The York-Antwerp Rules revisited

In Issue 8 of the Maritime Advocate I reviewed what was at that time an incipient effort by the International Union of Marine Insurance (IUMI) to curb the scope of the York-Antwerp Rules. The Comité Maritime International (CMI), which is loosely rendered in English as the International Maritime Law Association, is custodian of the York-Antwerp Rules, the current version of which was adopted at the CMI's plenary session in 1994 in Sydney. Despite efforts to involve the marine insurance community fully in the 1994 revision, they came late to the table then decided they did not like the bill of fare.

IUMI has now prevailed on the CMI to conduct an extensive review of the rules. 'IUMI', in the context of this debate, in fact describes four individuals who apparently have been empowered to drive IUMI's agenda - two company men based respectively in Dublin and London, a London solicitor and a London-market statistician. We face the prospect of a much-reduced version of General Average that would exclude salvage settlements under most circumstances and substantially eliminate common-benefit GAs, temporary repairs, wages allowances, substituted expenses and costs of handling cargo under York-Antwerp Rules X (b) & (c).

The argument for excluding salvage settlements arises from situations where one owner of property salvaged in a given situation is able to make a more favourable settlement with the salvors than his fellows in a so-called 'differential salvage settlement'. Currently, unless the parties agree otherwise, this expenditure becomes part of the GA pool and is contributed for rateably by all the parties at interest. The party which has made the favourable settlement loses much of the advantage it has thus gained, hence the argument that salvage settlements should be allowed to lie where they fall.

Such an argument undermines a fundamental principle of General Average, that of community of interest, and it does away with the equity that can be achieved in more complex cases involving, for example, sacrifice of property and a subsequent accident on the voyage during which the General Average occurs.

Posit a salvage operation where one parcel of cargo is sacrificed for the common safety, and another parcel is saved. The sacrificed cargo would pay nothing to the salvors, having no salved value. It would have its sacrifice made good in full under the General Average adjustment. The cargo that is saved would pay the salvors, possibly at a higher rate than the ship if the cargo owners have less bargaining power than the shipowners, and it would contribute under the General average adjustment, as would the shipowners, to make good the value of the parcel that was sacrificed. If the cargo that was saved remained in good condition on completion of the salvage services but suffered some subsequent damage, perhaps by heavy weather or in consequence of an accident during discharge, it would nevertheless have to pay for the salvage on the basis of the sound value it had at the place where the salvors' services were terminated.

Under the current York-Antwerp Rules, the salved parcel would then bear proportionately less of the salvage under the final adjustment if it were in damaged condition at the end of the voyage. The sacrificed cargo would contribute to the General Average on the amount that it receives as made good, and the General Average would include the sums paid to the salvors by the ship and the salved cargo. Proportionately, all interests suffer the same degree of monetary loss.

Were salvage to be settled outside of General Average, the sacrificed cargo would contribute nothing towards the salvage expenses and would have its sacrifice made good in General Average. The salved interests would contribute towards that cargo sacrifice and bear all of the salvage.

A state of affairs would come about where it is actually financially advantageous to have your cargo chucked over the side rather than having it delivered at destination. The Phoenicians apparently had the nous to work out, more than two thousand years ago, that this is plain daft.

Turning now to the other areas of General Average expenditure that IUMI has in its sights, the objective has been described as confining General Average to common safety, and eliminating expenditure incurred for the common benefit. A typical instance might be a fire in the cargo at sea where the ship comes into a port of refuge, the fire is successfully extinguished, the cargo is discharged into shore warehouses, the ship makes repairs necessary for the safe prosecution of the voyage, the cargo is reloaded and the voyage is resumed.

The current York-Antwerp Rules provide for the costs incurred in respect of the cargo in this circumstance to be allowed as General Average, together with the expenses incurred by reason of the prolongation of the voyage, including wages and fuel putting into the port of refuge and while detained there, port charges and so on. Under the IUMI proposals, allowances in General Average would cease once safety is attained. But when is safety attained? When no more smoke can be seen? When the cargo closest to the seat of the fire has been discharged? Does all the property attain safety at the same time or is the cargo in the hold most distant from the fire safe some time before the cargo in the hold where the fire has broken out?

Once safety is attained, what incentive are the shipowners going to have to continue the voyage, given that the expenses that IUMI seeks to exclude from GA - often quite substantial - now presumably fall on the shipowners, The type of expenditure described would not necessarily be recoverable under standard forms of hull insurance policy, and the P&I clubs are unlikely to go in to bat for first party losses. The inevitable outcome of the IUMI initiative is more circumstances under which shipowners will argue successfully that voyages are commercially frustrated.

Indeed, IUMI's own General Average Working Group noted in its report to IUMI's 1998 Lisbon conference that the proposed regime would "present some problems to the cargo owner in respect of forwarding cargo to destination in case the shipowner abandons the voyage". One would have hoped that the insurance community would seek to avoid that result rather than mounting an effort to bring it about.

Mention should also be made of the great loss of uniformity. At the moment, faced with fire on the voyage, any shipowner carrying cargo under contracts subject to the York-Antwerp Rules can ring up any qualified average adjuster anywhere in the world and say, "This is what I am faced with. Where are the expenses going to fall?" and he will get substantially the same advice from all of us. If General Average is to end with the attainment of safety, what happens thereafter becomes a matter for interpretation under the law and practice, presumably, of the place where the voyage ends.

Historically, the law of the United Kingdom did not allow the wages and maintenance of the crew during deviation to a port of refuge. American law did allow them during the deviation and up to the time the vessel regained the high seas, and most Continental European law allowed them until the point of deviation was regained. What happens if the ship has cargo for the UK and the Netherlands? Is an adjustment to be made in accordance with two different codes?

The York-Antwerp Rules are a commercial regimen to be agreed between carriers and shippers of cargo. Average adjusters should provide counsel, if asked. We do not advocate any particular position. To those who say we have a vested interest in the status quo, we say that someone ultimately will insure these exposures, once the hull, cargo and freight policies have been rewritten, and the claims will still have to be adjusted. But do the carriers and shippers understand and embrace the change that their insurers are trying to bring about? Why on earth would they?