The Present and Future of GA
Just as international organisations begin to show a renewed interest in the possibilities of risk sharing, GA itself is once again under renewed scrutiny in some quarters after the grounding of the ship
Ever Given in the Suez Canal. Yet calls for reform and abolition of GA are nothing new, as we have seen. In the years leading up to the reforms to the York-Antwerp Rules agreed in Vancouver in 2004, the International Union of Marine Insurance (IUMI) called for limiting the scope of GA by restricting it to ‘common safety’ demands, i.e. that any expense admitted should be strictly related to saving the ship and cargo in a situation of immediate peril. The demand that GA be reigned in in this way has been periodically made for at least the last 300 years.
1 Cornah, ‘The road to Vancouver’, p. 156. There were also calls to abolish GA in scholarly literature made over the same period, following in a tradition which is only somewhat younger.
2 Mukherjee, ‘The anachronism in maritime law’; on this see also Knut Selmer, The Survival of General Average: A Necessity or an Anachronism? (Oslo: Oslo University Press, 1958); Musolino, ‘A relic of the past’. For GA’s most trenchant abolitionists, the institution is a remnant of a ‘primitive era’ which points to ‘retardation rather than advancement’.
3 Mukherjee, ‘The anachronism in maritime law’, pp. 196, 199. For the legal scholar Proshanto Mukherjee, it is an ‘anachronism rooted in a romantic past’. For the Liverpool underwriter C.H. Johnson in 1925 it was ‘an effete but time-honoured custom … so opposed to modern ideals of economy and time, labour and money’.
4 Quoted in Mukherjee, ‘The anachronism in maritime law’, p. 200. For the Lloyd’s underwriter Douglas Owen in 1894, the system of GA was ‘stupendous and compound-comminuted’, sustained by ‘Average adjusters and legal faddists’.
5 Ibid. The 1877 Report of the Committee of Lloyd’s on GA found it ‘vast and complicated … almost intolerable’, and its representative at the Antwerp Conference that birthed the York-Antwerp Rules claimed it was ‘a nest of fraud and abuses … rendered obsolete by modern insurance’.
6 International Union of Marine Insurers, ‘Position paper of the International Union of Marine Insurers (“IUMI”): York-Antwerp Rules – CMI Questionaire’ (2013), available at <https://comitemaritime.org/work/review-of-the-rules-on-general-average/> [accessed 31 January 2024], p. 3. Stripped of its more bombastic rhetoric and amorphous references to ‘modernity’, ‘rationality’, and ‘progress’, the practical argument against GA can be boiled down to the fact that it has become too complicated thanks to the number of interests involved. It therefore costs too much and takes too long to resolve, to everyone’s eventual detriment.
7 Mukherjee, ‘The anachronism in maritime law’, p. 198. In short, the transaction costs now outweigh the benefit. This central problem is exacerbated by the ‘different laws’ and ‘divergent practices’ regarding GA that have remained resistant to decades of attempts at systemisation.
8 Ibid. An additional issue sometimes raised is that the majority of GAs were likely to have been caused by ship or crew fault, and that the procedure is thus also inequitable.
9 International Union of Marine Insurers, ‘Position paper’, p. 3. Critics maintain that insurance could fill any gap left by GA, with hull insurance policies covering extraordinary expenses incurred by the vessel, and insurance policies covering sacrificed property.
10 Mukherjee, ‘The anachronism in maritime law’, p. 200. Absorption clauses – whereby the hull insurer absorbs GA-eligible expenses that are too small to warrant a GA declaration – presage how this might work in practice.
11 ‘General Average Absorption Clause 2018’, <www.bimco.org/contracts-and-clauses/bimco-clauses/current/general-average-absorption-clause-2018> [accessed 30 January 2024]. If this proves too big a step for the international maritime business community, many have hoped – as the IUMI did in the run up to 2004 – that GA can be returned to its ‘original’ focus on common safety rather than taking on an ever-increasing remit thanks to the common benefit approach.
12 Mukherjee, ‘The anachronism in maritime law’, p. 208. This criticism is not new, but more recents articulations of it threaten to introduce a geopolitical edge into discussions that were previously technical in nature and responded to sectoral interests. In 2022 in reaction to the
Ever Given case, Xie Ming argued that the
Ever Given case
may not qualify as a GA under Chinese law, since Article 193 of China’s maritime law outlines a ‘common safety’ approach to GA and the vessel faced no immediate peril whilst lodged in the canal (there is no reference to the YAR in his article).
13 Xie Ming, ‘Legality, rationality of general average for MV Ever Given’ (2022), <https://law.asia/legality-and-rationality-mv-ever-given/> [accessed 10 August 2023]. Since the majority of the half-a-billion-dollar claim is reported to be an undisclosed fee paid in compensation to the Suez Canal Authority, there would certainly be a case against the GA when defined in this way.
14 Sarll, ‘The “Ever Given”’, p. 8. Xie then goes on to suggest that GA might be improved by allowing just 50 per cent damages to be made good through collective contribution when the property involved is not in immediate peril (i.e. a common-benefit situation). Though this is presented as an expansion of GA’s remit (as indeed it is if we start from Article 193 of China’s Maritime Law), when compared to the YAR it actually represents a diminuation of its scope. ‘As China grows more powerful’, Xie concludes, ‘it is necessary to examine the impact of this incident on the country in order to safeguard China and the world’s shipping interests’.
