1. Association of Average Adjusters Revisions to the York-Antwerp Rules Mega container ships – practicalities of declaring GA and casualty handling October 2015Presentation to members of the Hong Kong Shipowners Association Andrew Paton Managing Director, Richards Hogg Lindley Chairman, Association of Average Adjusters

2. Association of Average Adjusters (May 2015) Individual members (Fellows, Associates, Subscribers) 1 493 (38 countries) Representative members14

3. Association of Average Adjusters (May 2015) 2 Fellows (practising) UK Hong Kong Singapore Australia, Cyprus, Japan, New Zealand, USA (1 each) India 34 20 4 3 2 5 34

4. Associates New intermediate qualification between Associateship and Fellowship 3 Association of Average Adjusters (May 2015) 117 (22 countries)

5. 4 Management Committee-non UK resident Fellow -Associates (3) Education-on line training proposal -new intermediate qualification Website-www.average-adjusters.comwww.average-adjusters.com Overseas receptions for-Hong Kong, Piraeus, Singapore Members(2015) -Japan? (2016) Association of Average Adjusters

6. 5 Aims and Object of the Association (a)The promotion of professional standards and correct principles in the adjustment of marine insurance claims and general average by ensuring through examination or otherwise, that those entering into Fellowship or Associateship possess a high level of expertise (b)To achieve uniformity of practice amongst Average Adjusters by providing a forum for discussion and by establishing rules of practice where necessary (c)To ensure the independence and impartiality of its Fellows by imposing a strict code of professional conduct Association of Average Adjusters

7. 6 (d)To provide a service to the maritime community by establishing procedures by which advice on all aspects of marine claims may be obtained (e)To promote the professional interests of Fellows and Associates (f)To promote marine insurance education Association of Average Adjusters

8. Professionalism Integrity 7 Association of Average Adjusters

9. History-YAR 1950, 1974, 1974 as amended 1990, 1994, 2004 Why another revision?-Shipowners dislike of YAR 2004 CMI IGW-ICS -IUMI -IG P&I -Average Adjusters (AMD, AAA) CMI Conference-New York, May 2016 8 Revision of York-Antwerp Rules

10. 9 No desire to abolish GA Proposals only – not concluded comitemaritime.org/Review-of-the-Rules-on-General Average/0,27140,114032,00.html Not every single revision No obligation to use the new YAR Revision of York-Antwerp Rules

11. 10 Important Bigham Clause cap (Rule G) Salvage (Rule VI) Crew wages (Rule XI) Temporary repairs of accidental damage (Rule XIV) Commission (Rule XX) Interest (Rule XXI) Revision of York-Antwerp Rules

12. 11 Others Tug and tow (Rule B) Onus of proof (Rule E) Contributory values (Rule XVII) Cash deposits (Rule XXII) Revision of York-Antwerp Rules

13. 12 YAR 94 / YAR 2004 4.The proportion attaching to cargo of the allowances made in general average by reason of applying the third paragraph* of this Rule shall not exceed the cost which would have been borne by the owners of cargo if the cargo had been forwarded at their expense. Current proposal 4.The proportion attaching to cargo of the allowances made in general average by reason of applying the third paragraph* of this Rule shall not exceed the cost which would have been borne by the owners of cargo if the cargo had been forwarded at their expense. Remarks… Bigham Clause (Rule G) * Non Separation Agreement

14. 13 Bigham Clause (Rule G) No change, but Shipowners against inclusion of Bigham Clause

15. 14 Bigham Clause (Rule G) Cargo discharged and forwarded to destination1 September Repairs NSPOV completed and vessel ready to proceed on voyage31 December W&M, F&S, port charges for 4 months allowed in GA under NSA500,000 Cargo’s ppn of NSA GA allowances300,000 Cargo interests could have forwarded cargo to destination at own expense200,000 Bigham Clause cap – cargo contribution to NSA GA allowances limited to200,000

16. 15 Shipowners -We incur detention expenses at a port of refuge, but nevertheless deliver the cargo -Why should cargo be able to cap their contribution to expenses allowable in GA under the Non-Separation Agreement ? -Difference between cap and actual contribution not always recoverable from H&M insurance Cargo -Because we could have forwarded the cargo ourselves for a lesser amount than the NSA allowance Bigham Clause (Rule G)

