Expenses at port of refuge etc. - Law of Sea

EVOLUTION

As per the Resolution 6 passed at the Glasgow Conference 1860:

“That the expense of warehouse rent at a port of refuge on cargo necessarily discharged there, the expense of reshipping it, and the outward port charges at that port, ought to be allowed in general average.”

The resolution did not mention anything about the cost of entering into a port of refuge, which was though allowed in the general average under the practice of all maritime countries and their laws for the common safety. During that era only English Law used to treat the expenses in regards to storage, outward port charges and reloading of the cargo i.e. in a manner different from obtaining in other different countries.

At the 1864 York Conference, the principle which was decided at the Glasgow Conference got widened and incorporated in the York-rules:

“When a ship shall have entered a port of refuge under such circumstances that the expenses of entering the port are admissible as general average, and when she shall have sailed thence with her original cargo or a part of it, the corresponding expenses of leaving such port shall likewise be so admitted as general average; and whenever the cost of discharging the cargo at such port is admissible as general average, the cost of reloading and stowing such cargo on board the said ship, together with all storage charges on such cargo, shall likewise be so admitted. Except that any portion of the cargo left as such port of refuge, on account of it being unfit to be carried forward, or on account of the unfitness or inability of the ship to carry it, shall not be called on to contribute to such general average.”

The rule though did not deal in regards to the cost of discharge of cargo or cost of entering a port of refuge. This rule was also confirmed at the Antwerp Conference of 1877 except the exception stated in the last line. This rule was expanded at the Liverpool Conference of 1890.

At the 1890 conference, the rule included that part which dealt with the cost for leaving a port of the refuge which intended to be the declaration of laws in regards to maritime by governing the cost of entering or returning in a port of refuge or loading respectively.

The expenses of entry and departure from the port of refuge are allowed in general average. The question that, what are the circumstances in which a port of refuge gives rise to general average allowance, are dealt as per the law and practice which governs the adjustment. Under English law, the above-mentioned circumstances were regarding the common safety of the ship.

The Amendment of 1950 which had its origin in the Rule of Practice for the Association of Average Adjustors was passed in 1949 which provided for the admission in regards to the general average for the cost of removing vessel from the first port to the second port whenever the repairs which were considered to be necessary could not be effected at the first place or port.

The application of Rule of Practice was done when a vessel in any place or port under the circumstances where the wages and maintenance of the crew for repairs becomes necessary for safe prosecution of voyage which is admissible under general average.

Whenever the vessel is at any place or port where the wages, as well as the maintenance of the crew during detention for repairs, are necessary for the safe prosecution of voyage would be considered admissible under general average. This is an important interpretation as various commercial ports do not have adequate repair facilities because of increase in ships as well as the sophistication of ships.

The repair required for ensuring that the condition of the vessel would be such that it will be able to continue the voyage. Such repair would be permanent in nature. Though, it could be invoked in case if the ship was at a place or port where there could have been an effect on the permanent repairs.

The expense of entering as well as leaving the first as well as second ports of refuge is to be allowed in general average. Also, the removal expenses include the necessary cost of tug escort services or sea pilotage.

Treatment of the cost of removal to a second port for repairs in other circumstances

The repairs, necessary for the purpose of voyage’s safe prosecution can even be in most of the cases carried out at the port of refuge which would in almost every case the adopted course. Only in exceptional cases the decision regarding the removal of the vessel in another port for the purpose of carrying repairs may be taken. Thus, the valid reasons and grounds used to be examined that why despite of having the repair facilities at the port of refuge the repairs were being done somewhere else. The reasons for the repair being taken place at some other place could be technical, expense as well as delay.

Technical reasons could be that the facilities provided at the port of refuge may be inadequate or even the workforce could be inefficient that the technical manager present there may not consider the task of repairing of the ship much seriously.

Expense reasons could be that the vessel may be removed from one port to another for the purpose of achieving a saving in the repairing cost.

Whereas, Delay reasons could be when removal takes place with the aim of saving time.

The question in regarding the cost of discharging of cargo which is to be allowed in general average is to be decided in accordance with the law and practice of the place of the adjustment.

The cost for discharging the cargo at a place or a port is to be admitted as the general average under two separate circumstances -

1. When discharging becomes necessary for the purpose of having common safety or;
2. When the discharge takes place for enabling damages to the ship which is caused by any accident during voyage, which is to be repaired if such repairs are necessary for the voyage’s safe prosecution.

Measures taken for the common safety when the vessel is in port

As a matter of fact the vessel’s location is an essential factor for the purpose of determining that if a ship is threatened by any danger that to the extent is able to justify the allowances in general average for the purpose of taking measures. Thus, where there is an engine malfunction in a vessel which is in sea this will create a position of danger in the sea but if the vessel is in the port there will be no significance to that danger.

Instances likely to require cargo-handling operations include fire and collusion.

In case of fire, until it was extinguished and the master was able to stand down the crew the situation of peril continued to exist.In case a fire explosion takes place in a container ship or a container on board the cost for discharging the other containers; allowed in general average without the objection of any of the parties for not only to reach the particular container where the explosion had taken place but also where discharge for examination in other containers was stowed nearby.

