Is the present GA fit for purpose in the container Industry?

Singapore-based claims correspondent and consultancy firm NAU Pte has noted that in his closing remarks as chairman of IMCC, Keith Jones mentioned that “GA was not built for fire problem in container vessels with 30,000 bills of lading – more of an industry problem”.

NAU said that the volumes of cargo being transported in one shipment was far greater than in other modes of transport. Following a casualty resulting in serious damage to the ship, resulting in repairs exceeding the value of ship and freight at risk, or if the time required for repairs would be inordinate and frustrate the adventure, Owners could abandon the voyage as the adventure is frustrated. This was where General Average was of assistance in that if expenses were incurred for the common benefit, the party incurring the expenses would be entitled to recover from the parties who have benefited out of the exercise.

NAU noted, however, that if Owners were not eligible for contributions from other interests for the additional costs which they might incur (which they were not contractually bound to incur), they would obviously consider what was best for their own interests, and this might simply be to abandon the voyage.

NAU observed that during the recently concluded International Maritime Claims Conference held at Dublin, one of the comments it heard was that to avoid such General Averages, cargo interests could negotiate and incorporate clauses in their contracts providing for Owners to bear these extra-ordinary costs in full.

NAU said that, while this was certainly possible, given the bargaining powers in the container liner industry, it was unlikely that Container Owners or Operators would ever agree to the imposition of such clauses.

NAU believed that it would be best for cargo interests to seek a common standard requiring Owners to have greater GA absorption clauses under the hull policy, together with better and effective communication following the declaration of a GA.

NAU concluded that it was perhaps time to consider alternative methods to deal with General Average / Salvage in container shipping to ensure that trade continues without any disruptions. Things which could be considered included:

  • insurance coverages by both Owners (greater general average absorption clause in the hull policy) and the freight industry which would kick in to deal with General Average and Salvage better risk management to deal with problematic / mis-declared cargoes
  • better communication between the various parties i.e. Owners, Operators, Cargo Interests etc
  • special clauses to deal with the adjustment of claim (say by creating a specific York Antwerp Rules for container shipping when it comes up for revision).