17. 16 YAR 94-salvage allowable in GA YAR 2004-salvage not allowable in GA unless one party has paid salvage due from another party Shipowners-want 94 Rule Cargo-want salvage excluded where already apportioned and paid by the parties (LOF) Current proposal-salvage only allowed in GA in certain circumstances Salvage (Rule VI)

18. 17 Current proposals for allowing salvage in GA Subsequent accident resulting in loss or damage to property during voyage that results in significant differences between salved and contributory values Significant GA sacrifices of salved property Salved values manifestly incorrect and there is significantly incorrect apportionment of salvage expenses Any of the parties to the salvage have paid all or any proportion of salvage due from another party Significant proportion of the parties settled the salvage on substantially different terms Salvage (Rule VI)

19. 18 YAR 94-wages allowed in GA for: 1)Prolongation of voyage at sea as result of entering port of refuge/returning to port of loading. 2)Extra period of detention of port of refuge / loading for common safety or to effect repairs necessary for safe prosecution of voyage YAR 2004-allowed wages only as per 1) above Current proposal-restore position to YAR 94 Crew Wages (Rule XI)

20. 19 YAR 94 b.Where temporary repairs of accidental damage are effected in order to enable the adventure to be completed, the cost of such repairs shall be admitted as general average without regard to the saving, if any, to other interests, but only up to the saving in expense which would have been incurred and allowed in general average if such repairs had not been effected there. Current proposal (same as YAR 94 and similar to YAR 2004) b. Where temporary repairs of accidental damage are effected in order to enable the adventure to be completed, the cost of such repairs shall be allowed as general average without regard to the saving, if any, to other interests, but only up to the saving in expense which would have been incurred and allowed in general average if such repairs had not been effected there. Temporary Repairs of Accidental Damage (Rule XIV)

21. 20 Current proposal (similar to YAR 2004) c. No allowance shall be made under paragraph (b) except to the extent that the sum of the costs of temporary and permanent repairs actually effected exceeds the estimated cost of effecting permanent repairs at the port of refuge. Temporary Repairs of Accidental Damage (Rule XIV)

22. 21 Current proposal (similar to YAR 2004) To the extent that permanent repairs have not been completed at the time of the adjustment, the reasonable depreciation in the value of the vessel resulting therefore (as at the time of completing the voyage) shall be added to, or substituted for, the actual costs of permanent repairs included in the above calculation. No allowance shall be made under paragraph (b) except to the extent that the sum of the costs of temporary and permanent repairs actually effected exceeds the estimated cost of effecting permanent repairs at the port of refuge. Temporary Repairs of Accidental Damage (Rule XIV)

23. 22 c.No allowance shall be made under paragraph (b) except to the extent that the sum of the costs of temporary and permanent repairs actually effected exceeds the estimated cost of effecting permanent repairs to the port of refuge. Temporary Repairs of Accidental Damage (Rule XIV) TR (PoR)100,000 400,000 PR (as affected)300,000 PR (if effected at PoR)400,000 No additional cost- Therefore no allowance in GA for TR at PoR, regardless of savings, because no additional cost TR have to be considered as claim in PA100,000

24. 23 Temporary Repairs of Accidental Damage (Rule XIV) TR (PoR)100,000 600,000 PR (as effected)500,000 PR (if effected at PoR)400,000 Additional cost200,000 Savings in expense (discharge / storage / reloading cargo) by not effecting PR at POR150,000 Therefore allowance in full to GA for TR (PoR)100,000

25. 24 Temporary Repairs of Accidental Damage (Rule XIV) TR (PoR)100,000 600,000 PR (as effected)500,000 PR (if effected at PoR)400,000 Additional cost200,000 Savings in expense (discharge / storage / reloading cargo) by not effecting PR at POR75,000 Therefore allowance in GA limited to savings which less than cost of TR (PoR)75,000 Balance of cost of TR (PoR) to considered as claim in PA25,000 100,000

26. 25 Current proposal-based on YAR 2004 Shipowners-prefer YAR 94 and consider insufficient discussion -implications for H&M underwriters Outcome-possibly no change ? Temporary Repairs of Accidental Damage (Rule XIV)

