THE 2016 RULES

Apportioned
Ship, value £100,000 pays £2,280
Cargo A arrived value £96,000
add: made good £4,000
£100,000 pays £2,280
Cargo B value £500,000 pays £11,400
£700,000 pays £15,960

Balances
Shipowner receives:
Allowances inclusive of interest £11,400
deduct: received on account £6,000
interest attaching thereto – 1 year @ 7% £420
£6,420
£4,980
and pays general average contribution £2,280
receives on balance £2,700

Cargo A receives:
amount made good, including interest £4,560
deduct: received on account £2,000
interest attaching thereto – 1 year @ 7% £140
£2,140
£2,420
and pays general average contribution £2,280
receives on balance £140
£2,840

Cargo B pays:
general average contribution £11,400
less: advanced on account £8,000
credit for interest thereon – 1 year @ 7% £560
£8,560
pays on balance £2,840

Currency of adjustment and rates of exchange

33.27 Although the delegates at the Sydney Conference were not able to bring
themselves to approve a text to be incorporated into the scheme of the Rules to regulate
the interconnected questions of the currency in which an adjustment should be prepared
and the rates of exchange to be employed in converting allowances in other currencies
into the currency of the adjustment, these subjects had been widely researched within
both the AIDE and CMI in the run-up to the Conference; indeed, these topics had been
placed first on the list of questions asked of national Maritime Law Associations in part
B of the questionnaire despatched by the Chairman of the CMI International Sub-
Committee in 1991.

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 RULE XXI

33.28 In order to appreciate the desirability of establishing some international rule on

these related subjects – or at least some internationally accepted practice – it is perhaps
useful to observe how both jurisprudence and the practice of adjusters have changed
under the influence of commercial and economic considerations.

Anglo-American jurisprudence up until the 1960s

33.29 The general average adjustment should be prepared in the national currency of
the port of destination. In broad terms, the rate for exchanging general average admis-
sions into the currency of adjustment should be that ruling at the time of the loss, and not
that at the time of preparing the adjustment. The cases in which these general principles
were expressed were as follows:
• In England, Noreuro Traders Ltd. v. Hardy7 and Chandris v. Argo Insurance
Co. Ltd.8
• In the United States, The Arkansas.9

Under the commercial influences operating in the 1960s and 1970s

33.30 In some instances bills of lading and charterparties would stipulate for any case
of general average to be adjusted in a specified currency – frequently, but not always, US
dollars. For this purpose it became the accepted practice of adjusters to exchange the con-
tributory values and amounts made good for general average sacrifice (other than dis-
bursements) into the specified currency at the rate of exchange prevailing at the
termination of the adventure, and for disbursements to be exchanged at the rate prevailing
when payment had been made. Influenced by these tendencies, an AIDE Working Group
drafted two alternative recommended clauses dealing with the currency of adjustment and
rates of exchange, and included them in a booklet of recommended clauses for insertion
into bills of lading and charterparties published in 1981.10

Changes in the law in the 1980s and thereafter

33.31 Rather belatedly, the world’s legal systems came to recognise that the
majority of international trade was financed not so much by transactions in domestic
currencies, but in a relatively few stable currencies which were readily convertible. So
far as English law is concerned, the breakthrough came with the case of Miliangos v.
George Frank (Textiles)11 in which the English courts were prepared for the first time
to give judgment in a currency other than sterling. From there it was a short step to the
recognition of international currencies in shipping transactions. See The Despina R and
The Folias.12
33.32 The rationale now developed from these cases was that, irrespective of the
nature of the transaction, a plaintiff was entitled to judgment in the currency in which he
had “felt his loss”, i.e. the currency in which he maintained his accounts.

7 Noreuro Traders Ltd. v. Hardy [1923] 16 Ll.L.Rep. 319.

8 Chandris v. Argo Insurance Ltd. [1963] 2 Lloyd’s Rep. 65.
9 Det Forenede Dampskibsselskab v. Insurance Co. of North America (The Arkansas), 1929 AMC 581.
10 See report of the AIDE Working Group on General Average Clauses presented to the Xth General
Assembly at Cambridge 1979.
11 Miliangos v. George Frank (Textiles) Ltd. (H.L.) [1976] 1 Lloyd’s Rep. 201.
12 The Despina R and The Folias (consolidated in H.L.) [1979] 1 Lloyd’s Rep. 1.

