THE LEGAL EFFECTS OF THE JURISDICTION CLAUSE

This paper was supposed to be presented by the writer at the ICMA Congress in New York but was cancelled because of the 9/11 Tragedy

It is very common to find a jurisdiction clause in contracts of maritime nature, particularly in the Bills of Lading and charterparty. It is also common knowledge that the ability of this clause to achieve the results intended is dependent on a number of considerations such as the scope of its wording, its exclusivity, to whom it is binding, whether such a clause infringes on any mandatory statutes of the chosen forum and most critical of all, the judicial attitude of the courts in the forum which have to enforce such a clause.

Take the Gencon Bills of lading for instance, the choice of law and choice of jurisdiction are incorporated by way of reference. The clarity with which the bills of lading incorporate the choice of jurisdiction in the charterparty is very important. If the incorporation is vague and unclear, the court may not permit effective incorporation of the charterparty terms. There are several cases which have dealt with this issue. Hence the manner in which the bills of lading are worded to incorporate the provision of the charterparty is very important.

The next issue that have given rise to legal debates relates to situations where there are several sub-charterparties. The question that had risen is, which is the effective charterparty for purposes of ascertaining the correct jurisdiction clause. The problem becomes compounded when the various charterparties provide for different jurisdiction clauses. The tentative solution has been to determine which of the charterparties is available and therefore that would be the relevant choice of jurisdiction. However this area of the law remains cloudy.

The effects of a jurisdiction clause are serious enough to warrant many legal opinions being sought by marine cargo insurers and other uninsured cargo interests. In the context of international trade, most of the shippers have no direct influence over the choice of the jurisdiction clause in the bills of lading (unless of course you are a major shipper). In reality, many shippers are not even aware of the significance and the legal effects of such a clause.

The primary objective of most hard headed business people is to have the goods shipped and delivered to final destination with minimum fuss, very often with the fastest and the most cost effective means possible. It is not too presumptuous to state that the effects of the jurisdiction clause are not fully appreciated until a cargo claim has arisen or at the commencement stage of recovery action by the subrogated insurers, that is, after a claim has been paid.

The problems are even more complex and unfair when the bill of lading has been indorsed to an innocent third party like the consignee. To his dismay, he has to accept the fact that under common law, he is bound by a clause of which he is not even a party to it and of which, he has no knowledge. Take the case of a consignee who is based in India and the shipper is domiciled in Singapore but the choice of jurisdiction happens to be say, Nicaragua. Some jurists have commented that in such cases where the choice of jurisdiction have no direct connection to the transaction or the parties, the terms of the bills of lading should not be given effects.

Under the English law, a party can be bound by a term in a contract to which he is not party and of which he has no knowledge. This was established in the Court of Appeal judgement in the KH Enterprise case. Under the English law, jurisdiction clause in the bills of lading is generally held to be effective though this may not be the case in non-English law jurisdictions.

In the insurance recovery process, the jurisdiction clause in the bills of lading remains the most thorny issue confronting many marine cargo insurers. The concerns of the marine insurers is understandable and most would feel comfortable with forums which embrace established carriage of goods by sea conventions or where the rule of law is firmly established. Their biggest concern is having to fight an action in a jurisdiction where the rule of law is not firmly established and precedents do not have significant bearing in the adjudication process.

These problems are further compounded by the widespread use of multimodal transport bills of lading or intermodal bills of loading where the jurisdiction clause and governing law is very often, leveraged on to the law of the country where the multimodal operator is domiciled. In some of these countries, the body of maritime law is not fully transparent or adequately developed.

Yet attempt to transfer the jurisdiction to a more favourable forum is the natural desire of all the claimants against the carrier but this decision is fraught with danger. For the enterprising ones who try, they face the prospects of not being able to resist a stay application from the carrier in a forum of choice.. Some jurisdictions have not acceded to the Hague Visby Rules or other established convention and had unilaterally, adopted a shortened time-bar of less than a year in action against the carrier. Any delays in trying to settle for a forum of choice may cause the claimants to be time-barred in the forum as defined in the contract.

