Professional Documents
Culture Documents
General Average
and Salvage
Charges
Salvage Charges
Conclusion
General Average
The law of General Average is a legal
principle of maritime law to which all
parties, in a sea venture, proportionally
share any losses resulting from a
voluntary sacrifice of part of the ship
cargo to save the whole in an emergency.
The tenet of General Average is
that a party who has suffered some
extraordinary expenditure or loss in order
to save property belonging to others has
the right of compensation for its loss
from all parties to the voyage who have
benefited from it (e.g. a merchant whose
cargo is jettisoned to save a voyage).
Foreword
The laws of General Average have been deeply embedded into
maritime law for hundreds of years. The earliest documented laws
date back to the Digest of Justinian, Book XIV, in 530 ACE.
The recent grounding of a fully loaded cargo vessel on a
reef off the coast of New Zealand highlights the dangers
and consequences of even a minor maritime shipping
event.
Owners of cargo onboard a grounded vessel face an
anxious time waiting to see what develops before filing
an insurance claim or potentially re-ordering lost cargo.
Ron Johnson
Regional Manager
Marine AGCS - Pacific
+61.3.6332.3184
ron.johnson@allianz.
com.au
* Lowdnes & Rudolfs Law of General Average and The York Antwerp Rules by J F Donaldson and CT Ellis; Stevens & Sons Limited, London.
Expenditure
Grounding /
stranding
Cargo shifting in
heavy weather
Jettison of cargo
Port of refuge expenses
Heavy weather
collision or
machinery
breakdown
Fire
US$ 13,000,000
US$ 12,000,000
Summary of GA Disbursements
Ransom payment
US$ 2,500,000
US$ 250,000
Negotiation fees
US$ 300,000
Lawyers fees
US$ 100,000
Bank charges
US$ 10,000
Adjustors fees
US$ 40,000
Total
US$ 3,200,000
US$ 1,664,000
Cargo Owner 1
US$ 640,000
Cargo Owner 2
US$ 512,000
Cargo Owner 3
US$ 256,000
Cargo Owner 4
US$ 128,000
Salvage Charges
Salvage Charges to refloat a grounded vessel usually are expensive,
often running into the millions of dollars.
The term Salvage refers to the practice of rendering aid
to a vessel in distress. Maritime law has long decreed that
third parties who freely participate in a successful salvage
of life or property at sea without doing so under the
terms of a contract are entitled to remuneration.
Essentially, Salvage Charges apply in the event of a
successful salvage due to a voluntary act independent
of any contract. Conversely, under the Lloyds Open
Form, a standard legal document for a proposed marine
salvage operation, under the heading No cure - No
pay, if an attempted salvage has been unsuccessful, no
award/compensation will be received for the effort or
time spent if the salvage is unsuccessful.
However, this principle has been somewhat weakened
in recent years and awards are now being permitted
in cases where, although the ship may not have been
salvaged, pollution or damage to the environment has
been avoided or mitigated.
Conclusion
Awareness and communication are key for the broker to properly
consult with clients about General Average and Salvage Costs.
Shipping was one of the earliest activities that required
international cooperation in terms of laws and
regulations. Over time, maritime law has developed
alongside globalization.
This report outlines the current issues that an insured can
face when considering the appropriate cover.
Copyright 2013 Allianz Global Corporate & Specialty AG. All rights reserved. The material contained in
this publication is designed to provide general information only and was believed to be correct at the time
of publication. Allianz Global Corporate & Specialty AG assumes no obligation to update any information
contained herein. The descriptions of coverage are abbreviated and are subject to the terms, conditions
and exclusions of the actual policy. For full coverage details, please refer to the actual policy forms.
In relation to Australian clients and risks, Allianz Global Corporate and Specialty - Pacific issues Allianz
Australia Insurance Limited ABN 15 000 122 850 insurance
Allianz Global Corporate & Specialty AG,
Fritz-Schaeffer-Strasse 9, 81737
Munich, Germany
November 2013
www.agcs.allianz.com