Short answer. General average is the mechanism by which extraordinary sacrifices and expenditure decided by the master for the common safety of the venture, such as jettison, voluntary grounding, towage, a port of refuge or firefighting, are shared between ship, freight and cargo in proportion to their values at the end of the voyage. French law sets the regime out in articles L. 5133-1 to L. 5133-19 of the Transport Code, but almost every bill of lading and charterparty refers instead to the York-Antwerp Rules, most often the 2016 version, which then apply in place of the statute. A receiver obtains his cargo only by signing an average bond and providing security. The adjustment itself has no binding force and can be challenged.
A container ship runs aground, catches fire or loses propulsion; the owner declares general average, and within days hundreds of receivers with no connection to the casualty are asked for security without which their containers will not be released. Months or years later, an adjustment running to several hundred pages claims a contribution they do not understand.
What general average is, and what it is not
French law distinguishes general average from particular average. General average consists of damage, loss and extraordinary expenditure decided by the master and incurred for the common and pressing safety of the interests engaged in a maritime venture (article L. 5133-3). Three elements are required: a voluntary decision of the master, a common and pressing danger, and an extraordinary sacrifice or expense. Only damage and loss physically affecting the property engaged in the venture, and expenditure incurred for that property, are admitted, and only where they are the direct consequence of the general average act (article L. 5133-4). All other damage is particular average and stays with the owner of the thing damaged, subject to his recourse.
The classic cases are jettison of containers to lighten a grounded vessel or right a list, voluntary grounding to avoid a total loss, flooding a hold to extinguish a fire, towage of a vessel without propulsion, and putting into a port of refuge with the port, discharge, storage and reloading costs that follow. Not general average: damage caused by the casualty itself, as opposed to damage deliberately inflicted to deal with it, so cargo burned in the fire rather than soaked in putting it out; ordinary voyage expenses; and loss resulting from delay. The boundary is frequently argued, and it is the first line of challenge to any adjustment.
French law or the York-Antwerp Rules?
The Transport Code provisions apply only in the absence of contrary agreement (article L. 5133-1), subject to the reservation that a bill of lading term allowing the carrier to reserve other provisions is deemed unwritten. In practice, the bills of lading of the major lines and most charterparties provide that general average will be adjusted according to the York-Antwerp Rules, naming a version, whether 1994, 2004 or 2016, and a place of adjustment. Those Rules, drawn up by the Comité Maritime International, are not law; they apply as contract terms and displace the Code on the points they cover. The 2016 version, adopted in New York, is the reference in recent bills of lading and clarified the treatment of salvage remuneration, the cap on port of refuge expenses and limitation.
The governing law question is therefore the first to ask on receiving a demand for security: which contractual document binds the receiver, which version of the Rules, which place of adjustment, and which law governs the contract for whatever the Rules do not cover. A French receiver under a bill of lading subject to English law and the 2016 Rules is not in the same position as a charterer under a French law charterparty.
Who contributes, and on what basis
General average is borne by ship, freight and cargo (article L. 5133-7). The ship contributes in proportion to her value at the port where the venture ends, increased where appropriate by the damage she suffered; gross freight and passage money contribute for two thirds of their value; cargo saved or sacrificed contributes in proportion to its real or deemed market value at the port of discharge (article L. 5133-8). Under the York-Antwerp Rules the contributory value of cargo is its value at the time of discharge, established from the commercial invoice, and that of the ship her value at the end of the adventure, disregarding any profit or loss on a time charter. The principle is identical: each contributes in proportion to what the sacrifice saved.
Property sacrificed is made good and then itself contributes on the value allowed, so the owner of jettisoned cargo is not reimbursed in full but bears his share. Cargo declared at less than its real value contributes on the real value but is made good only in proportion to the declared value (article L. 5133-11); cargo for which there is neither bill of lading nor mate’s receipt contributes if saved but is not allowed if lost, as is deck cargo outside short-sea trades (article L. 5133-12). Where the casualty results from the fault of one of the parties, adjustment still takes place, subject to recourse against the party at fault (article L. 5133-5): the owner’s fault does not remove the duty to adjust, it opens an action to recover the contribution.
The general average security: what the receiver is signing
The master may refuse to deliver the cargo and require it to be held until the contribution is paid, unless sufficient security is given (article L. 5133-18), and the owner has a lien on the cargo for contributions for fifteen days after delivery (article L. 5133-19). That is the leverage which obliges receivers to sign. International practice requires two documents: the average bond, by which the receiver acknowledges the principle of contribution and undertakes to provide information on the value of the cargo, and the average guarantee, an undertaking to pay the contribution once adjusted, issued by the cargo underwriter where the goods are insured or, failing that, replaced by a cash deposit into an escrow account, usually ten to twenty-five per cent of value.
