General Average

General average is not a mathematical term, what it really means is ‘general loss’. ‘Average’ comes from the French avarie, meaning ‘damage’. It refers to the material loss experienced by all parties when there is a problem at sea, and parts of the ship and cargo are jettisoned into the sea.

General average dates back to the Rhodian Sea Law of 900 BC, but is now internationally agreed between all of the world’s major shipping nations under the updated York-Antwerp Rules 1994, the first version of which was the Glasgow Resolutions of 1860. These rules only exist by agreement by the two merchant parties who write them into the bills of lading and charterparties – the legal documents that support a voyage. It’s important to recognise that general average is not in any statutory law or any civil code.

Although general loss as a concept came before marine insurance, the two concepts are now tightly linked. Ships will insure themselves against other specific losses incurred at sea, and then also against general average. The York Antwerp Rules define an act of general average as where there is an extraordinary sacrifice deliberately made for the common safety of the people and cargo aboard a voyaging ship. That deliberate and reasonable loss of property to save people or other goods against another specific danger is the key differentiator versus other types of loss or damage.

As commerce evolved, general average shifted from being a principle to being seen as a form of insurance, where both the ship-owner and the cargo-owner could claim a loss when the damage was not attributable to them. The claims of such parties became so significant and varied that the methods of calculation of contribution for general average had to be uniformly codified in the Glasgow Resolutions and then in the York-Antwerp Rules.

Even though the rules are generally agreed, there are still some differences in national application. For example, in the UK third parties can perform an act of general average for safety reasons, whereas in France only the master of the ship, or their agents, can order such an act. Furthermore, the rescuing act must be successful in common law jurisdictions to qualify as general average, whereas in civil law even an unsuccessful act will qualify if it was made in the common interest. In the York Antwerp regime, there is a list of numbered rules around causality, burden of proof, and distribution of rights, and there are specific norms for pollution, delay, towage, salvage, stranding, and expenses within the regime.

In sum, the rules of general average are very specific to many circumstances of damage and loss at sea, but are sometimes seen to contradict each other. More and more, they have been used to secure the interests of ship-owners, and also protect and define when an insurer must pay out in unusual and sometimes catastrophic circumstances.