IUA MARKET BRIEFINGin co-operation with the

Association of Average Adjusters

Charterers’ WhimShould this affect an owner's claim on hull insurers?

Event Chaired by Paul Silver, Director, Richards Hogg Lindley

Keith Sturges, Director, Richards Hogg LindleyTristan Miller, Harvey Ashby

Charterers’ WhimShould this affect an owner’s claim on hull insurers?

Presentation by the Association of Average Adjusters on 28 October 2014 to the IUA

AAA Rule of Practice B26

“When a vessel is proceeding in ballast under a time charter alone or a time charter and a voyage charter entered into by the time charterer, the general average shall attach to the vessel and such items of stores and equipment as are indicated above. Failing a prior termination of the adventure, the adventure shall be deemed to end and the values for contribution to general average calculated at the first loading port upon the commencement of loading cargo.”

York-Antwerp Rules, 1994 (Rule XI)

“(a) Wages and maintenance of master, officers and crew reasonably incurredand fuel and stores consumed during the prolongation of the voyageoccasioned by a ship entering a port or place of refuge or returning to herport or place of loading shall be admitted as general average when theexpenses of entering such port or place are allowable in general average inaccordance with Rule X(a)………..

When the ship is condemned or does not proceed on her original voyage, thewages and maintenance of the master, officers and crew and fuel and storesconsumed and port charges shall be admitted as general average only up tothe date of the ship’s condemnation or of the abandonment of thevoyage………”

Case Study (Scenario A)

• Panamax bulk carrier in ballast passage under time charter from Rotterdam with orders to load at US Gulf ports.

• Vessel develops main engine problems and puts into to Lisbon for the common safety and to carry out permanent damage repairs.

• Delay in voyage is three months by the time she regains position and follows charterers’ orders to proceed to Quebec to load. Claim at stake US$300,000.

Scenario A

Quebec.

.Lisbon

Rotterdam.

B/down

Original voyage track

Scenario A

Should the general average claim be based on the full detention period and up to regaining position or does it terminate immediately the charterers decide to change their intended voyage?

Scenario B

Same as scenario A above but time charterers give orders to proceed to Poland to load after completion of repairs.

Should the general average continue for the whole period up to the point the ship is ready to sail (it being accepted that Poland is in the opposite direction to the original voyage)?

Scenario B

Same as scenario A above but time charterers give orders to proceed to Poland to load after completion of repairs.

Should the general average continue for the whole period up to the point the ship is ready to sail (it being accepted that Poland is in the opposite direction to the original voyage)?

Scenario B

Rotterdam

.Lisbon

B/down

Original voyage track

Tristan Miller

Harvey Ashby Limited

Fellow of the Association of Average Adjusters

AAA Rule of Practice B26

“When a vessel is proceeding in ballast under a time charter alone or a time charter and a voyage charter entered into by the time charterer, the general average shall attach to the vessel and such items of stores and equipment as are indicated above. Failing a prior termination of the adventure, the adventure shall be deemed to end and the values for contribution to general average calculated at the first loading port upon the commencement of loading cargo.”

York-Antwerp Rules, 1994 (Rule XI)

“(a) Wages and maintenance of master, officers and crew reasonably incurred and fuel and stores consumed during the prolongation of the voyage occasioned by a ship entering a port or place of refuge or returning to her port or place of loading shall be admitted as general average when the expenses of entering such port or place are allowable in general average in accordance with Rule X(a)………..

When the ship is condemned or does not proceed on her original voyage, the wages and maintenance of the master, officers and crew and fuel and stores consumed and port charged shall be admitted as general average only up to the date of the ship’s condemnation or of the abandonment of the voyage………”

Scenario A

Quebec.

.Lisbon

Rotterdam.

B/down

Original voyage track

What happens in other Scenarios

• Laden vessel – YAR

• Vessel in ballast – no charter– shipowner owns ship and bunkers

• Vessel in ballast – voyage charter– shipowner owns ship and bunkers

• Vessel in ballast – time charter & voyage charter

• Vessel in ballast – time charter

York-Antwerp Rules, 1994 (Rule XI)

“(a) Wages and maintenance of master, officers and crew reasonably incurred and fuel and stores consumed during the prolongation of the voyage occasioned by a ship entering a port or place of refuge or returning to her port or place of loading shall be admitted as general average when the expenses of entering such port or place are allowable in general average in accordance with Rule X(a)………..

When the ship is condemned or does not proceed on her original voyage, the wages and maintenance of the master, officers and crew and fuel and stores consumed and port charged shall be admitted as general average only up to the date of the ship’s condemnation or of the abandonment of the voyage………”

ITC – Hulls 1.10.83 Clause 11.3

• 11.3 When the Vessel sails in ballast, not under charter the provisions of the York-Antwerp Rules, 1974 (excluding Rules XX and XXI) shall be applicable, and the voyage for this purpose shall be deemed to continue from the port or place of departure until the arrival of the Vessel at the first port or place thereafter other than a port or place of refuge or a port or place of call for bunkering only. If at any such intermediate port or place there is an abandonment of the adventure originally contemplated the voyage shall thereupon be deemed to be terminated.