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 THE 2016 RULES

33.33 The practice of adjusters has followed these developments fairly closely and
can now be said to be reasonably well settled, but difficulties continue to arise when, in
addition to the shipowner’s claim in the currency in which he keeps his accounts, there
are also a number of cargo claims in a different currency or currencies.
33.34 When this is the case, and unless a specific currency has been selected for the
adjustment by the terms of the bill of lading or charterparty, the adjuster has to do his best
to solve the problem in one of the following ways:
1. To select a common currency for the establishment of the contributory values and use this
as the basis for apportioning each of the various claims in the currencies in which they have
been established. So far so good, but the system becomes complicated after the apportion-
ment of the total of the admissions in each currency, at which stage the debit and credit cur-
rencies in each currency have to be assembled and set off at the rates of exchange ruling at
the time of adjustment. Although theoretically fair and equitable, this system adds to the
complexities of the final stages of adjustment as well as in the settlements to be made there-
under.
2. To select a “currency of convenience”, taking into consideration the currencies in which
the major claimants keep their accounts, and considering which of them has remained, and
is likely to continue to remain, relatively stable vis-à-vis the others. In extreme cases, it
may be prudent for the adjuster to seek the agreement of the claimants to the currency pro-
posed for the adjustment.

33.35 The conundrum – how to avoid the effect of currency variations – has exercised
the minds of average adjusters for as long as the author can remember. Since no one can
predict how the value of different currencies will move between the date of incurring the
expense or suffering the sacrifice and the date when the adjustment will be issued, the
nearest one can get to a solution in practice is to select for the adjustment a currency
offering the best chance of stability or, better still, a worldwide index to which all national
currencies are related. This approach was considered very seriously during the run-up to
the Sydney Conference, and was expressed in two different ways, the Americans canvass-
ing the extended use of clauses in bills of lading and charterparties stipulating for adjust-
ment in United States currency, and the BMLA proposing formally the introduction of a
new paragraph into Rule XXI in the following terms:
Unless the parties have agreed that the adjustment shall be prepared in a specific currency, the
adjustment shall be prepared in Special Drawing Rights (SDRs). For this purpose the contrib-
utory values and the amounts made good for general average sacrifice (other than disbursements)
shall be converted into SDRs or the specified currency at the rate of exchange prevailing at the
termination of the adventure, and disbursements shall be so converted at the rate of exchange
prevailing on the dates when payment was made. The final balances so calculated shall be paid
to the creditors in the currency of their choice at the rate of exchange prevailing on the date of
settlement. Where no official SDR exchange rate is quoted for any currency, conversion to and
from SDRs shall be made by reference to United States dollars.

33.36 The BMLA proposal excited a great deal of interest when it was discussed at
working meetings of the International Sub-Committees of the CMI and AIDE. The
latter, being particularly concerned with the mechanics of adjustment, appointed two
members of its Working Group G (Mr Gerritzen and Mr Hebditch) to investigate what
practical problems there might be in ascertaining the information necessary for the

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 RULE XXI

preparation of an average adjustment, and to provide guidance as to the easiest way of

obtaining this information. The results of their research were incorporated into the
AIDE Report.13 They concluded that there was no problem: the current rates of
exchange for SDRs are widely available in the international and national financial
press; rates of exchange for SDRs of an older date could always be obtained at the
central bank of the country where the average adjuster is resident. Notwithstanding this
endorsement, the AIDE recommendation, approved at its General Assembly in Prague
in September 1993, was that, in the absence of agreement by the parties, the average
adjuster should have a discretion to select an appropriate currency. The AIDE recom-
mended text for insertion into Rule XXI:
Unless the parties have agreed that the adjustment shall be prepared in a specific currency, the
adjustment shall be prepared in such currency or currencies as may be equitable in the interests
of the parties, having regard to the currencies in which the major claimants in general average
have sustained financial loss.
For this purpose the contributory values and the amounts made good for general average sac-
rifice (other than disbursements) shall be converted into the currency of the adjustment at the rate
of exchange prevailing on the last day of discharge at the final port of destination, or at the termi-
nation of the adventure when this occurs at a port or place other than the final port of destination,
and disbursements shall be so converted at the rate of exchange prevailing on the dates when
payment was made.