Perhaps an example in a recovery case handled by the writer will be able to spotlight the problems posed by the jurisdiction clause in the bill of lading. In this example, the jurisdiction clause provides for Taiwanese law, and for the exclusive jurisdiction of the courts in Taipei. This matter involved a misdelivered shipment of goods from Hongkong to Russia. Claims against the carrier (through negotiation) was unsuccessful and an in-rem proceedings was thus commenced in Hongkong but not served on the carrier. The concern was whether the claimants could resist a stay application from the defendants who would obviously wish to rely on an alleged jurisdiction clause in the bill of lading.

This hesitation prompted the subrogation insurers to seek an opinion from a maritime lawyer in Taipei on the judicial attitude of the courts in Taipei. It was suggested that the Supreme Court of Taiwan had ruled in a case in 1978 that the jurisdiction clause in the bill of lading is only an expression of a carrier’s own willingness and as such, should not be deemed to be an agreement between both parties. It therefore followed that shippers are not bound by the jurisdiction clause in the bill of lading and it is the right of the shipper to decide whether or not to be bound by such a provision in the bill of lading.

Attention was also drawn to the 9 month time bar clause on the reverse side of the bill of lading. It was suggested that the subrogated insurers should ignore the jurisdiction clause (to avoid this 9 month time bar provision) on the pretext that the jurisdiction clause is only an unilateral expression of willingness made by the carrier and that such provision should not be applicable to the shipper or the subrogated insurers.

We also learned through this consultation process that the ROC courts will usually use the Civil Procedure Code to determine the issue of jurisdiction. Under this Code, it would appear that the courts in ROC lack jurisdiction over the matter on the argument that the ship involved is owned by a company not domiciled in Taiwan and that the ship in question has never called at Taiwan. Finally, the said casualty had occurred outside Taiwan.

With regard to the issue of the governing law, it was further suggested that it is the practice of the ROC courts to determine such issue based on the Law Governing the Application of Laws to Civil Matters Involving Foreign Elements. It was suggested that lex loci actus shall be applied to cases where the intention of the parties are unclear and that the act was committed outside Taiwan. Hence, it is very likely that the ROC courts will probably rule that the governing law clause is an unilateral expression of the carrier’s willingness and as such, shall not bound the shipper if the shipper chose not to.

Review of the above opinion by a learned Counsel in London

Still uncertain of the above findings, the subrogated insurers decided to place the facts of the above case and the Taiwanese opinion before a learned Counsel in London for review. Interestingly enough, the learned Counsel was of the view that under English law, the jurisdiction and governing law clauses in the bill of lading would be deemed to effectively incorporated though in ROC, this may not be case.

The issue in question, as expressed by the learned counsel, is whether the courts in Hong Kong would give effect to the law and jurisdiction clause in the bill of lading, bearing in mind that if they were to refuse jurisdiction on the basis that the matter should be dealt with in Taiwan, the Taiwanese courts on the other hand, may not regard the incorporation of the clause as effective. In effect, a court which is required to consider whether or not the clause should be given effect must do so not according to the court’s own law (lex fori) but according to the putative proper law of the contract ie in our case here, the ROC law.

An Australian case was also highlighted (Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 65 CLR 197) in where the issue was whether the foreign law and jurisdiction had been incorporated into the contract. The decision was that the issue should be determined not by the system of law indicated by the clause itself, but by the lex fori (the Australian law in this case).

In UK however, the questions of incorporation of the jurisdiction and governing law clause have generally been a settled issue to be considered under the putative proper law ie the law which would be proper law of the contract if the clause was validly concluded. To support this finding, several cases were mentioned, ie The Parouth [1982] 2 LR 351; The Atlantic Emperor [1989] 1 LR 548, 552lhc –553lhc and 554 rhc; The Lake Avery [1997] 540,550lhc etc.

