening situation at sea, the captain and crew may deem it necessary to jettison the cargo. To jettison cargo is a maritime term that is the last resort in an emergency situation where the crew throws the cargo overboard in order to stabilize the vessel. If there is a threat to a ship, due to damage to the hull, weather conditions, etc., the staff will jettison the cargo. While jettisoning happens as a last resort, the crew must move quickly when they throw the cargo overboard, which means they do not have time to see whose cargo gets tossed. This is when the York Antwerp Rules come into play, as those who lost their cargo will receive compensation from the profits of the ship’s owner and the owners of the other cargo. It is however worth noting that the use of these rules still remain fragmented, despite the progress, and harmonization is the only approach to solving the perceptions.
This is what informed the formation of the harmonization process, which to date has never been leveled in terms of general application. The law of general average is a principle of maritime law whereby all stakeholders in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency. For instance, should the crew jettison some cargo overboard to lighten the ship in a storm, the loss would be shared pro rata by both the carrier and the cargo-owners. In the exigencies of hazards faced at sea, crew members may have little time in which to determine precisely whose cargo they are jettisoning. Thus, to avoid quarreling that could waste valuable time, there arose the equitable practice whereby all the merchants whose cargo landed safely would be called on to contribute a portion, based upon a share or percentage, to the merchant or merchants whose goods had been tossed overboard to avert imminent peril. General average traces its origins in ancient maritime law, and the principle remains within the admiralty law of most countries. This is however not applicable to all countries that have not ratified the laws to match their own local ones, thus defeating the whole overall application of these laws.
Conclusion
Harmonization of the rules is still needed, despite the progress that has been made in recent years. General average is a dignified institution. The charges constituted against it are owned by the modern era of shipping industry which has become exhausted by its outdated usage. When the term ‘modern shipping’ is dragged in, it echoes in mind a system devoid of complication and a matured system worthy to meet the technicalities through which the stakes of common adventure can be laid upon. And to that extent it cannot be adjudged to meet the contemporary criterions. Its continuing survival is an exaggeration of a concept belonging to an ancient era for which it was designed to be compatible. The push and pull factors of elimination have been constant and the reformed rules of Y.A.R. do not leave any traces of innovation. Reiteration on substitute marine insurance arrangements coupled with adjustments in hull and cargo policies and exclusion of general average from carriage contracts is just embedded in theory without any pragmatic initiatives to actually transform them in practice. In the words of Professor W. Tetley the abolition of this institution can be brought by an International convention supplemented by mandatory national statutes but with all due respect to this authentic perception, the chances of such convention is unforeseeable. The inherent principle of equity is an excuse for safe preservation of a theory which in reality should have been acknowledged as an eminent concept in a state of debris. With the given analysis of the so called distribution system it under no circumstances provides to be an advantage for the subsidence and indemnification of damages undergone by the co-adventurers in times of imminent peril. The proponents of the revolutionary proposition need to set aside this antique entity camouflaged by a legal alibi and eradicate the anachronism from the face of modern maritime commerce.