MIA 1906 §66.7 tells us

(7)Where ship, freight, and cargo, or any two of those interests, are owned by the same assured, the liability of the insurer in respect of general average losses or contributions is to be determined as if those subjects were owned by different persons.

ROP B26 – First Paragraph

• When a vessel is proceeding in ballast to load under a voyage charter entered into by the shipowner before the general average act, the interests contributing to the general average shall be the vessel, such items of stores and equipment as belong to parties other than the owners of the vessel (e.g. bunkers, wireless installation and navigational instruments) and the freight earned under the voyage charter computed in the usual way after deduction of contingent expenses subsequent to the general average act. Failing a prior termination of the adventure, the place where the adventure shall be deemed to end and at which the values for contribution to general average shall be calculated is the final port of discharge of the cargo carried under the charter but in the event of the prior loss of the vessel and freight, or either of them, the general average shall attach to any surviving interest or interests including freight advanced at the loading port deducting therefrom contingent expenses subsequent to the general average act.

AAA Rule of Practice B26

“When a vessel is proceeding in ballast under a time charter alone or a time charter and a voyage charter entered into by the time charterer, the general average shall attach to the vessel and such items of stores and equipment as are indicated above. Failing a prior termination of the adventure, the adventure shall be deemed to end and the values for contribution to general average calculated at the first loading port upon the commencement of loading cargo.”

York-Antwerp Rules, 1994 (Rule XI)

“(a) Wages and maintenance of master, officers and crew reasonably incurred and fuel and stores consumed during the prolongation of the voyage occasioned by a ship entering a port or place of refuge or returning to her port or place of loading shall be admitted as general average when the expenses of entering such port or place are allowable in general average in accordance with Rule X(a)………..

When the ship is condemned or does not proceed on her original voyage, the wages and maintenance of the master, officers and crew and fuel and stores consumed and port charged shall be admitted as general average only up to the date of the ship’s condemnation or of the abandonment of the voyage………”

Keith Sturges

Richards Hogg Lindley

Fellow of the Association of Average Adjusters

Decision not to proceed to same destination taken whilst vessel is still proceeding towards port of refuge

Allowances terminate:

View 1 – Date charterers made their decision (2 June)

View 2 – Date charterers told owners (17 June)

View 3 – On regaining position, regardless of changed voyage (8 July)

B26 “Vessel in ballast and under charter –Contributing Interests”

Freight earned under a voyage charter:

If entered into by the shipowner – contributes

If entered into by time charterer – does not contribute

B26 “Vessel in ballast and under charter –Contributing Interests”

(Failing a prior termination of the adventure) place where adventure ends:

If voyage entered into by the shipowner

= Completion of discharge at final port

If entered into by time charterer (or no voyage charter)

= Commencement of loading at first port

“Adventure”

An exciting or very unusual experience

A commercial or financial speculation; a venture

A financial speculation or business venture

“Voyage”

A course of travel or passage, especially a long journey by water to a distant place

A journey or expedition from one place to another

Still proceeding to POR. Charterers decide to send a substitute vessel to US Gulf. They tell shipowners …….. immediately

Some adjusters:

Voyage/adventure immediately over. Allowances cease on arrival Lisbon.

Values assessed Lisbon date of arrival.

Still proceeding to POR. Charterers decide to send a substitute vessel to US Gulf. They tell shipowners … 20 days after arrival Lisbon

Some adjusters:

Date of decision (as in previous slide)

Some adjusters:

Voyage/adventure over on this day. Allowances cease on day 20 at Lisbon.

Values assessed on this date

Still proceeding to POR. Charterers decide to send a substitute vessel to US Gulf. They tell shipowners … 1 day after leaving Lisbon

Some adjusters:

Date of decision

Some adjusters:

Voyage/adventure over at this point (… at sea?)

Values assessed …... on arrival Quebec?

Still proceeding to POR. Charterers decide to send a substitute vessel to US Gulf.

Regardless of date of decision or notification:

Some adjusters:

Adventure has not been terminated

Values assessed on commencement of loading at next port

YAR XI

When the ship is condemned or does not proceed on heroriginal voyage, the wages … etc. ….shall be admitted asgeneral average only up to the date of the ship’scondemnation or of the abandonment of the voyage………

…….. or up to the date of completion of discharge of cargoif the condemnation or abandonment takes place beforethat date

Cargo interests decide to change the destination

YAR suggests the common adventure would continueup to delivery at the changed port.

No premature cessation of GA allowances

Why different if is t/chrs who change the destination?

ITC Hulls – Ballast GA (not under charter)

If at any …. intermediate port or place there is anabandonment of the adventure originallycontemplated the voyage shall thereupon bedeemed to be terminated.

My conclusions:

1. Charterers’ change of intentions does not destroy thecommon adventure

2. B26 deals only with contributing interests – norelevance

3. YAR provide no real guidance regarding time charterers

4. We need uniformity – new Rule of Practice

Discussion

Voting

Voting

1. Is there a general view that allowances should be limited when charterers decide to change the specified voyage?

2. Should there be a change to Rule of Practice B26?

Charterers’ WhimShould this affect an owner’s claim on hull

insurers?

Presentation by the Association of Average Adjusters on 28 October 2014 to the IUA