Our understanding of this matter was further strengthened in a decided case (Albeko Schuhmaschinen AG v Kamborian Shoe Machine Co Ltd (1961) 111 LJ 519 which relates to the formation of contracts and where Salmon J expressed the view that even if the criteria of the lex fori regarding the formation of the contract had been satisfied, nevertheless the contract would not be regarded to be effectively concluded if the criteria of the putative proper law were not satisfied.

This example focussed the typical problems posed by the jurisdiction clause and in today’s context, we have seen widespread incorporation of jurisdiction and governing law clause in multimodal bill of lading issued by multimodal operators in countries like Vietnam, Thailand, Indonesia and many others. Whilst it is not the attempt of this writer to belittle the legal framework of some of these countries, it is a fact that there exist, many unknown grounds and uncertainties in the law of incorporation of the jurisdiction clause and governing law in countries where the body of maritime law is still being developed. The Taiwanese courts to be fair, have shown a great deal of common sense in their approach to this issue.

Issuers of bills of lading would obviously prefer to hide behind the uncertainties and unfamiliarity of some of the lesser known forums. For the subrogated insurers or uninsured cargo interests, it is a costly affair to ascertain the judicial attitude of some of these forums and also in trying to resist the stay application of the defendants in a forum of choice. Finally, to overcome the problem of choice of law/jurisdiction, it is recommended that insurers should proceed with recovery action at an early stage so that the issue of time bar could be managed.

Capt Lee Fook Choon

LN52.10.01

MARINE CARGO INSURANCE

The Challenges Beyond

The cargo insurance industry has become highly competitive and knowledge intensive. Insurers have resorted to mergers and information technology to achieve the economy of scale.

The global environment is in a constant state of change. Whether insurers can depend on; internal costs control; imaginative investment incomes; and core premium income to stay viable will be something which even economists cannot predict with certainty.

With the rapid liberalisation of China and the opening of India, cargo insurers are posed with formidable challenges but with many opportunities too. One needs to take bold, imaginative and well-considered risks. The challenge ahead is to lift the traditional conservative lid among insurers to allow the range and scope of business to be expanded even when the premium rates are nowhere near attractive.

The increase in the range and depth of cargo insurance business should not be achieved purely from commercial expediency but in a well-considered undertaking. To achieve this, insurers cannot be contented with just enhancing the insurance knowledge of their underwriting and claims handling staff. There is also a crucial need to expand their fields of knowledge in a multi-discipline approach. For instance, they need to enhance their knowledge of the subject matter insured (product knowledge); the mechanics and risks of sea/land/river/air transportation; the packaging criteria; pre and post casualty control measures; ways to control litigation costs and country knowledge of the main trading nations. Acquisition of knowledge for underwriting and claims handling staff, like any many other professions, is a continuous process.

Product Knowledge

Many underwriting and claims handling personnel are rather poorly informed of the subject matter insured. Many are insufficiently equipped to understand the nature and characteristics of the subject matter insured. Hence, in determining whether it is a good risk that warrants a Class A coverage; or whether a particular mode of transport is suitable; or whether a particular damaged product can be sold in the market or to be condemned; they are largely left to the whims of the assureds or intermediaries.

Take for instance steel related cargoes. Many insurance personnel do not understand the complexities of the steel trade. Grade B steel products are being insured as though they are of Grade A materials. Similarly, in food grains and other agricultural products, losses sustained are being treated as transit loss covered by the policies when in reality, many of the losses can be traced to defects in seeding process; weather-derived diseases; poor crop husbandry; and harvesting and handling deficiencies before shipments. The same can be said of the timber trade and other vegetable oil business where many claims can be attributed to rust suspensions and other non-chemical based impurities which actually can be made good or even sold at substantially good prices even if downgraded or reprocessed.

