General average is one of the rare mechanisms in which the law asks a victim to pay. The master deliberately sacrifices part of the venture to save the rest, and the burden of the sacrifice is then shared among all those who benefited from it. The shipper whose containers arrived intact then receives a call for contribution, often accompanied by a demand for security even before delivery. The question that immediately arises is that of fault: if the ship grounded because the shipowner neglected maintenance, why should cargo contribute? The answer of the French Transport Code is clear, and it surprises. Here are the six points that determine, in practice, who contributes, for how much, and against whom to turn.
1. A party’s fault does not prevent the adjustment; it only opens a recourse
This is the central rule, and the one shippers discover with incredulity. Article L. 5133-5 of the Transport Code provides that where the event which caused the average is the consequence of a fault committed by one of the parties engaged in the venture, general average is nonetheless adjusted, subject to recourse against the party to whom the fault is attributable. The adjustment therefore comes first, and liability is debated afterwards. Concretely, the innocent shipper must provide its security and pay its contribution, then exercise its recourse against the shipowner at fault in a second phase, bearing the burden of proving the fault and of overcoming the excepted perils of the contract of carriage. This dissociation between adjustment and liability is the key to reading the whole file: it explains why refusing to contribute on the ground that the shipowner was at fault is almost always a poor strategy.
2. What falls within general average, and what does not
The scope is narrower than the practice of adjusters suggests. Under Article L. 5133-3, general average is decided by the master and consists of the extraordinary damage, losses and expenses incurred for the common and pressing safety of the interests engaged in a maritime venture. Three cumulative conditions can be read there: a decision by the master, an extraordinary character, and a common and pressing peril. Article L. 5133-4 adds a causation filter, since only damage materially affecting the property engaged and expenses incurred for that property are admitted where they are the direct consequence of the general average act. Article L. 5133-6 completes the mechanism with the substituted expense rule: any additional expense voluntarily incurred to avoid a loss which would have been classed as general average is allowed as such, up to the amount of the loss avoided. It is on these three texts that the challenge to an item of the adjustment is fought.
3. Who contributes, and how far each party’s obligation goes
Article L. 5133-7 sets the base: general average is borne by the ship, the freight and the cargo. Article L. 5133-15 fixes its limits, and it contains two rules that are often forgotten. The first is protective: the value of its contribution is, for each interested party, the limit of its obligation, so that a shipper can never be called upon beyond the value of what was saved on its account. The second is formidable: where one of the contributors is insolvent, its share is apportioned among the others in proportion to their interests. In other words, one shipper’s default increases the bill for all the others. In a containerised venture with several hundred parties entitled, this pooling of insolvency risk alone justifies following the provision of security closely.
4. Misdeclaration and irregular deck carriage are paid for dearly
The Code sanctions documentary irregularities with a deliberate asymmetry. Under Article L. 5133-11, goods declared at a value lower than their real value contribute in proportion to the real value, but their loss or damage is classed as general average only in proportion to the declared value. The shipper who under-declared therefore pays on the true figure and is compensated only on the false one. Article L. 5133-12 treats goods without a bill of lading or master’s receipt the same way: they are not admitted if lost, but they contribute if saved, and the rule applies to deck cargo outside short coastal trade. Article L. 5133-13 goes further in the event of jettison: the value of goods irregularly carried on deck within the meaning of Article L. 5422-7 is not admitted in general average. That last text characterises as a fault stowage on deck without the shipper’s consent stated in the bill of lading, specifying that consent is presumed for containers on board ships fitted with appropriate installations.
5. The master’s lever over delivery, and the case of total loss
Contribution is not claimed after the event in the hope of the goodwill of the parties entitled. Article L. 5133-18 authorises the master to refuse to deliver the goods and to request their deposit until payment of the corresponding contribution, unless sufficient security is given by the party entitled. That is why the first letter received by a consignee is not a call for funds but a demand for security, average bond and average guarantee, the one signed by it, the other by its cargo insurer. Negotiating the wording of these undertakings is the most useful act of the first days, because they often fix the fate of later challenges. At the other end of the spectrum, Article L. 5133-16 lays down a simple rule: there is no adjustment in the event of total loss of the interests engaged in the venture. When nothing has been saved, there is nothing left to apportion.
6. Five years to act, and a bounded contractual freedom
Article L. 5133-17 fixes the limitation period: any action arising from general average is time-barred five years from the date on which the venture ended. This statutory period does not, however, have the last word, because Article L. 5133-1 reserves contrary stipulations by the interested parties, and international practice almost always refers to a body of contractual rules whose time limits are appreciably shorter. Checking the applicable period therefore starts with the bill of lading and the version of the rules it refers to. Contractual freedom nevertheless has an express limit, laid down by the same Article L. 5133-1: the clause provided in a bill of lading allowing the carrier to reserve provisions other than those of the chapter is deemed unwritten. A boilerplate clause giving the carrier a unilateral power to choose its regime therefore has no effect.
These six points form the defensive framework of a general average file, from the first call for security to the final recourse. The firm’s practical guide to general average details the mechanics of the adjustment, the documents to gather and the timetable of the first weeks. Get the general average guide. For a current matter, the maritime law page sets out the firm’s working method and the contact form allows you to describe a specific situation.
Where the adjustment is contested or a contributing party refuses to pay, the matter goes to court or arbitration. Our page on maritime litigation describes how we conduct these proceedings before the French courts and the main arbitral institutions.
On the same guide, from the side of the mechanics of contribution and adjustment: General average: contribution, security and adjustment.
7. Where a contributor does not pay, its share falls on the others
A little known mechanism in Article L. 5133-15 of the French Transport Code alters the arithmetic of every multiparty file. The provision sets out three rules in turn. Claims falling within each heading rank together. Where the values are insufficient, they are paid in proportion to their amount. And, above all, where one of the contributors is insolvent, its share is apportioned between the others in proportion to their interests.