27. 26 YAR 94 a. A commission of 2 per cent on general average disbursements, other than the wages and maintenance of master, officers and crew and fuel and stores not replaced during the voyage, shall be allowed in general average. Current proposal (same as YAR 94 para b. and similar to YAR 2004) a. The capital loss sustained by the owners of goods sold for the purpose of raising funds to defray general average disbursements shall be allowed in general average. Commission (Rule XX) Remarks…

28. 27 Commission (Rule XX) Current proposal-abolish the 2% commission Shipowners and other stake holders-agree

29. 28 YAR 94 Interest shall be allowed on expenditure, sacrifices and allowances in general average at the rate of 7 per cent per annum, until three months after the date of issue of the general average adjustment……… Current proposal a. Interest shall be allowed on expenditure, sacrifices and allowances in general average until three months after the date of issue of the general average adjustment………. Interest (Rule XXI) (No change)

30. 29 Interest (Rule XXI) YAR 2004-‘Each year the Assembly of the Comité Maritime International shall decide the rate of interest which shall apply. The rate shall be used for calculating interest occurring during the following calendar year.’

31. 30 Current proposal b. 12 month ICE LIBOR for currency of adjustment as announced on 1 January of calendar year + 4%. If adjustment prepared in currency for which no ICE LIBOR rate announced, rate to be 12 month US Dollar ICE LIBOR. Interest (Rule XXI) Shipowners and other stake holders-agree

32. 31 YAR 94 1. There is a common maritime adventure when one or more vessels are towing or pushing another vessel or vessels, provided that they are all involved in commercial activities and not in a salvage operation. When measures are taken to preserve the vessels and their cargoes, if any, from a common peril, these Rules shall apply Current proposal 1. There is a common maritime adventure when one or more vessels are towing or pushing another vessel or vessels, provided that they are all involved in commercial activities and not in a salvage operation. When measures are taken to preserve the vessels and their cargoes, if any, from a common peril, these Rules shall apply. Tug and Tow (Rule B) (No change)

33. 32 YAR 94 2. A vessel is not in common peril with another vessel or vessels if by simply disconnecting from the other vessel or vessels she is in safety; but if the disconnection is itself a general average act the common maritime adventure continues. Current proposal 2. A vessel is not in common peril with another vessel or vessels if she disconnects from the other vessel or vessels and thereby places herself in safety; if the vessels are in common peril and one is disconnected either to increase the disconnecting vessel’s safety alone or the safety of all vessels in the common maritime adventure the disconnection will be a general average act. Tug and Tow (Rule B)

34. 33 YAR 94 - Current proposal 3. Where vessels involved in a common maritime adventure resort to a port or place of refuge allowances under these rules may be made in relation to all of the vessels. Allowances in general average shall cease at the time that the common maritime adventure comes to an end. Tug and Tow (Rule B)

35. 34 YAR 94 1. The onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average. Current proposal 1. The onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average. Onus of Proof (Rule E) (No change)

36. 35 YAR 94 2. All parties claiming in general average shall give notice in writing to the average adjuster of the loss or expense in respect of which they claim contribution within 12 months of the date of the termination of the common maritime adventure. Current proposal 2. All parties to the adventure shall, as soon as possible, supply particulars of value in respect of their contributory interest and, if claiming in general average, shall give notice in writing to the average adjuster of the loss or expense in respect of which they claim contribution, and supply evidence in support of such notified claim. Onus of Proof (Rule E)

37. 36 YAR 94 3. Failing such notification, or if within 12 months of a request for the same any of the parties shall fail to supply evidence in support of a notified claim, or particulars of value in respect of a contributory interest, the average adjuster shall be at liberty to estimate the extent of the allowance or the contributory value on the basis of the information available to him, which estimate may be challenged only on the ground that it is manifestly incorrect. Current proposal 3. Failing such notification or if any party does not supply particulars in support of a notified claim, or evidence of value in respect of a contributory interest within 12 months of the loss or payment of the expense, the average adjuster shall be at liberty to estimate the extent of the allowance or the contributory value on the basis of the information available. This estimate shall be communicated to the party in question in writing. This estimate may be challenged within 60 days of receipt of the communication on the grounds that it is manifestly incorrect. Onus of Proof (Rule E) Remarks…

38. 37 Onus of Proof (Rule E) Changes to 2 and 3 intended to meet the argument that under strict construction of existing wording an inquiry from the average adjuster “restarts” the clock; considered preferable that it should not Considered fair that any estimate should be communicated to the party concerned, but that the grounds for challenging such estimate shall be limited; to avoid delay caused by trivialities