Knowledge of vast categories of goods insured can be acquired through talks or short courses given by many trade associations and such talks can be organised through the Institute of Insurance or other insurers' associations.

Understanding the Transportation Systems

Today, goods are transported across the world by a multitude of transport modes involving mother carriers, feeder ships, inland barges, road, rail or even domestic air carriers. While the transport systems in Japan, Europe and US are highly developed, the same cannot be said in most countries.

The rail systems and roadways in many countries are in desperate needs of repairs or investment in infrastructure renewal. This also includes the fleet of inland barges and coastal ships used in delivering goods to far inland destinations. It is common to see poorly equipped coastal tankers being chartered to deliver parcel chemical or clean oil products from well-managed ocean tankers to inland river ports. The standard of tank preparation before loading is not observed and the interchangeability of the tank used is also not adequately monitored. This often results in contamination of products on arrival at the final destination. It is also not uncommon to find rickety open and uncovered trucks being used to carry expensive cargo to inland destinations.

Many insurers, under tremendous commercial pressure, are willing to cover door-to-door risks even though they may not have the slightest clue with regard to the state of the inland transport systems in the country of destination. In such a situation, insurers must be prepared to take inevitable losses rather than fortuitous losses. To increase awareness of the inland transport systems and the applicable legal regime governing the limit of liability for such inland carriers, insurers will do well by building up a file on useful data and historical records of the principal trading nations.

Packaging

One major factor contributing to frequent losses is the sufficiency and adequacy of packaging. Many of the losses suffered in transit, especially during inland transits, can be attributed to less than rigorous packaging being employed. Some packaging methods or materials are determined by shippers whilst some are left to forwarders engaged by the shipper to do the packaging and/or consolidation for shipment.

The normal excuse given by shippers is that a particular packaging material has been in use for numerous shipments without difficulties encountered and, therefore, the argument that insufficient packaging or inadequate packaging is the cause of loss cannot be accepted. To reinforce this point, I will cite a case involving medical basic ingredients shipped in paper cartons by air from India to Europe. On arrival, the paper cartons were found to have softened by moisture as a result of condensation during the airflight and the entire shipment was rejected by the Danish Health Authority for being unfit for human consumption.

The assured gave the excuse that the packaging was adequate and customary whilst ignoring the fact that frequent use of a certain packaging mode without apparent deficiency noted does not mean that the standard of packaging is adequate. A combination of human negligence, weather effects, and shortcomings of the aircraft storage control procedures can put to test whether a certain packaging mode is adequate. There are many similar cases that can be quoted.

Many shippers are also under intense pressure to trim their business costs. Rationalising the packaging methods or materials used is one cost-effective measure. Packaging materials and method used should be adequate to withstand the full rigours of handling and storage in many transport modes and the benchmark cannot be measured only against a particular mode such as truck transportation.

One of the effective ways for insurers to control their claims exposure is to focus on the packaging of the subject matter insured. Good, adequate and robust packaging can go a long way to reduce the scope and extent of damage to goods-in-transit.

Claims Handling

The importance of proper claims handling to ensure only valid claims are paid, cannot be overstated in determining the profitability of the business. It is a fact that insurers rely to a great extent on a network of insurance surveyors to keep claims in check. For some established insurers, great pains are taken to set up a panel of surveyors but this panel is realigned each time a new claims person is put in charge. It is important for insurers to take note that professionalism and loyalty work both ways.

If a survey firm is confident that their listing on the panel is based on merits and is not simply replaced by a change of claims manager, they will work with diligence and a degree of professionalism. As most surveyors can testify, to do a good job in obtaining important information or documents or other physical evidence, very often surveyors must go the extra mile. It is this ‘ extra push’, which very often, makes the difference. The other spectrum is to do ‘just enough’ and the pride of a job well done is relegated to the back-burner. So, many claim handlers do complain about the quality and standard of field surveyors.

