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York-Antwerp Rules 2016: a welcome compromise after 22 years of controversy?

News / / York-Antwerp Rules 2016: a welcome compromise after 22 years of controversy?

On 6 May 2016, the Comité Maritime International (“CMI”) approved a revised version of the York-Antwerp Rules (YAR). This is the first such revision in 12 years and may prove to be a significant evolution of the rules used by general average adjusters. Although many aspects of the 1994 YAR remain, there are significant amendments (for example, to interest rates, adjustment procedure and the time limit for claims) that should be welcomed by supporters of the 2004 YAR.

The background

Although the CMI approved another set of revised rules in 2004, the previous revision (dating from 1994) has remained in general use because the shipping industry has never wholeheartedly adopted the 2004 YAR. BIMCO has (after twice reviewing the position) declined to refer to the 2004 YAR in its standard form charterparties and bills of lading, which has prevented them from coming into common use. BIMCO’s response to the 2016 YAR has been rapid and positive, however, and it announced its approval of the revised rules on 11 May 2016. The 2016 YAR will, therefore, begin to be incorporated into many BIMCO standard form contracts before the end of this year and, although time will tell, it seems that the shipping industry may regard them as adequately addressing the concerns they had regarding the 2004 YAR. The International Union of Marine Insurance (“IUMI”) has also expressed its approval of the 2016 YAR. As the IUMI was the key organisation that expressed criticism of the 1994 YAR and supported the controversial 2004 YAR, it seems likely that the new Rules represent a compromise that most of the main stakeholders can live with.

1994 YAR vs. 2004 YAR

The main differences between these two versions of the YAR are as follows:

Salvage

The 1994 YAR provide that salvage should always be reapportioned in GA, whereas the 2004 YAR left salvage contributions out unless one party paid another’s salvage contribution on its behalf. 

Crew wages and maintenance at places of refuge

The 1994 YAR allow these in general average, whilst the 2004 YAR do not.

Allowance for temporary repairs to accidental damage

The 1994 YAR only limit the amount recoverable in GA at the level of saved expense that would have been incurred (and allowed in GA) if the         temporary repairs had not been effected at the port of refuge. No account is taken of savings that individual interests (e.g. hull insurers) may have made as a result of delaying the repairs until they can be carried out at a cheaper location. Under the 2004 YAR, the opposite approach is taken: temporary repair costs are treated as particular average up to the amount of savings made by individual interests and are only treated as GA if they exceed those savings.

Interest rates and commission

The 1994 YAR allowed interest at 7% p.a. on disbursements, sacrifices and allowances and a commission of 2% on most disbursements. The 2004 YAR, by contrast, provide for an interest rate on the former to be set annually by the CMI and no commission.

Time bar

The 2004 YAR introduced the first time bar (albeit one subject to any mandatory time limits enforced by national laws) for claims for GA contributions. The period is one year from the date upon which the GA adjustment is issued.

2016 YAR: amendments to the Rules

No single interest has had its way entirely in the 2016 YAR. The shipping industry may well, however, welcome several elements of the new Rules. Rule XI (a) provides, as the 1994 YAR did, that so long as they are reasonably incurred, the wages and maintenance of master, officers and crew are allowable in GA. The attempt to exclude these expenses in the 2004 YAR seems to have failed, therefore. The position of the 1994 YAR is also upheld regarding temporary repair costs to accidental damage, which are still treated first as GA, without taking into account potential savings made by hull insurers.

Possibly the most controversial issue considered by the CMI was whether to include salvage in GA. Supporters of its exclusion won a pyrrhic victory in the 2004 YAR, as the lack of salvage GA in those Rules is often considered as one of the key reasons the shipping industry did not back them. The 2016 YAR include a compromise at Rule VI (a)-(b) in that salvage expenditure is included as GA, but Lloyds Open Form–type salvage is not included unless one or more of five scenarios occur. One expressed view is that these are intended to ensure that the significant time and expense spent on re-apportionment is only incurred if not to do so produces “an inequitable result”.

Meanwhile, some amendments in the 2016 YAR follow, or are closer to, the 2004 YAR. For example, interest on expenditure, sacrifices and allowances will now be 4% above the 12-month LIBOR of the currency in which the adjustment is prepared. This allows a flexibility that the 1994 YAR, with its fixed 7% rate, did not. The 4% uplift is designed to reflect the fact that ship-owners may be charged significant borrowing rates. The 2% commission, however, has now been removed entirely as an anachronism.

The 2016 YAR retain, verbatim, the one-year time bar introduced by the 2004 YAR. This may be welcomed by insurers (although it should be noted that the limit does not in fact apply to claims between insureds and their respective insurers), and to some extent will promote international uniformity. 

The 2016 YAR also include amendments designed to streamline the adjustment process, alongside other clarifications. Rule XVII (a)(ii) now provides that “cargo may be excluded from contributing to general average should the average adjuster consider that the cost of including it in the adjustment would be likely to be disproportionate to its eventual contribution.” Under Rule XVI (a)(i), adjusters may also take CIF invoice values “to reflect the value at the time of discharge” even if they are in fact, in the case of multimodal transport, slightly inflated. The adjuster’s power to move the process forward is reinforced by the inclusion, at Rule E 3, of the right to estimate both the extent of GA and contributory values if interests do not provide figures within one year of the termination of the common maritime adventure. Such estimates may only be challenged “within two months of receipt of the communication and only on the grounds that they are manifestly incorrect.”

Comment

The GA regime has consistently faced criticism for increasing the overall costs of marine casualties, but the fact remains that there is a clear requirement for a mechanism that redistributes the burden of sacrifices incurred for the common safety of the interests in a voyage. For this reason, an updated version of the YAR that encourages faster production of adjustments without an over-concentration on minute details is to be welcomed. The 2004 YAR may have contained provisions that the shipping industry could never accept, but the 1994 YAR arguably required an overhaul and we may be cautiously optimistic that once the new Rules are commonly incorporated, the speed with which adjustments are issued may increase and the cost of adjustments may fall without any group of interests feeling unfairly treated. It remains to be seen whether the new version of the Rules is fully embraced by the shipping community. 

Christian Dwyer

Christian Dwyer Global Head of Admiralty

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