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Major changes from the York-Antwerp Rules 1994

As anticipated, at the CMI Conference in New York on 6th May 2016 the York-Antwerp Rules 2016 were adopted, which seem to largely reflect the York-Antwerp Rules 1994 which has been widely incorporated into contracts of carriage; while a more recent 2004 revision has remained largely redundant, being considered less favorable to ship-owners.

The Assembly of the CMI also adopted the “CMI Guidelines relating to General Average”.  The relevant documents can be downloaded from the CMI website: www.cmi2016newyork.org/session-1

It is noted that BIMCO, the world’s largest international shipping association, has already agreed that their standard documents will be amended to reflect the new rules, YAR 2016.  Accordingly, we consider it advisable to highlight the major changes from the YAR 1994, noting that the minor changes include an amended numbering system and greater consistency in the terms being used.

RULE B

YAR 2016 provides a clearer requirement for the “disconnection” to be a general average act in the tug and tow cases, as noted in paragraph 2:

2. If the vessels are in common peril and one is disconnected either to increase the disconnecting vessel’s safety alone, or the safety of all vessels in the common maritime adventure, the disconnection will be a general average act.

Paragraph 3 provides a brief introduction concerning port of refuge expenses.  It is submitted that if the tug and tow are detained at a port of refuge whilst repairs to the tow which are necessary for the safe prosecution of the voyage are effected, the port charges,  crew wages, maintenance and fuel and store referable to the tug will be allowed in general average.  Equally, if the detention is on account of repair to the tug, the port charges during the period of detention (and the crew wages and maintenance of the crew if she has one) referable to the tow will be allowed in general average.

RULE E

Rule E of YAR 1994 allows the parties to give notice of a claim in general average within 12 months, measured from the date of the termination of the common maritime adventure, or request from the adjuster, and provides for the average adjuster’s liberty to make an estimate of allowances or contributory values upon expiry of the 12 months of his requesting for such evidence and particulars.  The adjuster’s estimate may be challenged only on grounds that it is manifestly incorrect.

Rule E of YAR 2016 provides a clearer time-line for the provision of documents and evidence with the intention to help speed up the adjusting process, and paragraph 3 allows:

(a) For notification and particulars in support a claim – 12 months from the termination of the common maritime adventure or payment of the expense;

(b) For particulars of value – 12 months from the termination of the common maritime adventure.

The parties are allowed to challenge the adjuster’s estimates within 2 months of receipt of same.

Paragraph 4 of YAR 2016 is a new provision that any party pursuing a recovery from a third party shall advise the average adjuster and supply full particulars within 2 months upon receipt of the recovery achieved.  The adjuster should take note ensuring that any allowable credit to the general average is made in the appropriate manner.

RULE G

Additional words are added in the last paragraph of Rule G:

4. The proportion attaching to cargo of the allowances made in general average by reason of applying the third paragraph of this Rule shall be limited to the cost which would have been borne by the owners of cargo if the cargo had been forwarded at their expense. This limit shall not apply to any allowances made under Rule F.

It will help resolve an area of uncertainty and differences in average adjusting.  The following example illustrates the working of the “cap”:

  • Vessel with cargo on board sustains propeller damage and is towed into Port of Refuge A;
  • In order to do repairs necessary for the safe prosecution of the voyage, it would be necessary to discharge, store and reload cargo;
  • Instead, cargo is discharged and then forwarded to destination;
  • Vessel is towed to Port of Refuge B (where there are the necessary repair facilities) and effects permanent repairs;
  • Ship and Cargo are 20/80% respectively of total values;
  • It would have cost Cargo US$350,000 to have arranged for its own carriage to destination.

It is worth noting that the unrecoverable part of Rule G paragraph 3, (i.e. US$400,000 – US$350,000 = US$50,000) is recoverable under English law per “Abt Rasha” (2000) from H&M Underwriters.  The position under other jurisdictions is less clear.

RULE VI. SALVAGE REMUNERATION

The wording of Rule VI paragraph b) is new to the YAR 2016:

b) Notwithstanding (a) above, where the parties to the adventure have separate contractual or legal liability to salvors, salvage shall only be allowed should any of the following arise:

(i) there is a subsequent accident or other circumstances resulting in loss or damage to property during the voyage that results in significant differences between salved and contributory values,

(ii) there are significant general average sacrifices,

(iii) salved values are manifestly incorrect and there is a significantly incorrect apportionment of salvage expenses,

(iv) any of the parties to the salvage has paid a significant proportion of salvage due from another party,

(v) a significant proportion of the parties have satisfied the salvage claim on substantially different terms, no regard being had to interest, currency correction or legal costs of either the salvor or the contributing interest.