39. 38 YAR 94 - Current proposal 4. Any party to the adventure pursuing a recovery from a third party in respect of sacrifice or expenditure claimed in general average, shall so advise the average adjuster and, in the event that a recovery is achieved, shall supply to the average adjuster full particulars of the recovery within 2 months of receipt of the recovery. Onus of Proof (Rule E) Remarks…

40. 39 Onus of Proof (Rule E) Introduces obligations to advise the adjuster when recoveries are being pursued (so that a suitable note can be included in the GA adjustment) when actual recoveries are made

41. 40 YAR 94 (ii) The value of the cargo shall include the cost of insurance and freight unless and insofar as such freight is at the risk of interests other than the cargo, deducting therefrom any loss or damage suffered by the cargo prior to or at the time of discharge. Current proposal (ii) The value of the cargo shall include the cost of insurance and freight unless and insofar as such freight is at the risk of interests other than the cargo, deducting therefrom any loss or damage suffered by the cargo prior to or at the time of discharge. Any cargo may be excluded from the general average should the average adjuster consider that the cost of including it in the adjustment would be likely to be disproportionate to its eventual contribution. Contributory Values (Rule XVII)

42. 41 YAR 94 b. To these values shall be added the amount allowed as general average for property sacrificed, if not already included, deduction being made from the freight and passage money at risk of such charges and crew’s wages as would not have been incurred in earning the freight had the ship and cargo been totally lost at the date of the general average act and have not been allowed as general average; deduction being also made from the value of the property of all extra charges incurred in respect thereof subsequently to the general average act, except such charges as are allowed in general average or fall upon Current proposal b. To these values shall be added the amount allowed as general average for property sacrificed, if not already included, deduction being made from the freight and passage money at risk of such charges and crew’s wages as would not have been incurred in earning the freight had the ship and cargo been totally lost at the date of the general average act and have not been allowed as general average; deduction being also made from the value of the property of all extra charges incurred in respect thereof subsequently to the general. average act, except such charges as are allowed in general average. Where Contributory Values (Rule XVII)

43. 42 YAR 94 the ship by virtue of an award for special compensation under Art. 14 of the International Convention on Salvage, 1989 or under any other provision similar in substance. Current proposal payment for salvage services has not been allowed as General Average by reason of Rule VI sub- paragraph b, deductions shall be limited to the amount paid to the salvors including interest and salvors’ costs Contributory Values (Rule XVII) Remarks…

44. 43 Contributory Values (Rule XVII) New wording is made necessary by reason of the proposed changes to Rule VI; where salvage is not allowed in GA, the deduction of extra charges (ie salvage) has to be made

45. 44 YAR 94 Where cash deposits have been collected in respect of cargo’s liability for general average sacrifice or special charges, such deposits shall be paid without any delay into a special account in the joint names of a representative nominated on behalf of the shipowner and a representative nominated on behalf of the depositors in a bank to be approved by both. The sum so deposited together with accrued interest, if any, shall be held as security for payment to the parties entitled thereto of the general Current proposal 1) Where cash deposits have been collected by the average adjuster in respect of cargo’s liability for general average, salvage or special charges, such deposits shall be paid without any delay into a special account, earning interest where possible, in the name of the average adjuster. The adjuster shall issue a deposit receipt in respect of all deposits. Treatment of Cash Deposits (Rule XXII)

46. 45 YAR 94 average, salvage or special charges payable by cargo in respect of which the deposits have been collected. Payments on account or refunds of deposits may be made if certified to in writing by the average adjuster. Such deposits and payments or refunds shall be without prejudice to the ultimate liability of the parties. Current proposal 2) The special account shall be constituted in accordance with the law regarding client or third party funds applicable in the domicile of the adjuster. The account shall be held separately from the Adjusters own funds, in trust or in compliance with similar rules of law providing for the administration of the funds of third parties Treatment of Cash Deposits (Rule XXII)

