The Language of Average
Averages represent a technical and rather arcane branch of maritime law which even many modern maritime lawyers view with trepidation. Today, Averages are dealt with by specialist ‘Average adjusters’, who serve a long apprenticeship and must pass a series of examinations before they are recognised as associates or fellows of the Association of Average Adjusters. I here provide a short explanation of the language used to talk about Averages.
Once it had been decided that an incident had taken place which warranted the use of an Average procedure, an Average was ‘declared’. For heuristic reasons, I sometimes refer to a shipmaster ‘declaring’ Average on his arrival in port, but a shipmaster could not do this unilaterally. This was done in conjunction with the receiving merchants or by a recognised authority with jurisdiction over Average. With a Particular Average (PA), the ‘declaration’ could be as simple as recognising that the shipmaster was not responsible for the damage in question and that the owner of the affected property had to bear the cost; with a General Average (GA), this meant recognising that the damages had to be made good by all interested parties. ‘Adjustment’ refers to the process through which it was decided which Average was appropriate, which damages were eligible for the Average, establishing who needed to contribute, and how much they owed.
For a GA, a ‘contribution rate’ had to be determined: this was the percentage of the total overall value of the venture which had been lost, and thus the rate at which each interested party had to contribute to make good the loss. For example, if a jettison of cargo had been made worth 5 per cent of the overall value of the voyage, then all interested parties had to contribute 5 per cent of the value of their investment. This contribution rate was arrived at by means of a simple division: those damages which were deemed eligible for GA were divided by the total value of the voyage minus the value of any property which was not deemed eligible to contribute. The question of which things should be deemed eligible has been central to almost all disagreement surrounding GA. The eligible damages in a GA are sometimes referred to as the ‘active mass’; the sum decided upon as the eligible value of the voyage is referred to as the ‘passive mass’.
1 This is following the usage of Giuseppe Felloni, who noted the potential of GA as a source of historical economic data in the 1970s. See Giuseppe Felloni, ‘Una fonte inesplorata per la storia dell’economia marittima in età moderna’, Atti della Società Ligure di Storia Patria, nuova serie 38 (1998), 843–60. The contribution rate is thus the active mass divided by the passive mass, usually expressed as a percentage. Property included in the passive mass is said to ‘contribute’ to the GA. Both inanimate property, and the owners of that property, can be said to ‘contribute’ to an Average.
Finally, I have capitalised the words General Average and Average throughout where the words refer to a maritime Average. When referring to a mathematical average, I have used lower case.