It is also common practice that the benchmark of survey services is focused on costs. While it is undeniable that cost has to be controlled, it is also a fact that experienced professionals cannot be cheaply reproduced. They are expensive employees and the costs of employing such people will have to be passed on to users of such services. Globalisation and economy of scale will not alter this situation and in fact, with globalisation, experienced personnel are even harder to keep as their services are in demand.

Perhaps, insurers should take another look at these suggestions:

1. A reliable network of surveyors to be maintained. Once a panel is formed, removal from or addition to this panel should be based on merits and not on personal relationship. Surveys firms should be assessed on the quality of their employees; their knowledge of the local environment; contacts with salvage merchants and traders; and their contacts with service and repair workshops, whether locally, in the region or through Internet.

2. The quality of surveyors should be assessed based on their professional background and pay structure to stamp out corrupt practices.

3. Insurers should back up surveyors in the course of their work in dealing with assureds or their intermediaries in the course of claims handling.

The quality of survey report has a tremendous bearing on the ultimate success of recovery actions against the carriers. Many cases of good merits can be frustrated by poor reports with no concrete substantiation of evidence and facts.

Understanding the Threat of Fraudulent Practices in International Trade

Fraudulent activities in international trade are on the rise. These activities are not only confined to Malacca Straits but also to Vietnam, Philippines waters, parts of China, Central America, South America, parts of Africa and even in Europe. There is still no international order that can help to eradicate or minimise the threats of such criminal activities. The modus operandi of these fraudulent activities is a very complex web involving the planners, executioners, collaborators, distributors and some authorities at the point of sale.

To depend on law enforcement agencies or the courts in many countries to recover converted goods is still a dream. It is better for insurers to take precautionary measures than to become a victim of criminal acts. Insurers need to understand the types of maritime frauds prevalent in the market place and what are some of the possible steps that can be taken to mitigate the risks:

Types of Maritime Frauds

* Hijacking of ship by disgruntled crew to settle disputes with owners

* Hijacking of ship by organized syndicates with crew’s complicity

* Hijacking of cargoes with or without crew’s complicity

* Hijacking of ship and cargoes by crew or by organized syndicates

* Illegal detention of ship/cargo by owners to force payment of outstanding hire or demurrrage or detention charges

* Pirate attacks to plunder ship's stores, equipment and or cash

* Misrepresentation of the nature of goods shipped

How to prevent maritime frauds

* Investigate the ownership and background of operators including their share ownership, mortgages etc 

* If the ship is a chartered carrier, obtain all pre-chartering correspondence between charterers, shipbrokers and owners to determine the quality of shipowners and the shipbrokers.

* Obtain details of P & I coverage as well as hull and machinery coverage to determine the quality of insurance. 

* Obtain copies of vessel’s trading documents to establish the authenticity of registration/classification documents.

* Obtain details of crew (if possible) such as their nationality, age, qualifications, domicile address in order to draw up a character profile of the crew-very critical to determine whether they are guilty of complicity in the crime committed. 

* Investigate into the background of charterers, nature of their business, scale of their operations and location of their office. 

* Obtain evidence and investigate into the background of shippers, nature of business, historical aspects of sale transaction of missing cargo, payment terms of goods, how shipments were arranged, how carrying ships were selected, terms of bills of lading, legality of export and foreign exchange control procedures. 

* Identify the chain of buyers i.e. intermediate and final buyers, their background, if possible, and whether or not they qualify to claim under the policy, whether the import is legal and is covered by the necessary import permits. 

* Examine prevailing market conditions of the product that is the subject of crime.

Country Knowledge

Many insurers are less than well informed of the economic, political, social and legal environment of their principal trading nations other than the United Kingdom. If insurers want to ensure prudent measures to be taken to avoid the pitfalls in claims handling, they need to expand their country knowledge of their principal trading nations. The major trading nations I am referring to are China, India, European Community, East European Countries, Korea, Japan, United States and Russia.