33.37 At the Sydney Conference both of these projected solutions found enthusiastic
advocates as well as fierce critics. The Brazilian delegation, as representing a country
which has suffered severe devaluations in its currency in past years, was particularly
strong in its support for the SDR solution, but in the voting neither proposal was able to
command the required majority.
33.38 This issue was further debated in the lead-up to the 2016 Conference. The IWG
Sub-Committee charged with the review of the financial issues resurrected the possibility
of using SDRs as the currency of adjustment. The use of SDRs appeared attractive, as
there is also an SDR interest rate; however, as noted previously, this rate was found to be
volatile and inconsistent, and therefore unsuitable.
33.39 Although both questions – the selection of an appropriate currency of the
adjustment and the mechanics for converting into that currency the admissions in general
average of claims presented in other currencies – have to be solved without guidance
from the York-Antwerp Rules, the debates have at least demonstrated a general desire
that these problems should be addressed in a pragmatic manner. Thus, in the authors’
submission:
• The problem as to the selection of the currency of the adjustment can be avoided
by the inclusion in the general average clauses contained in bills of lading and
charterparties of a stipulation that the adjustment will be prepared in a specified
currency.
• Absent such provision in the general average clause in the document governing the
contract of carriage, objection should not be taken to an adjustment dealing only
with a claim submitted for sacrifices of ship and/or expenses incurred by the ship-
owner if it is prepared in the currency in which the shipowner keeps his accounts;

13 The AIDE Report of 30 July 1993 at pp. 60–61.

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 THE 2016 RULES

but when there are substantial cargo claims in other currencies the adjuster will
have to exercise his discretion, subject to any law and practice governing the
adjustment, to find a solution which will maintain an equitable balance between
the interests of the parties.
• In adjustments which are prepared in a single currency, there is a widely accepted
practice (as incorporated into both the BMLA and AIDE proposals referred to
above) as to the dates to be followed for the ascertainment of the rates of exchange
to be adopted for the purpose of the adjustment.

236
 CHAPTER 34

Rule XXII: Treatment of Cash Deposits

(a) Where cash deposits have been collected in respect of general average, salvage
or special charges, such sums shall be remitted forthwith to the average
adjuster who shall deposit the sums into a special account, earning interest
where possible, in the name of the average adjuster.
(b) The special account shall be constituted in accordance with the law regarding
client or third party funds applicable in the domicile of the average adjuster.
The account shall be held separately from the average adjuster’s own funds, in
trust or in compliance with similar rules of law providing for the administra-
tion of the funds of third parties.
(c) The sums 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 in respect of which the deposits have been collected. Payments
on account or refunds of deposits may only be made when such payments are cer-
tified in writing by the average adjuster and notified 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.
(d) All deposits and payments or refunds shall be without prejudice to the ultimate
liability of the parties.

Introduction
34.01 The collection of cash deposits is but one of the means whereby security may
be provided by the concerned in cargo for their eventual payment of general average con-
tribution. In most jurisdictions a shipowner is invested with a possessory lien over the
cargo onboard the ship for unpaid freight and for general average. On delivery of the
cargo to the consignee, the shipowner loses his right of lien but may demand alternative
security for the general average in return for so doing. The nature of such alternative
security that may be demanded is not governed by the York-Antwerp Rules, and varies
from case to case. Although there is no uniformity in this respect, such alternative security
will normally consist of an average bond or other undertaking signed by the receiver of
the cargo, supported by one of the following:
• a guarantee furnished by the cargo underwriters;
• a bank guarantee;
• a cash deposit.1

1 For an account of the normal procedure for collecting general average security, and for the forms custom-
arily employed for the purpose, see para. 37.01 et seq.

