The rationale for the equipment table doctrine of “general average” is that losses suffered for the good of all parties to a maritime venture should be borne by all parties to the venture.
General average is unique in that it is only recognized in admiralty law. Some legal writers claim the origin of this ancient doctrine dates back more than 4,000 years. The concept was codified into Roman law by Justinian in 533 A.D., and it has since been adopted by all maritime nations.
It its simplest form, general average is a voluntary act of sacrifice at a time of marine peril, ordered by the master for the common safety of the ship and cargo, in which all interested in the common venture (the owner of the ship, the owner of the cargo, and sometimes the party entitled to collect freight payment) contribute to the payment of that sacrifice.
The Supreme Court in the Star of Hope case of 1870 (75 U.S. 203) defined general average as “a contribution by all parties in a sea adventure to make good the loss sustained by one of their members on account of sacrifices made on the part of the ship or cargo to save the residue and lives of those on board from an impending peril, or for extraordinary expenses necessarily incurred by one or more of the parties for the general benefit of all the interests embarked in the enterprise. Losses which give a claim to averages are usually divided into two great classes: (1) Those which arise from sacrifices of part of the ship or part of the cargo (jettison), purposely made in order to save the whole adventure from perishing: (2) Those which arise out of extraordinary expenses incurred for the joint benefit of ship and cargo.”
Additional cases hold that three requirements are necessary for general average: common imminent danger, voluntary sacrifice for the common benefit of the venture and the successful avoidance of the common peril.
While the concept of general average is universally accepted, the practical aspects of applying the doctrine to international maritime ventures can be extremely difficult. The specific laws of general average can vary considerably from nation to nation. To complicate matters, general average is often predicated upon the specific laws at ports of final destination.
In order to avoid legal uncertainties in international shipping, maritime nations have held several conferences over the past century for the purpose of standardizing the application of general average principles. The international standards are known as the York-Antwerp Rules and are incorporated into virtually all ocean bills of lading and charter parties. The current version of these standards is found in the York-Antwerp Rules of 1974.
These rules are not statutory and do not have the force of law unless expressly incorporated into various shipping documents. The rules are consistent with, and supplement, the ancient principles of general average. They also address specific instances of general average sacrifices and provide guidance for a group of specialized maritime experts called “general average adjusters.”
The adjuster is often required to perform an extremely complicated set of calculations called a general average statement. The statement sets out the percentages that each party in the maritime venture should contribute for the losses sustained. The statement is merely advisory and not legally binding. However, statements are rarely questioned and are usually given effect in courts of law or maritime arbitrations. Statements are, however, subject to certain defenses predicated on fault concepts, which may defeat general average recoveries.
While general average has been the cornerstone of maritime law since antiquity, the issue of whether the concept is applicable to present day factual situations is still being litigated. The recent case of American Home Assurance (875 F. 2d 1351) illustrates the point.
The matter arose from the grounding of a tug and barge. The barge and tug interests argued that the cost of lightering the barge’s cargo and repairing its hull were general average expenses. They further argued that a crewing company that merely supplied workers for the tug should contribute to these expenses.
The appeals court held that it was inappropriate to collect a contribution from the crewing company as that company did not own the tug, barge or cargo. The decision is interesting in that the court relied upon basic principles of general average dating back possibly more than 4,000 years to resolve this modern-day dispute.