There is a compelling need for insurers to compile country information and data (for quick reference) on the strengths and weaknesses of each of these countries, their technical abilities, customs regime and transaction restrictions, trade practices, political risks, quality of inland transport systems, judicial system, etc. Ask yourself these questions: How much do you know about a country’s legal system? How does the court system function in that country? Is there any avenue for application to court for access to the vessel for document inspection? Do you know enough of the ship’s arrest procedures in all these countries in respect of obtaining security for your claims, the issue of counter security, the issue of whether protective writ can be issued to protect time-bar, repercussions of wrongful arrest, sister and associate ship arrests, the law governing validity of the limitation fund etc?

Why are these questions so important? They are very important because without which, insurers will be heavily exposed to wrongful advice leading to massive wastage in the legal costs in either pursuing a recovery claim or defending a claim. Many insurers, due to the legacy of history, are comfortable with English law but, unfortunately, English law is not universally adopted. Continental law or a hybrid variation of English law is adopted in many trading nations.

Dispute Resolution

Traditionally, insurers tend to look to the court for resolving any disputes with assureds or reinsurers. But in today’s commercial world, there are alternative cost-effective dispute resolution options other than going to court to settle a commercial dispute. In India and China, for instance, it does not make sense to settle disputes by dragging them through the district, provincial high court and then the highest court of appeal. Increasingly, insurers should look at Arbitration and or Mediation processes to resolve commercial disputes.

Insurers in European countries are looking into all aspects of claim control possibilities and it is of no co-incidence that they are by far the boldest in trying out mediation and arbitration.

Arbitration

Arbitration as a dispute resolution process is very little understood amongst insurers in this part of the world. What is an arbitral process and how to commence an arbitration proceeding is something still unfamiliar to many insurers. In actual fact, the East Asian Branch of the Chartered Institute of Arbitrators and the Hong Kong International Arbitration Centre will be more than willing (I believe) to educate insurers through insurers’ associations or the Institute of Insurance in understanding the arbitration process..

The arbitration process needs to be understood and insurers will be well served if they are briefed on the advantages and disadvantages of arbitration such as : How arbitrators are appointed? The difference between a sole and a three-member tribunal; the definition of commencement of arbitration in preservation of writ; How to challenge and dismiss arbitrators guilty of misconduct? How to ensure transparency and accountability in the arbitral process? How to control the costs of arbitration? How to enforce an arbitration award in home country as well as in a foreign country? The right of appeal to the court etc.

Mediation

This is a process that has seldom been used by local insurers. From my experience as a mediator for foreign insurers, the results have been most gratifying. In most cases, it is a win-win situation, and unlike court or arbitration, the parties can walk away happy with the outcome (having the opportunities to have their views heard and tested against reality). Mediation is a poorly understood concept even among local insurers who are familiar with court proceedings.

The questions often asked are: How does mediation work? What is the difference between domestic and cross-border mediation? How to appoint a mediator? How can complex insurance claims be resolved through mediation? What are the advantages of mediation? If we proceed with mediation, can we revert to arbitration or court action at a later stage? Can a mediation agreement be binding on the parties? And, finally, what is the likely cost of mediation?

Mediation is hot topic in many countries. In construction, municipality and domestic family disputes, for instance, it is widely practised with good results. It is not possible to go into a substantive discussion on specific questions of the mediation process in this article as the depth of the subject will require a separate paper to do so.

The writer reckons that his views may not be shared by all but certainly, he hopes that this article will act as a catalyst to stir more general discussions among insurers to enhance the professional levels in the industry.

Capt Lee Fook ChoonACII, Master Mariner, LLM, Chartered ArbitratorToplis & Harding (Marine) LtdToplis & Harding (Recoveries) Ltd

LN56.03

GENERAL AVERAGE EXPLAINED

Classic definition of general average given by an English Judge Lawrence J in Birkley v Presgrave :

All loss which arises in consequence of extraordinary sacrifices made or expenses incurred for the preservation of the ship and cargo come within general average and must be borne proportionately by all those who are interested

GA is now defined in MIA 1906 s 6

(1) GA loss is a loss caused by or directly consequential on a general average act. It includes
ageneral average expenditure as well as a general average sacrifice.