On a container ship carrying the goods of several thousand cargo interests, a fair number of them small businesses with no cargo cover, default is not a theoretical possibility. The solvent, well insured shipper then finds itself called on beyond its initial share, and discovers that transfer months after having provisioned the file.
One limit frames that transfer, and it has to be asserted. The last paragraph of the same article provides that the value of his contribution is, for each interest, the limit of his obligation. The transfer of insolvent shares cannot therefore result in a demand exceeding the contributory value of your own cargo, as determined at the port of discharge under Article L. 5133-8. A supplementary demand crossing that ceiling is refused on that ground alone.
Two checks are called for on a supplementary demand. The first concerns the reality of the insolvency relied on: an unpaid claim is not an irrecoverable one, and the owner must show what steps it took before shifting the burden. The second concerns the proportionality of the transfer, which follows the proportion of interests and not equal shares.
8. Identifying your debtor and your guarantor in the contractual chain
The contribution demand almost always reaches the consignee, because it is the consignee who presents to collect the goods. That does not make it the party who must economically bear the cost, and the question of where the burden lands is settled outside maritime law altogether, in the contract of sale.
The tipping point is the transfer of risk. Under a sale at departure, the buyer bears the risks of carriage from the moment the goods are handed to the carrier, and the general average contribution follows that allocation. Under a sale at arrival, the burden stays with the seller. The Incoterm chosen, and above all its edition, therefore governs the final allocation, and a demand received by a buyer under a sale at arrival passes back to its seller, provided it is notified in the form and within the time limits set by the contract.
Next comes the guarantor. The cargo policy in principle covers the contribution, but only up to the sum insured, which produces a scissors effect with Article L. 5133-11: goods declared at less than their real value contribute in proportion to the real value, while the underwriter guarantees only up to the amount subscribed. The difference stays with the shipper. The declaration of value at the time of subscription is therefore the real point of vigilance, long before any casualty.
There remains the case where a freight forwarder organised the carriage. It answers in principle for the carrier it selected, which gives the cargo interest an additional counterparty, often more accessible than a foreign owner. That route requires speed, the period for suing a forwarder being short as well.
9. After paying: subrogation of the underwriter and conduct of the recourse
Payment of the contribution is not the end of the file, it is the start of the second stage that Article L. 5133-5 contemplates. That stage still has to be conducted by the party with the interest and the standing to do so, which is not always obvious once an underwriter has been involved.
Where the cargo underwriter has paid the contribution, it is subrogated to the rights of its insured to the extent of what it paid. The recourse against the carrier or the shipowner then belongs to it within that limit, and the shipper keeps the action for the uncompensated part, in particular the fraction left with it by under-insurance or by a deductible. Two actions therefore coexist, and nothing requires them to be conducted together, although it is almost always preferable.
That coexistence produces a procedural effect worth anticipating. Proceedings started abroad by the hull underwriter do not necessarily displace a French court seised by the cargo interests. The Court of Justice so held on 19 May 1998 in Drouot assurances v Consolidated metallurgical industries, case C-351/96: the lis pendens rule does not apply between two claims for contribution to general average involving the hull underwriter and the cargo interests, unless it is established that, with regard to the subject matter of the two disputes, the interests of the underwriter and those of its insured are identical and indissociable. Identity of parties is not inferred from the insurance relationship alone.
Three precautions make that second stage worthwhile. Gather, from delivery onwards, the documents contemporaneous with the casualty, including the log extract and the attestation that Article R. 5133-1 requires of the master. Notify the seller, the forwarder or the underwriter, depending on the chain, in the form and within the time limits set by the contract. And watch the one year period in Article L. 5422-18, which usually expires before the adjustment is even issued.
Frequently asked questions
I am only the consignee, do I really have to pay?
The demand reaches you because you are the party presenting to collect the goods, and Article L. 5133-18 of the French Transport Code allows the master to hold them until payment or against sufficient security. That does not settle who ultimately bears the cost, which is decided by the contract of sale. Under a sale at departure the buyer bears the risks of carriage from the moment the goods are handed to the carrier, and the contribution follows that allocation. Under a sale at arrival the burden stays with the seller.
Does the Incoterm decide who ultimately pays?
In practice, yes, because the tipping point is the transfer of risk. The Incoterm retained, and the edition of it, therefore governs the final allocation of a general average contribution. A demand received by a buyer under a sale at arrival passes back to the seller, provided it is notified in the form and within the time limits set by the contract. Checking the clause before answering the shipowner is the cheapest step in the whole file.
Another shipper is insolvent, can its share be claimed from me?
Yes. Article L. 5133-15 provides that where one of the contributors is insolvent, its share is apportioned between the others in proportion to their interests. Two limits apply. The apportionment follows the proportion of interests, not equal shares. And the value of his contribution remains, for each interest, the limit of his obligation, so no supplementary demand can exceed the contributory value of your own cargo.
The casualty was the owner’s fault, must I still contribute?
Yes, and it is the most counter-intuitive rule in this field. Article L. 5133-5 provides that a general average adjustment takes place even where the event results from the fault of a party engaged in the adventure, subject to recourse against the party to whom that fault is attributable. Rule D of the York-Antwerp Rules is to the same effect. You contribute first and pursue afterwards, through a separate action governed by its own time limit.
Does my cargo underwriter cover the whole contribution?
Only up to the sum insured. The scissors effect is this: Article L. 5133-11 makes under-declared goods contribute in proportion to their real value, while the underwriter guarantees only up to the amount subscribed. The uncovered fraction stays with you. That risk is neutralised when the value is declared at the time of subscription, not after the casualty.