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Friday, July 20, 2018

GENERAL AVERAGE CLAUSES DEPARTING FROM THE YORK ANTWERP RULES – A REMINDER

INTERTANKO has been asked to write again on the issue of General Average Clauses. In a move to protect the internationally recognised regime as set out in the YAR Rules of 1994, the International Group of P&I Clubs actively opposes moves to erode the system by excluding from cover the additional risk introduced by certain charterparty clauses such as the Exxon GA Clause.

In 1998 INTERTANKO published a number of articles on General Average clauses in its Tanker Charterparty Circular. These articles included a discussion on Exxon’s GA clause (now clause 27 (iii) of ExxonMobil VOY2000) and its departure from the York Antwerp Rules 1994. We have been asked to write again about this issue in our Weekly News.

We would, like to draw members’ attention to the International Group P&I Clubs' circulars on General Average Charterparty Clauses.

The Clubs have in a previous circular drawn their members' attention to the fact that some charterers were attempting to introduce new clauses which had the effect of restricting owners’ rights to include certain types of pollution costs in General Average in circumstances where those costs would otherwise have been recoverable in accordance with the York Antwerp Rules 1994.

The Clubs point out that prior to 1994, the York Antwerp Rules (YAR) allowed the recovery of pollution expenses and liabilities in a wide range of circumstances. For example, clean-up expenses and the cost of third party pollution damage claims arising out of jettisoning oil to re-float a vessel were usually allowable within General Average.

As a result of increasing reluctance on the part of property underwriters to accept pollution expenses in General Average, there was considerable pressure to exclude all pollution costs from General Average when the YAR were revised in 1994. YAR 1994 represents a hard fought compromise between shipowner and property interests. Whilst the cost of pollution clean-up and third party pollution liabilities following discharge is now generally excluded from General Average under Rule C of YAR 1994, the cost of preventive measures incurred prior to a spill is usually allowable. However, YAR 1994 also provides that the cost of preventing or minimising environmental damage is recoverable in General Average under Rule (XI) (d) if incurred, inter alia, as a condition of entry into or departure from a port of refuge, regardless of whether or not a spill has actually occurred.

The Clubs furthermore point out that although this erosion of shipowners’ entitlement to recover pollution costs in General Average was regrettable, it was considered as a justifiable price to pay for the continued existence of YAR as an internationally accepted General Average regime which has served the industry well over the years. For these reasons, the Clubs’ earlier circular to members recommended that any further attempts by charterers to erode the YAR 1994 position by contract should be firmly resisted.

In a move to protect the internationally recognised regime as set out in the York Antwerp Rules of 1994, the Clubs actively oppose moves to erode the system by excluding from cover the additional risk introduced by certain charterparty clauses such as, for example, the Exxon GA Clause, which reads as follows:

"GENERAL AVERAGE. General Average shall be adjusted, stated, and settled according to the York-Antwerp Rules 1994 ("Rules") and, as to matters not provided for by those Rules, according to the laws and usages at the port of New York; provided that, when there is an actual escape or release of oil or pollutant substances from the Vessel (irrespective of Vessel location), the cost of any measures, continued or undertaken on that account, to prevent or minimise pollution or environmental damage shall not be allowable in General Average; and, provided further, that any payment for pollution damage (as defined in Article 1 6.(a) of the 1992 Protocol to the International Convention on Civil Liability for Oil Pollution Damage) shall also not be allowable in General Average. It is understood and agreed, however, that the cost of measures to prevent pollution or environmental damage, undertaken in respect of oil or pollutant substances which have not escaped or been released from the Vessel, shall be included in General Average to the extent permitted by the Rules. If a General Average statement is required, it shall be prepared at such port by an Adjuster from the port of New York appointed by the Carrier and approved by Charterer of Vessel. Such Adjuster shall attend to the settlement and the collection of the General Average, subject to customary charges. General Average Agreements and/or security shall be furnished by Carrier and/or Charterer, and/or Owner, and/or Consignee of cargo, if requested. Any cash deposit being made as security to pay General Average and/or salvage shall be remitted to the Average Adjuster and shall be held by the Adjuster at the Adjuster's risk in a special account in a duly authorised and licensed bank at the place where the General Average statement is prepared."

Although the Clubs have adopted a united front on this issue, this has left owners facing something of a dilemma when considering business offered by charterers with restrictive clauses such as this. Members should contact their club if asked to accept charterparty clauses which do not recognise the YAR 1994 regime in full and seek to arrange additional cover.