(2) There is a general average act where any extraordinary sacrifice or expenditure is
voluntarily and reasonably made or incurred in time of peril for the purpose of preserving
the propertyimperiled in the common adventure. Rule A of York Antwerp Rules 1994 which in practice apply to the adjustment of general average provides :

“ There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.

The result of a GA act is a GA loss. GA losses include : the loss suffered by virtue of a GA sacrifice; loss or liability incurred by a GA expenditure, or any losses directly consequent upon a GA act.
The person who suffers a GA loss is entitled to claim a contribution from those who benefit from it in proportion to the values of the interests which have been sacrificed and those which have been saved. The liability for such contributors may in turn be a loss for which they can claim against their own insurers and is also described as a general average loss.

Differences between Particular Average and Particular Charges

PA loss is a partial loss of the subject matter insured caused by a peril insured against, which is not a general average loss or a particular charge.

“Particular Charges” are expenses incurred by or on behalf of the assured for the safety and preservation of the subject matter insured, other than particular average or general average. They include expenses of services ‘ in the nature of salvage’ rendered by the assured or his agents.

Examples of GA

Jettisoning part of cargo or ship's stores, scuttling the ship, cutting away masts or cables, extinguishing a fire by pouring water into a hold, voluntary stranding, putting the cargo into lighters, engaging salvage services, paying money to secure the vessel's release from detention, sale of part of the cargo, additional fuel consumption, employment of towage services, tipping the vessel to repair the propellers, incurring damage to property belonging to third parties

General Average losses include expenses of ship repairs and reconditioning cargo.

York Antwerp Rules

Generally widely accepted as can be seen by their frequent incorporation into charterparties, B/L and marine insurance policies. YA Rules revised regularly, the most recent times was 1994, 2000 and 2004. Consist of 7 lettered rules and 22 specific rules. GA claims adjusted mainly on principles of lettered rules though reasonable consideration are given to the specific rules. GA Rules had been developed since mid 19 century for the purpose of removing differences between municipal laws and for reaching general agreement on matters of details and principles.

Claims Procedures

A person claiming GA contribution can assert a lien. The lien is released in return for the defendants providing an average bond, whereby he undertakes to pay the contribution due and to provide particulars of the value of his property and security in the form of either or both of a cash deposit or more commonly, a guarantee issued by his insurers.

The shipowners will then appoint a GA average adjuster, who in turn carries out a detailed and often lengthy assessment of the rights and liabilities of all interested parties, though unless otherwise agreed, his adjustment is not binding on them.

SPECIAL FEATURES

- The right only arises from a maritime adventure in the nature of a voyage

- There must be a real danger

- The danger must be to a common adventure and the action taken must be necessary for the safety of the common adventure or a direct consequence of such action

- Duration of the common adventure (eg if a portion of cargo is discharged and a GA event followed , the discharged cargo should not be called upon to contribute)

- Port of Refuge expenses [“ the going into port, the unloading, warehousing, and reloading of the cargo and the coming out of the port, are at all events part of one act or operation contemplated, resolved upon and carried through, for the common safety and benefit, and properly to be regarded as continuous.” By Thesiger LJ in Artwood v Sellar]

- There must be a sacrifice or expenditure of an extraordinary nature

- The sacrifice or expenditure must be real

- The GA act must be intentionally incurred for the benefit of the common adventure

- The action taken must be reasonable

- Contribution may be claimed from and only from an interest when it is successfully brought to the place of termination of the adventure

- Substituted Expenses (towage of a vessel from a port of refuge, forwarding of cargo from a port of refuge, temporary repairs, the extra expenses of drydocking with cargo onboard, additional overtime and air freighting spare parts.


Capt Lee Fook Choon