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 THE 2016 RULES

34.02 Where there has been a sacrifice of cargo, a shipowner is obliged under English
law to collect general average security from the other cargo interests in order to protect
the position of the party whose goods have been sacrificed.2 In cases where the general
average consists of the shipowner’s sacrifices and/or expenditure, he is at liberty to decide
whether or not to take security for his own protection, and the form of such security is
also within his own discretion, provided that it is reasonable in all the circumstances. The
question as to what security is reasonable will be decided in accordance with the law pre-
vailing at the place where security is demanded. In England a form of average bond which
purported to make the average adjuster an arbitrator has been held to be unreasonable.3
34.03 It is usual for liner bills of lading, particularly for lines trading to a number of
different countries whose domestic law may be rudimentary or uncertain, to include a
clause to reinforce the shipowner’s right to take general average security, and in particular
to collect general average deposits.

Evolution
34.04 The Rule was introduced in 1924 in order to regulate the treatment of cash
deposits from the time they were collected until the time of settlement under the adjust-
ment. Prior thereto, there was a great deal of variation in practice in the way in which
general average deposits were handled, and it was apparent that in quite a number of
cases the depositors were not accorded fair treatment.4 The Association of Average
Adjusters therefore proposed a new Rule designed to protect the rights of depositors as
far as possible, in particular by requiring that deposits be paid into a special account,
earning interest whenever possible, in the joint names of two trustees. This Rule, which
was numbered XXIII, read:
Treatment of Cash Deposits
Where cash deposits have been collected in respect of cargo’s liability for general average,
salvage or special charges, such deposits shall be paid into a special account, earning interest
where possible, in the joint names of two trustees (one to be nominated on behalf of the ship-
owner and the other on behalf of the depositors) in a bank to be approved by such trustees. The
sum so deposited, together with accrued interest, if any, shall be held as security for and upon
trust for payment to the parties entitled thereto of the general average, salvage or special charges
payable by the cargo in respect of which the deposits have been collected. The trustees shall have
power to make payments on account or refunds of deposits which may be 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.

34.05 The application of this Rule did not accord with the practice in the United
States, where it was customary for general average deposits to be handled by the average
adjuster in a single-name account, and consequently it became usual for bills of lading
issued by American shipowners to exclude the application of the Rule. At the 1949
Amsterdam Conference, the United States representatives stated that they were concerned

2 Crooks v. Allan (1879) 5 Q.B.D. 38; 4 Asp. M.C. 216.

3 Huth v. Lamport (1886) 16 Q.B.D. 442, 735; 5 Asp. M.C. 543, 593.
4 See article entitled “General Average: Treatment of Deposits”, published in Lloyd’s List and Shipping
Gazette, 27 and 28 March 1922, giving details of the practice followed in the United Kingdom, most countries
of Europe, the United States, Argentina and Japan.

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 RULE XXII

that the 1924 Rule might offend against the anti-trust laws in some of the states of the
USA, and in consequence the text of the Rule was amended by deleting the word “trus-
tees” and all references to the creation of a trust.
34.06 The text agreed in 1950 was approved again in 1974, 1994 and 2004 without
amendment.
34.07 It cannot be said that the Rule is uniformly applied in practice. In the first place,
despite the acceptance of the 1950 text by the United States Maritime Law Association,
and the absence of any proposal from the United States to vary it, the practice of average
adjusters in the United States remains much the same as it was, namely to place general
average deposits in a “special account” (though not necessarily a separate account for
each case) in the single name of the average adjuster. The reason for ignoring the dual
representative provision has nothing to do with anti-trust laws; rather it is due to the
reluctance of the US banking system to cater for, or to offer reasonable terms for, joint-
name accounts.
34.08 In the case of The Motomar5 it was held in the District Court that a person who
places funds in a “special deposit” to be held there for disbursement to others has created
a trust; that this was equivalent to a bailment of the money and is not converted into a
loan unless the person holding the funds uses them for his own purposes; consequently,
by creating the deposit and making it available where and in the form it was collected, the
trustee has fulfilled his obligation. The decision was upheld in the Court of Appeals
(Second Circuit) and is considered to support the practice of adjusters, since although
Rule XXII requires a dual representative account, the creation of a special account by one
party would not be considered to be prejudicial to the other unless he suffered some fin-
ancial loss as a result.
34.09 In the United Kingdom, unless the depositor, or a cargo insurer who has
refunded the deposit, nominates a representative, it is frequently the average adjuster who
acts in this respect and consults the shipowner or his agent in regard to the selection of the
bank in which the deposits are to be lodged and the arrangements to be made whereby,
whenever possible, interest is to be earned thereon. However, when the deposits are taken
and retained in a country where the average adjuster has no office or representation, it is
customary for the ship’s agents to be the shipowner’s representative and for Lloyd’s
agents to be invited to act as the representative of the depositors. Lloyd’s agents, when so
acting, are entitled to charge a fee for this service.
34.10 In European countries, it is likewise recognised that the average adjuster has
an obligation to use his influence to ensure as far as possible that the deposit funds are
well looked after and that the interests of the depositors, as well as those of the ship-
owners, are protected. The AIDE have considered the question of the average adjust-
er’s responsibilities in this connection at their General Assemblies in 1975, 1977 and
1985, and have adopted a set of recommendations in this respect, which are of
considerable importance.6
34.11 From time to time, concern has been expressed, both as to the legal rights of
the depositors and as to the protection of the adjustment creditors, when deposits have