We quote below extract from the CMI Guidelines:

“The wording of Rule VI paragraph (b) is new to the York Antwerp Rules 2016. It arises from concerns that, if the ship and cargo have already paid salvage separately (for example under Lloyd’s Open Form) based on salved values (at termination of the salvors’ services), allowing salvage as general average and re-apportioning it over contributory values (at destination) may give rise to additional cost and delays, while making no significant difference to the proportion payable by each party.

A variety of measures to meet these concerns have been considered, ranging from complete exclusion of salvage to using a fixed percentage mechanism. Such measures were found, during extensive CMI discussions to produce inequitable results or were impossible to apply across the range of cases encountered in practice.

It was pointed out that many leading adjusters will, when appropriate, propose to the parties that if re-apportionment of salvage as general average will not produce a meaningful change in the figures or will be disproportionately costly, the salvage should be omitted from the adjustment; it is then up to the parties to decide whether it should be included or not. However, it was considered that a means should be found to make this practice more universal and to set out express criteria that would help to ensure that the allowance and re-apportionment of salvage as general average (where already paid separately by ship and cargo etc.) would only occur in cases where there was a sound equitable or financial basis for doing so.

The average adjusters will still be required to exercise their professional judgment in applying paragraph (b) because several of the criteria (i-v) that are listed require a view to be taken as to what should be deemed to be “significant” in the context of a particular case. Because of the wide range of cases that the York-Antwerp Rules apply to, it was not considered desirable to offer a fixed definition of how “significant” should be construed, other than to note that the objective of the new clause was to reduce the time and cost of the adjustment process where it is possible to do so.

When assessing whether there is a significant difference between settlements and awards for the purposes of Rule VI(b)(v) the adjuster should have regard only to the basic award or settlement against all salved interests before currency adjustment, interest, cost of collecting security and all parties’ legal costs.”

RULE XI. WAGES AND MAINTENANCE OF CREW AND OTHER EXPENSES PUTTING IN TO AND AT A PORT OF REFUGE, ETC.

New words “entry or detention” are added to paragraph (b)(i) to specify that allowances at a port of refuge are only made possible either when the ship and cargo remain in peril after arrival at the port of refuge or when repairs necessary for the safe prosecution of the voyage are being effected:

(b)  (i) When a ship shall have entered or been detained in any port or place in consequence of accident, sacrifice or other extra-ordinary circumstances which render that entry or detention necessary for the common safety, or to enable damage to the ship caused by sacrifice or accident to be repaired, if the repairs were necessary for the safe prosecution of the voyage, the wages and maintenance of the master, officers and crew reasonably incurred during the extra period of detention in such port or place until the ship shall or should have been made ready to proceed upon her voyage, shall be allowed in general average.

The definition of “port charges” is newly added under paragraph (c) (ii) in view of the comments made in the “Trade Green” (2000), which are contrary to the established practice and intentions of successive versions of the York-Antwerp Rules:

(c)   (ii) For the purpose of these Rules, port charges shall include all customary or  additional expenses incurred for the common safety or to enable a vessel to enter or remain at a port of refuge or call in the circumstances outlined in Rule XI(b)(i).

Also, additional words are added to paragraph (d) (iv) to correct an apparent anomaly:

(d)   (iv) necessarily in connection with the handling on board, discharging, storing or reloading of cargo, fuel or stores whenever the cost of those operations is allowable as general average.

RULE XIII. DEDUCTIONS FROM COST OF REPAIRS

Paragraph (c) provides that the costs of cleaning, painting or coating of bottom shall not be allowed in general average unless the bottom has been painted or coated within the 24 months (against 12 months as specified in YAR 1994) preceding the date of the general average act in which case one half of such costs shall be allowed.

RULE XVI. AMOUNT TO BE ALLOWED FOR CARGO LOST OR DAMAGED BY SACRIFICE

Wording is added in paragraph (a) (i) to deal with issue arising from place of final delivery not being port of discharge, giving express sanction to the long-established adjusting practice:

(a)  (i) The amount to be allowed as general average for damage to or loss of cargo sacrificed shall be the loss which has been sustained thereby based on the value at the time of discharge, ascertained from the commercial invoice rendered to the receiver or if there is no such invoice from the shipped value. Such commercial invoice may be deemed by the average adjuster to reflect the value at the time of discharge irrespective of the place of final delivery under the contract of carriage.

RULE XVII. CONTRIBUTORY VALUES

Recognition of the adjusting practice that low value cargo may be excluded from contributing to general average is now expressed in paragraph (a) (ii):

(a)  (ii) The value of the cargo shall include the cost of insurance and freight unless and insofar as such freight is at the risk of interests other than the cargo, deducting therefrom any loss or damage suffered by the cargo prior to or at the time of discharge. 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.