47. 46 Current proposal 3) The sum so deposited, together with accrued interest, if any, shall be held as security for payment to the parties entitled thereto of the general average, salvage or special charges payable by cargo in respect of which the deposits have been collected. Payments on account or refunds of deposits may only be made when such payments are certified to in writing by the average adjuster and advised to the depositor requesting their approval. Upon the receipt of the depositor’s approval, or in the absence of such approval within a period of 90 days, the average adjuster may deduct the amount of the payment on account or the final contribution from the deposit. Where refunds are due to the depositor, these may only be made upon surrender of the original deposit receipt. 4) All deposits and payments or refunds shall be without prejudice to the ultimate liability of the parties. Treatment of Cash Deposits (Rule XXII) Remarks…

48. 47 Treatment of Cash Deposits (Rule XXII) Complete revision of rule necessary due to modern banking practices regarding joint accounts Whilst natural for responsibility for holding of deposits to fall on the adjuster, considered necessary to set basic rules for protection of parties involved; both depositors and ultimate GA creditors

49. Numbered Rule-Role of the Average Adjuster Guidelines-Best Practice for Average Adjusters Rule unlikely-IWG redrafting the guidelines 48 IUMI Proposal

50. Declaration of General Average General Average security Casualty handling (distressed cargo) 49 Mega Container Ships

51. 50 Declaration of General Average GA (cargo) sacrifice-fire / explosion -flooding of holds -wetted cargo Duty of shipowners to declare GA and obligation to have an adjustment prepared? -English law cases say obligation exists to have a GA adjustment prepared

52. 1,000s of cargo interests Containers (including shipper owned) Complex VSA / slot charter arrangements –release of manifests / confidentiality –B/L different YAR regimes 51 General Average Security

53. collect Average Bonds ? S&P rating requirement ? large number of uninsured interests – cash deposits abandoned containers difficulties of exercising a lien on containers 52 General Average Security

54. Security wording issues common YAR regime ‘It is hereby agreed that the General Average shall be adjusted according to the York-Antwerp Rules 1994’ 53 General Average Security

55. Limitation ‘Any period of prescription, whether provided by statute law, contract or otherwise, shall commence to run from the date upon which the general average adjustment is issued.’ 54 General Average Security

56. Enforcement ‘This agreement shall be governed by English Law and the High Court of Justice of England and Wales shall have exclusive jurisdiction of that Court.’ ‘We agree to nominate an address for service proceedings under this Guarantee in England and Wales within 7 days of a request by the Shipowners or their lawyers to do so.’ 55 General Average Security

57. 56 Adjusters with sufficient resources Asia and Europe offices to collect security on 24 hours basis language skills computers/database expertise experienced staff General Average Security

58. 57 Port of refuge ‘MSC Flaminia’ issue First class GA surveyors work with owners, P&I, H&M, cargo, agents, authorities etc Casualty handling (distressed cargo)

59. 58 Disposal of extinguishing water test analysis disposal plants ‘top face’ – road tankers water – sea tankers sludge Casualty handling (distressed cargo)

60. 59 Shoreside special lifting equipment bund washing facilities disposal of TL containers Casualty handling (distressed cargo) Photos…

61. Considerable quayside area 60

62. Bund concrete block perimeters – fully sealed to the quayside 61

63. Sealing of quayside drains 62

64. Speciality built steel trays to avoid water leaking from containers 63

65. Steel tray 64

66. Steel tray 65

67. Difficult discharge 66

68. 67 Difficult discharge

69. Loose cargo in hold 68

70. Bulging container (wetted paper) 69

71. Washing basin 70

72. 71 Washing basin

73. 72 Washing basin

74. Assessment of DG cargo 73

75. Hazardous total loss cargo 74

76. Disposal basin for total loss cargoes and containers 75

77. Destruction of total loss containers 76

78. Washing cargo (copper rod wire) with residual value 77

79. Washing cargo (aluminium) with residual value 78

80. 79 extinguishing water damage / loss to cargo and containers (GA sacrifice) costs of pumping out and disposal of extinguishing water costs of discharge of extinguishing water damaged containers Allowances in GA

81. 80 costs of storage for reasonable period of extinguishing water damaged cargo up to time of forwarding or disposal costs of washing such containers costs of disposal of total loss cargo and containers due to extinguishing water Allowances in GA

82. 81 All such costs are direct consequence of the GA act (intentional flooding of hold to extinguish the fire) Charges of the GA surveyors also allowed in GA Allowances in GA

83. 82 fire damage / loss to cargo and containers disposal of any total loss containers due to fire (expense for consideration of P&I Association) Not Allowances in GA