5 St. Paul Fire & Marine Insurance Co. v. S.S. Motomar (1954) 211 Fed. Rep. 690.
6 These recommendations, adopted by Resolution of the XIIIth General Assembly, Venice, 1985, are set out
hereafter as Appendix 10.

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 THE 2016 RULES

been taken in a currency which may be subject to fluctuation in value between the time
the deposits are taken and the time settlements are made under the adjustment. In 1933,
the International Union of Marine Insurance adopted a Resolution favouring the con-
version of such deposits into the currency of the average adjustment.7 This was soon
recognised as being too sweeping, and is no longer accepted as a guide to practice. As
a general rule it is now considered more prudent to retain the deposits in the currency
in which they were originally lodged. However, in the authors’ experience, this can
lead to practical difficulties in large general average cases where deposits have been
tendered in several different currencies, and it is submitted that neither the shipowner
nor the average adjuster could be faulted in the exercise of their best endeavours to
care for the general average deposits if, as recommended in the AIDE Resolution
referred to, they “have regard to the relative stability of the currency in which the
deposit funds were originally lodged and any advantage which might be gained by re-
investing the funds in any available stronger currency”.
34.12 The 2013 CMI Questionnaire posed the following question: “Due to the diffi-
culty in setting up joint accounts, sometimes in a foreign currency, it has become the
practice of adjusters to hold deposits in trust accounts in their own name. Should this
practice be recognised by the YARs?” Respondents generally agreed that it should,
although there were a number of MLAs which considered that the issue should not be
dealt with in the Rules but left to be dealt with under local laws. As mentioned earlier, the
IWG established a number of subgroups to consider specific issues; consideration of this
Rule fell within the ambit of the financial issues subgroup.
34.13 The subgroup recognised the difficulty of establishing joint bank accounts due
to money laundering and anti-terrorist legislation and agreed that the practice of the
average adjuster holding deposits should be ratified. However, it was also considered that
an attempt should be made to ring-fence the deposits from the adjusters’ own funds and
from the adjusters’ liquidation.
34.14 The revised Rule, accepted at the 2016 Conference, is complemented by a note
in the CMI Guidelines8 which reads as follows:
Under Rule XXII(b) the adjuster is required to hold deposits in a special account constituted in
accordance with the law regarding holding client or third party funds that applies in the domicile
of the appointed average adjuster.
Unless otherwise provided for by the applicable law, CMI recommends that any special
account should have the following features:
• Funds should be held separately from the normal operating accounts of the adjuster.
• Funds should be protected in the event of liquidation or the cessation of the average
adjuster’s business.
• The holding bank should provide regular statements that show all transactions clearly.

7 The “Montreux Resolution”, which read:

The members of the International Union of Marine Insurance, in general meeting assembled, express the
view that shipowners, or the average adjusters, on receipt of deposits should convert such deposits into
the currency of the average statement without undue delay and also state on the average receipt the rate
of exchange of these deposits, and the currency in which the statement will be drawn up.
8 Included as Appendix 3.