Furthermore, salvage payment which is not included in general average under the terms of Rule VI (b) would form “an extra charge incurred in respect thereof subsequently to the general average act” and a deduction in order to establish the contributory value of the property.  Additional wording in paragraph (b) makes it clear that the deduction in this respect is limited to the actual salvage payment made including interest and salvor’s costs:

(b)  To these values shall be added the amount allowed as general average for property sacrificed, if not already included, deduction being made from the freight and passage money at risk of such charges and crew’s wages as would not have been incurred in earning the freight had the ship and cargo been totally lost at the date of the general average act and have not been allowed as general average; deduction being also made from the value of the property of all extra charges incurred in respect thereof subsequently to the general average act, except such charges as are allowed in general average. Where payment for salvage services has not been allowed as general average by reason of paragraph (b) of Rule VI, deductions in respect of payment for salvage services shall be limited to the amount paid to the salvors including interest and salvors’ costs.

The insertion of the word “accompanied” in paragraph (e) is to make it clear that unaccompanied personal effects, such as a container full of house-hold goods being moved to another country are liable to contribute to general average:

(e)   Mails, passengers’ luggage and accompanied personal effects and accompanied private motor vehicles shall not contribute to general average.

RULE XIX. UNDECLARED OR WRONGFULLY DECLARED CARGO

The wording of the second paragraph is amended merely for clarity purposes:

(b)  Where goods have been wrongfully declared at the time of shipment at a value which is lower than their real value, any general average loss or damage shall be allowed on the basis of their declared value, but such goods shall contribute on the basis of their actual value.

RULE XX. PROVISION OF FUNDS

There is no provision for Commission at 2% to be allowed on general average disbursements.

RULE XXI. INTEREST ON LOSSES ALLOWED IN GENERAL AVERAGE

Under the YAR 2016, interest will be fixed annually at ICE LIBOR on the first banking day of each year in the currency of the adjustment plus 4%.  For interest, it is noted that for a US$ adjustment that would produce a rate of 5.17% for 2016 as opposed to 7% under YAR 1994.

(b)  The rate for calculating interest accruing during each calendar year shall be the 12- month ICE LIBOR for the currency in which the adjustment is prepared, as announced on the first banking day of that calendar year, increased by four percentage points. If the adjustment is prepared in a currency for which no ICE LIBOR is announced, the rate shall be the 12-month US Dollar ICE LIBOR, increased by four percentage points.

RULE XXII. TREATMENT OF CASH DEPOSITS

A significant change is made to the treatment of cash deposits.  Removing the joint account requirement, the new rule sets out more clearly how the average adjuster should handle such funds:

(a) Where cash deposits have been collected in respect of general average, salvage or special charges, such sums shall be remitted forthwith to the average adjuster who shall deposit the sums into a special account, earning interest where possible, in the name of the average adjuster.

(b) The special account shall be constituted in accordance with the law regarding client or third party funds applicable in the domicile of the average adjuster. The account shall be held separately from the average adjuster’s own funds, in trust or in compliance with similar rules of law providing for the administration of the funds of third parties.

(c) The sums so deposited, together with accrued interest, if any, shall be held as security for payment to the parties entitled thereto, of the general average, salvage or special charges in respect of which the deposits have been collected. Payments on account or refunds of deposits may only be made when such payments are certified in writing by the average adjuster and notified to the depositor requesting their approval. Upon the receipt of the depositor’s approval, or in the absence of such approval within a period of 90 days, the average adjuster may deduct the amount of the payment on account or the final contribution from the deposit.

(d) All deposits and payments or refunds shall be without prejudice to the ultimate liability of the parties.

 

We quote below extract from the CMI Guidelines:

“Under Rule XXII(b) the adjuster is required to hold deposits in a special account constituted in accordance with the law regarding holding client or third party funds that applies in the domicile of the appointed average adjuster. 
Unless otherwise provided for by the applicable law, CMI recommends that any special account should have the following features:

  • Funds should be held separately from the normal operating accounts of the adjuster.
  • Funds should be protected in the event of liquidation or the cessation of the average adjuster’s business.
  • The holding bank should provide regular statements that show all transactions clearly.”

RULE XXIII. TIME BAR FOR CONTRIBUTING TO GENERAL AVERAGE

The YAR 1994 does not include this time bar rule:

(a) Subject always to any mandatory rule on time limitation contained in any applicable law: 

(i) Any rights to general average contribution including any rights to claim under general average bonds and guarantees, shall be extinguished unless an action is brought by the party claiming such contribution within a period of one year after the date upon which the general average adjustment is issued. However, in no case shall such an action be brought after six years from the date of termination of the common maritime adventure. 

(ii) These periods may be extended if the parties so agree after the termination of the common maritime adventure.

(b) This rule shall not apply as between the parties to the general average and their respective insurers.

[Click here for the YAR 1994 and YAR 2016 in tabular format.]