15 Ibid.Whatever the precise motivation behind connecting reform of GA to a broader recognition of China’s power, the argument presents some curious parallels with a memorandum received by the Tuscan authorities in 1670. The English resident, John Finch, also expressed dissatisfaction with GA rules; he too claimed that his own national state’s legislation could better protect merchants by providing an arbitrary limit on the ‘pretensions’ of shipmasters.
16 p. 121. The seventeenth-century English state, finding itself in a new position of considerable naval and commercial power, was not so interested in the details of General Average law in the end, but did see in its difficulties an opportunity to obtain greater jurisdiction and sway over commerce.
17 p. 129. It is possible that Xie’s remark that to the effect that ‘the revision … of maritime legal systems … will provide not only assurance … but also proposals from China for the formulation of maritime legislation and regional rules by the countries along the routes’ hints at a not wholly dissimilar agenda.
This book is not an analysis of contemporary maritime risk management so will not claim any special insight into GA’s future. My own opinion, for what it is worth, is that any benefits derived by abolishing GA (which is, at any rate, dependent on a clause voluntarily inserted into freight contacts) would clearly be outweighed by the confusion, uncertainty, and delay resulting in the medium-term from its abolition. Furthermore, many of the contentious issues – master and crew liability for the accident, admissibility of certain expenses – would presumably remain. Where a history of risk sharing can contribute to the debate more definitely regards the specifically historical claims that often accompany arguments about GA, which, interestingly, tend to be lent upon more by critics of the institution rather than defenders. The first point is that GA has always attracted a degree of controversy ever since the Late Middle Ages when merchants stopped travelling with their goods and masters tended to become agents rather than co-adventurers.
18 Addobbati, ‘Principles and developments’, p. 164; De ruysscher, ‘Maxims, principles and legal change’, p. 275. There is a long history of jurists, merchants, and above all professional underwriters complaining about GA, and, in the latter case, calling for its abolition. This observation is not a simple declaration of
plus ça change, plus c’est la même chose: the fact that there have always been critics does not automatically imply that their complaints can thus be safely ignored. But it does mean that the suggestion, repeated for almost 200 years, that very recent developments have rendered GA unworkable and unacceptable should be taken with a grain of salt. It should certainly put paid to the lazy argument that GA should be abolished because it is inherently ‘unmodern’, ‘anachronistic’, or ‘unsophisticated’.
GA has always by its very nature tended to be something of a shipmasters’ tool. Even though shipmasters now have much less opportunity to defray running costs via GA, the structure of the instrument tends to arouse suspicion on the part of cargo interests (and their insurers) who are by the laws of mathematical average far more likely to be on the receiving end of GA declaration than its beneficiaries. Furthermore, voluntary actions on the part of the crew on the one hand and the influence of outside forces on the other are disentangled only with great difficulty, as even the ancient Greeks knew.
19 See pp. 93–4. Furthermore, GA has never been a straightforward procedure to administrate. Early modern calculators may not have had to deal with modern container ships, but they still had to deal with tens or even hundreds of merchants in multiple jurisdictions and with multiple cargoes – all of this using significantly less information technology than we have at our disposal. An interesting statistical comparison can be offered in this regard. In an analysis of over 1,700 cases from the 1990s, fees for Average adjusters were estimated to represent 10 per cent of GA payments: in seventeenth-century Tuscany, the administrative and legal costs of processing cases represented 9 per cent of all payments.
20 International Union of Marine Insurers, ‘Position paper’, p. 3. A related observation concerns the desire to return GA to its ‘original’ state by restricting its scope to the common safety of the vessel and excluding expenses made for the common benefit of the voyage.
21 Xie, ‘Legality, rationality of general average’; Mukherjee, ‘The anachronism in maritime law’, p. 208. See Cornah, ‘The road to Vancouver’. This strand of criticism likewise has a long history:
I am not able to approve it, because Average, or rather maritime contribution, does not have a proper place unless there should be a cut or a jettison in order to lighten a labouring ship … I believe that these expenses ought not to be made good by the merchants or the owners of the merchandise, as they are more made for the fitting out and repairing of the ship than on account of saving the goods.
22 Casaregi, Discursus legales de commercio, vol. 1, p. 281.Such sentiments were expressed as early as 1707 by Giuseppe Casaregi. Yet the apparently straightfoward continuity between the Lex Rhodia de Iactu and modern GA is quite illusory. In the many intervening centuries, there were lots of different rules regarding common contribution, which, in some cases, expanded the institution into a full-blown form of mutual insurance. The consolidation of these practices under the rubric of ‘(General) Average’ in a form that we can broadly recognise only occurred in the early modern period.
For most of its history, moreover, GA has been a tool for the common benefit. Even the collection of Roman juridical opinions contained in the Lex Rhodia does not explicitly limit GA to instances of the common safety, and Roman laws concerneding contribution probably expanded in scope over time. For most of GA’s history, it has been extraordinary expenses – not the straightforward cases of jettisoned cargo for common safety – that have occasioned the largest and most controversial GAs, not least because their ‘voluntary’ and sometimes ‘extraordinary’ aspects are often more difficult to prove. The ‘original’ GA restricted to preserving common safety in peril has more often than not been an exercise in wishful thinking. Ironically, for an instrument whose archetype was jettison during a storm, early modern GA was most useful when confronting the unpredictability of human affairs.