Legality, rationality of general average for MV Ever Given

By Xie Ming, ETR Law Firm
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After the MV Ever Given blocked the Suez Canal in 2021, throwing global trade into turmoil, the ship’s owner declared what may be a record general average case in terms of the amount involved – sparking disagreements in legal circles over the legality of the move.

Under article 193 of China’s Maritime Law, the term “general average” refers to “an extraordinary sacrifice or expenditure intentionally and reasonably made or incurred as a direct consequence of measures adopted for the common safety of the vessel, cargo and other property that are exposed to a common danger on a common voyage”.

Conflict of laws

If article 193 of the Maritime Law is compared with articles 165 and 171, it is obvious that the definition of “general average”, taken literally, does not include accidents that occur in “navigable waters connected with the sea”. Some have argued that since Ever Given ran aground in a canal, the special protections offered by general average may not apply. The author would argue that the issue originates from the limited nature of article 193, and that accidents occurring in “navigable waters connected with the sea” should still constitute general average.

Xie Ming, ETR Law Firm, Legality, rationality of general average for MV Ever Given
Xie Ming
Partner
ETR Law Firm

Theoretical arguments exist that both article 193 and the York-Antwerp Rules 2004 require the incident to occur on a common voyage, which, in practice, includes navigable waters connected with the sea.

Logically, in the event of a general average act, salvage remuneration is a common extraordinary expenditure paid directly for the intentional measures taken. Since it is determined that salvage remuneration incurred in navigable waters connected with the sea is to be borne by the shipowner, the general average should naturally be shared with the cargo owner.

Article 193 originates from the phrase “a common maritime adventure” in the original version of the York-Antwerp Rules 1974, which did not exclude the idea of “navigable waters connected with the sea”.

Up for debate

Based on the reports in various media, the author believes that such an accident may not constitute general average under current Chinese laws and rules. Was there genuine and material danger? There was no reported risk of hull rupture, rolling over or capsizing, and the vessel could be refloated after dredging the sand and gravel from the bottom with the help of tugs and tidal force.

Were the ship, cargo and other property exposed to a common danger? No, the canal authorities closed the channel and the ship was in no danger of being struck by other ships.

Were the measures taken by the ship for the common safety of the ship, cargo and other property? Only the ship itself was caught in an awkward situation and the measures, such as dredging of sand and gravel, and tugboat rescue, were taken for the safety of the ship only.

Proposed revision

When a ship, its cargo and other property on board are exposed to a general or minor danger, instead of a material one, even in the absence of a common danger, could consideration be given to including the “extraordinary sacrifice of the vessel or expenditure intentionally and reasonably made or incurred as a direct consequence of measures adopted” in general average, if they are not for common safety but rather for the sake of unspecified other ships, cargo aboard those vessels, or even the public interest or the international shipping and trading order? The author recommends that article 193 be supplemented as follows:

“For the interest of the shipping public and shipping order, 50% of the extraordinary sacrifice or expenditure intentionally and reasonably made or incurred as a direct consequence of measures adopted may likewise be recognised as general average, notwithstanding the fact that the ship, cargo and other property have not been exposed to a common danger, and the measures were not taken for the common safety.”

Policy basis

The Explanations of the Ministry of Transport on Revising the Maritime Law state that: “The revision and issuance of a set of maritime legal systems in keeping with the development of shipping and trade will provide not only assurance and services for the development of maritime trade corridors, but also proposals from China for the formulation of maritime legislation and regional rules by the countries along the routes.”

The author believes that policies are the basis for legislation, and the Maritime Law has rarely seen any legal innovations in the past 30 years. As China grows more powerful, it is necessary to examine the impact of this incident on the country in order to safeguard China and the world’s shipping interests.

Legal principle

The above-mentioned modification is based on the principle of good faith and rules for avoiding perils in response to an emergency in China’s Civil Code, integrated with the existing general average system.

The principle of good faith, specified in article 7 of the Civil Code, is a basic principle recognised in the civil law of all countries. The essence of general average is that the cargo owner is also required to share the costs for the danger avoidance actions taken by the shipowner. When ship and cargo are both immobilised in a major shipping lane, if the cargo owner were to deem it the sole responsibility of the shipowner and refuse to share the load, would this run afoul of the principle of good faith? The author would argue that in the traditional philosophy of navigation, the ship and cargo are in common peril, but with container ships getting ever larger, the ship and cargo in this incident have noticeably “come together” in obstructing public interests.

Both article 182 of the Civil Code and article 21 of the Criminal Law provide for the avoidance of peril in the event of emergency. In the author’s opinion, the incident is consistent with the concepts and conditions relating to avoidance of danger as commonly known in academic circles.

Co-opetition of rescues

The dredging of sand and gravel, assistance from tugboats and other measures ultimately enabled Ever Given to escape peril, and the extraordinary expenditures incurred gave rise to the co-opetition between the rescue of both the vessel itself and the public interest. The author’s proposed revision aimed to address both types of rescue. As for the above-mentioned figure of 50%, it is but a personal suggestion and varied opinions are welcome.

Xie Ming is a partner at ETR Law Firm

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