Three precautions on signature. Check that the bond expressly reserves the right to challenge the adjustment and the admission in general average, and does not amount to an acknowledgment that the owner was not at fault. Provide the value of the cargo strictly from the commercial invoice, without uplift. And involve the cargo underwriter as soon as the demand arrives, because the guarantee he issues is the cheapest solution and shifts the burden of any challenge onto him; an uninsured receiver, by contrast, ties up funds for the whole of the adjustment, often more than two years.
The adjustment: the adjuster, the values, the deadlines
The adjustment is prepared by an average adjuster appointed and paid by the owner, who collects contributory values, verifies expenditure, determines what is allowed and calculates contributions. Damage is assessed for the ship at the port where the venture ends, at the actual or estimated cost of repairs (article L. 5133-9), and for cargo at the port of discharge, on the basis of its sound market value (article L. 5133-10). The adjustment is a technical document, often several hundred pages on a large container ship, written in English and delivered two to four years after the casualty.
It has no binding force of itself. The adjuster is neither judge nor arbitrator; his adjustment is a proposed apportionment which contributors may accept or contest, and it becomes enforceable only by agreement or by a court decision. Limitation deserves attention: under French law any action arising from general average is time-barred five years from the date the venture ended (article L. 5133-17); under the 2016 York-Antwerp Rules, rights to contribution are time-barred one year from the date of the adjustment and in any event six years from the end of the common maritime adventure. Those periods run against the owner too, who can no longer claim a contribution once they expire.
Challenging the adjustment: five grounds
The first is the very principle of general average: the act was not decided by the master, the danger was neither common nor pressing, the expenditure was not extraordinary, or the damage flows from the casualty rather than from the sacrifice. The second is the owner’s fault: where the casualty results from unseaworthiness or from a breach of his obligations, the contributor may refuse to contribute or exercise recourse (article L. 5133-5); under the York-Antwerp Rules, Rule D expressly preserves remedies for fault, and the owner’s defence then rests on the exceptions in the contract of carriage, particularly due diligence to make the vessel seaworthy.
The third concerns the expenditure allowed: port of refuge costs, temporary or permanent repairs, handling and storage, and salvage remuneration, a portion of which is regularly disallowed or reduced once the vouchers are examined. The fourth is contributory values, and above all the value of the ship, frequently understated by owners to reduce their own share. The fifth is limitation. A challenge starts with written observations to the adjuster, who may correct the adjustment, and failing that goes before the court or arbitrator designated by the bill of lading or charterparty, most often London. For an isolated receiver, contesting an adjustment covering tens of millions is rarely economic; it becomes so when cargo underwriters act together, which is standard practice on major casualties, or where the contribution claimed is large relative to the value of the goods.
How the firm works
For shippers and receivers, the firm analyses the security demand and the bill of lading, negotiates the terms of the bond, coordinates the cargo underwriter, and on receipt of the adjustment examines admission in general average, the owner’s fault, the expenditure and the values, then conducts the challenge or the recourse.
For cargo underwriters it acts on significant casualties, including alongside foreign counsel where the adjustment is drawn in London, Hamburg or Singapore. For owners and their clubs it secures the declaration of general average, the collection of guarantees and the recovery of contributions, and defends a contested adjustment. The firm appears before the commercial courts of the French ports and the Chambre arbitrale maritime de Paris, and works in English with adjusters and clubs.
Have you received a general average security demand, or an adjustment? A consultation establishes what you actually owe and what can be challenged.
Frequently asked questions
What is general average?
Extraordinary damage, loss and expenditure decided by the master for the common and pressing safety of the interests engaged in a maritime venture (article L. 5133-3 of the Transport Code), shared between ship, freight and cargo in proportion to their values (articles L. 5133-7 and L. 5133-8).
Do I contribute if my cargo was undamaged?
Yes. Contribution is owed by all interests saved, including undamaged cargo, because it benefited from the sacrifice. It is proportionate to the value of the goods at the port of discharge.
Can I refuse to sign the general average guarantee?
The master may refuse delivery and require the cargo to be held until the contribution is paid, unless sufficient security is given (article L. 5133-18). In practice a cargo underwriter’s guarantee obtains delivery without tying up funds; the right to challenge the adjustment should be reserved in the bond.
Is the adjuster’s adjustment binding?
No. It has no binding force of itself and may be challenged on admission in general average, on the owner’s fault, on the expenditure allowed and on contributory values, before the court or arbitrator designated by the contract.
What is the limitation period in general average?
Five years from the end of the venture under French law (article L. 5133-17); one year from the date of the adjustment, and in any event six years from the end of the adventure, under the 2016 York-Antwerp Rules where they are incorporated.
Further reading: general average: who contributes and who to pursue, demurrage and detention, ship arrest in France.
Written by Hervé Guyader, avocat at the Paris Bar, doctor of law. This content is general information and is no substitute for advice on your own matter.