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 RULE XXII

Commentary
(a) Where cash deposits have been collected in respect of general average, salvage or special
charges, such sums shall be remitted forthwith to the average adjuster who shall deposit the
sums into a special account, earning interest where possible, in the name of the average
adjuster.

34.15 The requirement that funds shall be remitted forthwith to the average adjuster
may present a problem where the deposits are collected in a country with stringent
exchange and currency control regulations.
(c) The sums 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 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 in writing by the average
adjuster and notified 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.

34.16 This provision recognises that although held by the average adjuster, the
deposit remains “the property” of the depositor, and that accordingly the depositor should
be granted the opportunity to approve payments made ex the deposit. However, since
depositors are notoriously difficult to contact after completion of the adventure, a mech-
anism enabling deductions to be made from the deposit 90 days after a request for
approval has been incorporated.

241
 CHAPTER 35

Rule XXIII: Time Bar for Contributing to General Average

(a) Subject always to any mandatory rule on time limitation contained in any
applicable law:
(i) Any rights to general average contribution including any rights to claim
under general average bonds and guarantees, shall be extinguished unless
an action is brought by the party claiming such contribution within a
period of one year after the date upon which the general average adjust-
ment is issued. However, in no case shall such an action be brought after
six years from the date of termination of the common maritime adventure.
(ii) These periods may be extended if the parties so agree after the termination
of the common maritime adventure.
(b) This rule shall not apply as between the parties to the general average and their
respective insurers.

Time bars under English law

Statutory
35.01 Under section 5 of the English Limitation Act, 1980 there is a limitation period
of six years for actions founded on “simple contracts”, after which the action will be time
barred. This raises the age-old debate whether the origins of general average are contrac-
tual or arise by universal usage under the law maritime. However its origins, modern-day
law and practice concur that the obligation to contribute in general average is contractual
in nature, and time begins to run when the cause of action accrues.

Contractual: under policies of insurance

35.02 It was settled by Chandris v. Argo Insurance Co. Ltd.1 that the claims arose
when sacrifices were made and expenditure incurred, not at the time when the claims
were quantified by issue of adjustment.

Contractual: under charterparty

35.03 When the charterparty imposes a shorter time for the limitation of actions (as,
for example, in the Centrocon Arbitration Clause), it was held in the Astraea (Alma

1 Chandris v. Argo Insurance Co. Ltd. [1963] 2 Lloyd’s Rep. 65.

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 RULE XXIII

Shipping Corporation v. Union of India)2 that a claim for general average contribution
involved “a dispute under the charterparty” and was caught by the time bar (in that case
12 months – but sometimes even shorter) provided by that clause. This decision adminis-
tered a shock in shipping circles for which some relief was granted three years later in the
case of the Evje.3
35.04 As Lord Salmon observed in that case, the general view was that clauses like
the Centrocon Arbitration Clause “had no application to claims for general average con-
tribution”. Viscount Dilthorne, for his part, remarked that “average adjusters had long
held the view that the Centrocon Arbitration Clause did not apply to general average
claims”.

Contractual: under bill of lading

35.05 Subject to any specific contractual provisions in the bill of lading, contracts of
carriage which are subject to the Hague or Hague-Visby Rules provide that the carrier
and the ship shall be discharged from liability unless suit is brought within one year of the
date of delivery of the goods (or the date on which the goods should have been delivered).
However, neither the Hague nor the Hague-Visby Rules impose a time bar for a claim for
general average contribution, for which when English law applies, the period of limitation
runs for six years from the accrual of the cause of action.
35.06 Some bills of lading incorporate limitation provisions (such as the Centrocon
Arbitration Clause), in which event the bill of lading holders are as much bound or enti-
tled as the parties to the charter.

