General Average – Recovery of Pollution Related Expenditure under Charterparties

June 1999

The following article is based on the Club’s November 1998 circular entitled "General Average Charterparty Clauses":

In Circular No. 267 of May 1997 the Club advised Members that some tanker charterers were attempting to introduce new clauses which had the effect of restricting owners' rights to include certain types of pollution costs in General Average in circumstances where those costs would otherwise have been recoverable in accordance with the York Antwerp Rules 1994.

In "Sea Venture" Vol. 16, page 28 the changes concerning the recovery of pollution expenses in General Average under the revised YAR 1994 were discussed. The new provisions concerning recovery of such expenses are contained in new Numbered Rule XI (d), as set out in the earlier "Sea Venture" article.

Prior to 1994, the York Antwerp Rules (YAR) allowed the recovery of pollution expenses and liabilities in General Average in a wide range of circumstances. For example, clean up expenses and the cost of third party pollution damage claims arising out of jettisoning oil to re-float a vessel were usually allowable within General Average.

As a result of increasing reluctance on the part of property underwriters to accept pollution expenses in General Average, there was considerable pressure to exclude all pollution costs from General Average when the York Antwerp Rules were revised in 1994. YAR 1994 represents a hard fought compromise between shipowner and property interests. Whilst the cost of pollution clean up and third party pollution liabilities following a discharge is now generally excluded from General Average under Rule C of YAR 1994, the cost of preventive measures incurred prior to a spill is usually allowable. However, YAR 1994 also provides that the cost of preventing or minimising environmental damage is recoverable in General Average under Rule (XI) (d) if incurred, inter alia, as a condition of entry into or departure from a port of refuge, regardless of whether or not a spill has actually occurred.

Although this erosion of shipowners' entitlement to recover pollution costs in General Average was regrettable, it was considered a justifiable price to pay for the continued existence of YAR as an internationally accepted General Average regime which has served the industry well over the years. For these reasons, the Club has advised Members that any further attempts by charterers to erode the YAR 94 position by contract should by firmly resisted.

In the light of these conclusions the International Group agreed that the additional risks arising from the use of such clauses would be excluded from the Pooling Agreement with effect from 20 February 1999. The Club rules were consequently amended (Club Rule 25 xvi) to exclude such additional risks from the normal scope of Club cover.

Members who are asked to accept any charterparty clause which attempts to modify the YAR 94 position on pollution costs should contact the Managers for further advice.