Whereas in case of collusion, the ship which was holed in the consequence of collusion which occurred in the port may in case of danger of sinking or the case of capsizing as ship which sustained similar damages at the sea.

Continuation of the allowances following the measures undertaken as a general average act

The situation in respect to peril which necessitated the resort for the port of refuge continues unless and until the cargo and the ship had been placed in that position where the remedial measures may be taken. It is the from the origin of English practice to allow general average not only for the cost of entry in a port of refuge for the purpose of repairing the accidental damage but also for the purpose of discharging the cargo whenever it is necessary to effect these repairs.

The damages to the ship for the purpose of repairs for it to be necessary for voyage’s safe prosecution which if not repaired may give rise to a position of peril at the sea.

Discharging of cargo is generally considered necessary for enabling the damages to be repaired when it is to be undertaken for accessing that part of the ship which is in need for repairing or if whenever there is an underwater damage in the vessel where the vessel is required to be dry-docked.

Discovery of damage to the ship at a port of loading or call

As a general principle, for the purpose of qualifying the port of call situation for general average allowance the detention at port as well as the accident which gave rise to it must have happened during the community of interest. Even if the damage caused on an antecedent voyage no exception will apply provided some accident or some extraordinary circumstances has taken place which occurred during community of interest.

Though a mere finding of a latent defect does not amount to an accident or some extraordinary circumstance and thus the cost of discharging the cargo for the repairmen of the latent defect would be taken as an exception and not in general average.

Handling or discharge of cargo, etc. when incurred for the restowage of shifted cargo

Before the year of 1974, the cost of restowage of cargo at the port of refuge which was shifted during voyage had given a rise to the position of peril at the sea was considered as a contentious issue. In the United States of America, prior to 1974 there was a practice to allow such expenses. Though after 1974, the cost of discharging of cargo or cost of handling on board or cost of stores or fuel for restowage was excluded.

At the Stockholm Conference of 1924 the following things had taken place:

1. Specific allowances for the cost incurred for the fire insurance as a part of the storage’s cost.
2. Provisions in regards to the cost of storage, reloading of fuel and stores and cargo by admitting the cost of handling and also discharging from the ship.
3. Allowances of storage expenses in the event of the voyage abandoned or the ship being condemned was extended till the date of completion of the discharging of the cargo if the abandonment of the voyage or condemnation of the ship had taken place, before that date.

Generally the cost of discharge, reload and storage is allowed in general average if the discharge was considered to be necessary for their common safety or for enabling the repairs to the ship which are necessary for safe prosecution of voyage.

The storage’s cost includes the cost of transportation of cargo from the place where they had been discharged from ship into warehouse or any other place of the storage including the rent of warehouse and other associated cost. Though, if it is stored in open then these items either as quay rent, the hire, the wages of watchmen or other provision for security and fixing of tarpaulins are all to be included.

In the Stockholm Conference of 1924 the arguments in respect to the allowances in general average for the cost of fire insurance premiums were discussed by the adjustors. A loss of cargo due to fire in the warehouse does not fall under general average , it is not logical to charge premium to general average and such cost must fall on the party for whom the insurance was taken. The cargo which were insured for the purpose of marine risks which may happen during the voyage the expectation is that the insurance would cover the fire occurring whilst thus where the cargo was to be discharged at the port of refuge. Also, under the contract for carriage a shipowner remains under the obligation to act reasonably and must act with care for the cargo while it is in the custody as a bailee and in the course of his duty he must arrange for cargo which must be insured against fire.

The premium of insurance was allowed if it is reasonably incurred in circumstance. Though, in case of bulk cargo the shipowner is generally advised to ascertain that which insurances were in place for voyage. Earlier the maintenance, wages of crew etc. were incurred during the detention for extra periods for the purpose of reloading as well as for the restowage of the cargo which is discharged as general average were not expressly permitted. Though, now rules have been formed in this respect as well.

Condemnation of the ship and abandonment of the voyage

Condemnation of the ship

Condemnation of the ship was applied when the ship, in commercial sense, considered as a constructive total loss. This could be discharging of the shipowner form the obligation of his as the carrier of the goods for executing the repairs and to continue the voyage. Under English Law, this form of position is obtained if the vessel sustains such damage on voyage by the expected perils where the cost of repairing and salving would exceed the value when repaired.

• Abandonment of the voyage

Under this two situations may be taken; firstly, in case of external events say damages caused to ship which is sustained in consequence of the expected perils; there the commercial purpose of adventure is frustrated. Secondly, is the abandonment of voyage by the agreement between both the parties. The discharging cost might have to be dealt differently when voyage is frustrated in comparison to the cases where the abandonment of the voyage takes place by the agreement between the parties. Whenever the adventure frustrated or the ship is being condemned the parties may take time to decide what should be done in respect to cargo. Though, if it is not necessary to discharge cargo for common safety then it might remain on board during such period of delay and the shipowner is under the obligation to take care of it. The shipowner may act as a bailee or under the affreightment contract. If the cargo is discharged before the abandonment of voyage or ship’s condemnation then the date when general average allowance would cease would be upon the state of facts which became manifest which justifies the abandonment or evidences the frustration of the adventure.