Contractual: by average bond, guarantee or undertaking

35.07 The authors consider it to be quite remarkable that the first reported record of
the effect on the parties entering into a form of average bond was in the note of a judg-
ment of McNair J. in Chambers in an unrecorded case in the 1960s.4 The learned judge is
reported to have ruled that the consignee enters into:
new obligations which are created by valid consideration: the shipowner gives up valuable rights
of lien […] in exchange for the obligations in Lloyd’s Average Bond. […] One of the purposes
of the LAB procedure is to crystallise the situation and so that the parties need not have regard to
time limit provisions in other documents.

35.08 The leading case in our present jurisprudence is the Evje. At first sight one may
be excused for thinking that the facts of this case were virtually a repetition of the facts in
the Astraea, since the Evje had been chartered by the Indian government, as the Astraea
had been, subject to the terms of the Centrocon Arbitration Clause. The two cases
differed, in that the owners of the Astraea relied upon the terms of the charterparty to
govern the claim for general average contribution, whereas the owners of the Evje had
sought and obtained from the Indian government a letter of undertaking “to pay uncon-
ditionally any general average contribution which may be legally due”. This letter of

2 Alma Shipping Corporation v. Union of India (The Astraea) [1971] 2 Lloyd’s Rep. 494.
3 E.B. Aaby’s Rederi A/S v. Union of India (The Evje) [1974] 2 Lloyd’s Rep. 57.
4 See the Evje at p. 66.

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 THE 2016 RULES

undertaking constituted a new contract, as it would be under a Lloyd’s average bond,

given for valid consideration which superseded the terms of the charterparty.
35.09 Sometime later the whole issue was reviewed in the Judicial Committee of the
Privy Council, whose judgment upholding the effect of the average bonds and guarantees
was delivered by Lord Diplock.5

Commentary
35.10 London market underwriters, like insurers worldwide, abhor claims with a long
tail, and it is not surprising therefore to find that the IUMI Report of September 1999 had
considered the adoption of “a contractual time limit of one year within which parties
claiming in general average should produce their adjustment and, if not accepted, should
commence proceedings, failing which the claim [would become] time barred”.

“[A]n action is brought”

35.11 Under English law an action is said to have commenced when a claim form has
been issued by the court. If the parties enter into an arbitration agreement, this would also
found an action under English law.

5 The Potoi Chau (Castle Insurance Co. Ltd. v. Hong Kong Islands Shipping Co.) [1983] 2 Lloyd’s Rep. 376.

244
 CHAPTER 36

CMI Guidelines Relating to General Average

Introduction
36.01 One of the topics discussed by the CMI IWG prior to the New York Confer-
ence was whether or not the York-Antwerp Rules should include a set of definitions. This
idea was ultimately rejected for the good reason that it is difficult to draft definitions to
cover every eventuality and thus the inclusion of definitions may only stimulate dispute.
36.02 However, it was recognised that it might, in a few limited instances, be useful
to include some explanatory notes to assist in understanding and applying certain Rules.
This acknowledged the fact that Rules cannot in themselves be all-embracing or they
would transform into a voluminous set of regulations which may well be difficult to
understand and impracticable to apply.
36.03 During the course of the work of the IWG, various other topics were raised for
consideration for inclusion as Rules. For example, the IUMI Representative had floated
the idea of a rule detailing the duties and obligations of the average adjuster. This pro-
posal did not find favour but showed that there was some misunderstanding of the average
adjusters’ role in relation to general average.
36.04 Out of these two areas was born the concept of a set of guidelines to assist in
the understanding of certain aspects of general average and some of the Rules in
particular.
36.05 Where a casualty involves a number of cargo interests, it is frequently the task
of the average adjuster to explain the concept of general average and the practical applica-
tion of it and its procedures to those who have little, if any, experience of general average.
This can involve much time on the part of the average adjuster and thus increases the cost
of adjustment.
36.06 Although many adjusters have produced explanatory documents or notes on
their website to explain general average and its procedures, it is regrettable that these are
frequently viewed as being self-serving and therefore not authoritative. For this reason,
the adjusters on the IWG were in favour of “official” documentation which could be pro-
vided to cargo interests, and thus hopefully staunch the flow of questions which often
diverted them from the important task of advising those involved in the common mari-
time adventure and obtaining general average security.
36.07 The IWG considered it most important that although any guidelines should
have the stamp of CMI authority, they should not be considered as part of the York-
Antwerp Rules and neither should they be binding on any of the parties. It was also

