Circular No. 19/98 - General Average Charter Party Clauses
NOVEMBER 23, 1998
CIRCULAR NO. 19/98
TO MEMBERS OF THE ASSOCIATION
GENERAL AVERAGE / CHARTER PARTY CLAUSES
Reference is made to Circular No. 2/97 of February 11, 1997 alerting Members to the fact that some tanker charterers were attempting to introduce new clauses which had the effect of restricting shipowners' rights to include certain types of pollution costs in General Average in circumstances where those costs would otherwise have been recoverable in accordance with the York Antwerp Rules of 1994.
Prior to 1994, the York Antwerp Rules (YAR) allowed the recovery of pollution expenses and liabilities in General Average in a wide range of circumstances. For example, clean up expenses and the cost of third party pollution damage claims arising out of jettisoning oil to refloat a vessel were usually allowable within General Average.
As a result of increasing reluctance on the part of property underwriters to accept pollution expenses in General Average, there was considerable pressure to exclude all pollution costs from General Average when the York Antwerp Rules were revised in 1994. YAR 1994 represents a hard fought compromise between shipowner and property interests. While the cost of pollution clean up and third party pollution liabilities following a discharge is now generally excluded from General Average under Rule C of YAR 1994, the cost of preventive measures incurred prior to a spill is usually allowable. However, YAR 1994 also provides that the cost of preventing or minimizing environmental damage is recoverable in General Average under Rule (XI)(d) if incurred, inter alia, as a condition of entry into or departure from a port of refuge, regardless of whether or not a spill has actually occurred.
Although this erosion of shipowners' entitlement to recover pollution costs in General Average was regrettable, it was considered a justifiable price to pay for the continued existence of YAR as an internationally accepted General Average regime which has served the industry well over the years.
Over the last eighteen months or so, a number of Charterers have abandoned such clauses and have accepted that pollution costs may be included in General Average to the extent permitted by YAR 1994. Moreover, all Clubs have agreed that, in view of the participation of the International Group in the discussions which led to the YAR 1994 compromise, any attempt to erode this internationally recognized regime should be actively opposed. The additional risks arising from the use of such clauses will therefore be excluded form the Pooling Agreement with effect from February 20, 1999.
Amendments to the Club's Rules have already been agreed by the Board in order to exclude such risks from the normal scope of Club cover with effect from February 20, 1999. Further details of this change, as well as those to other Rules for 1999 will be circulated shortly.
Members who are asked to accept any charterparty clause which attempts to modify the YAR 1994 position on pollution costs should contact the Managers for further advice.
Joseph E.M. Hughes, Chairman & CEO