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considered that the Guidelines should contain a mechanism for regular revision and
expansion in scope.
36.08 A set of Guidelines was drafted and presented for discussion at the CMI Con-
ference in New York. Despite the most strenuous opposition of the French delegation, the
Guidelines were adopted, with 41 votes in favour and only the French delegation
abstaining.1
36.09 Average adjusters will consider the CMI Guidelines to be a most useful tool in
explaining general average and its procedures to those, such as cargo receivers, who are
not well versed in such matters. It is anticipated that this comparatively small measure
will significantly reduce the time spent by adjusters in providing such explanations.

Commentary
(A) Introduction
36.10 The objective of the Guidelines is to provide those interested in general average
with general background information, guidance as to recognised best practice and an
outline of procedures. The Guidelines make it clear that they do not form part of the
York-Antwerp Rules, nor are they binding or intended to override or alter the provisions
of the Rules, contracts of carriage or the law of any governing jurisdictions.
36.11 It is envisaged that the Guidelines will be a living document which will be
revised and enhanced from time to time. To this end the CMI has established a Standing
Committee to recommend changes to the Assembly of the CMI for approval.

(B) Basic principles

36.12 This section includes an explanation of the concept and development of general
average and the York-Antwerp Rules. It also provides examples of general average situ-
ations and the basic principles of the adjustment of general average together with an
example adjustment.

(C) General average procedures

36.13 This section explains why general average and salvage security is required and
the form it usually takes. It also sets out the basic documentation required to calculate the
contributory value of the cargo and any general average allowances to which the owners
of the cargo may be entitled.

(D) Role of the average adjuster regarding general average

36.14 The effect of the adjustment is dealt with here as well as the best practice of
average adjusters. As this book is primarily concerned with the principles and practice of
general average adjustment it is appropriate to set out and expressly endorse this
practice here:

1 A full copy of the CMI Guidelines Relating to General Average is included as Appendix 3.

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 CMI GUIDELINES RELATING TO GENERAL AVERAGE

Average adjusters work under different regulatory and professional regimes; however, the fol-
lowing elements of best practice appear to be universal and are endorsed by the leading profes-
sional associations.
2.1 Irrespective of the identity of the instructing party, the average adjuster is expected to act
in an impartial and independent manner in order to act fairly to all parties involved in a
common maritime adventure.
2.2 In all cases the average adjuster should:
(a) Give particulars in a prominent position in the adjustment of the clause or clauses
contained in the charter party and/or bills of lading that relate to the adjustment of
general average or, if no such clause or clauses exist, the law and practice obtain-
ing at the place where the adventure ends. Where conflicting provisions exist, the
adjuster should explain in appropriate detail the reason for the basis of adjustment
chosen.
(b) Set out the facts that give rise to the general average.
(c) Where the York-Antwerp Rules apply, identify the lettered and/or numbered
Rules that are relied upon in making the allowances in the adjustment.
(d) Explain in appropriate detail the choice of currency in which the adjustment is
based.
(e) Make appropriate enquiries as to whether any recovery relating to the casualty is
being undertaken, and set out the results of those enquiries in the adjustment.
2.3 On request, and where practicable, the adjuster should make available copies of reports
and invoices relied upon in the preparation of the adjustment.

(E) Role of the general average surveyor

36.15 Because the reliance of information or advice obtained from surveyors repre-
senting only one of the interests involved in a general average situation, usually the hull
underwriters’ surveyor of the P&I Club surveyor, is viewed with suspicion, it is quite cus-
tomary, particularly in relation to a substantial casualty, to appoint an independent sur-
veyor to represent the general average interests. Usually his role is to assess any damage
to a ship or cargo as a result of a general average sacrifice.

(F ) York-Antwerp Rules 2016

36.16 Under this section notes are included to provide some explanation concerning
specific aspects of certain rules. The Guidelines approved in New York include such
notes in relation to Rule VI concerning Salvage, and Rule XXII concerning Treatment of
cash deposits which are dealt with earlier in this book.

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 PART III

PRACTICAL ISSUES