I. Introduction and Legal Foundation
The concept of General Average is a foundational and equitable principle in maritime law, both internationally and under Philippine jurisdiction. It is governed domestically by the Code of Commerce and is heavily influenced by the York-Antwerp Rules, which are routinely incorporated into contracts of carriage. The doctrine is predicated on the ancient maxim of maritime law: “That which is sacrificed for the benefit of all shall be made good by the contributions of all.” It operates as a mechanism to distribute the financial consequences of a voluntary and extraordinary sacrifice or expenditure made to preserve a common maritime adventure from peril.
II. Essential Elements of a General Average Act
For an act to qualify as General Average, giving rise to contribution, the following elements must concur, as outlined in Article 811 of the Code of Commerce and established jurisprudence:
III. Common Examples of General Average Acts
Typical scenarios include: the jettison of cargo to refloat or stabilize a vessel; damage to machinery or the hull in efforts to refloat a grounded ship; costs incurred in entering a port of refuge for necessary repairs following a casualty; and expenses for salvage operations undertaken under a formal contract to save the maritime adventure.
IV. The Role of the Shipowner and the General Average Statement
Upon the occurrence of an event that may constitute General Average, the shipowner (or the carrier) typically declares General Average. The shipowner has a lien on the cargo and can refuse its delivery until security for the potential contribution is provided. A professional Average Adjuster is then appointed to calculate the losses, sacrifices, and expenditures, and to apportion the contributory values of the saved property (vessel, cargo, and freight) to produce the General Average Statement. This statement details each party’s proportionate share.
V. Contributory Values and Apportionment
The contribution is calculated based on the net saved values at the termination of the adventure (usually at the port of destination or where the voyage is abandoned). Cargo contributes based on its delivered value, the vessel on its sound value at the voyage’s end, and freight at risk on the amount net to the carrier. The loss or sacrifice is then distributed pro-rata among these values.
VI. Fault as a Bar to Contribution
A critical defense for a cargo interest facing a claim for General Average contribution is to prove that the peril was caused by the “fault or privity” of the shipowner. Under Article 823 of the Code of Commerce, if the maritime accident giving rise to the sacrifice or expenditure is due to the shipowner’s fault, the right to claim contribution is extinguished. This is often linked to the carrier’s duties under the Civil Code (Article 1733) and the obligation to exercise extraordinary diligence. If the casualty resulted from unseaworthiness, improper stowage, or negligent navigation for which the carrier is not exempted, the General Average claim may be defeated.
VII. Relationship with Marine Insurance
General Average contributions, sacrifices, and expenditures are generally covered under standard marine insurance policies (both hull and cargo). An insured cargo owner who pays a General Average contribution can claim reimbursement from its insurer, provided the peril was an insured risk. Similarly, the shipowner’s hull policy will cover its share of sacrifice and contribution. Insurers often step in to provide the required security on behalf of their assured.
VIII. Jurisdiction and Governing Law
Philippine courts have jurisdiction over General Average matters arising from voyages to or from Philippine ports, or involving Philippine-flagged vessels. While the Code of Commerce provides the statutory framework, the specific terms of the charter party or bill of lading, which often incorporate a particular version of the York-Antwerp Rules, will govern the detailed adjustment process. Conflict of laws principles may apply in international voyages.
IX. Practical Remedies
For a shipowner/carrier: Immediately upon a casualty, declare General Average in writing and notify all cargo interests. Appoint a qualified Average Adjuster. Exercise the possessory lien over cargo by demanding security (usually a General Average bond backed by a guaranty from the cargo insurer or a cash deposit) prior to delivery. Collect all evidence demonstrating the absence of fault, including logbooks, weather reports, and expert assessments on the seaworthiness of the vessel at the commencement of the voyage. For a cargo owner/consignee: Upon notification, do not accept delivery or pay freight without securing the cargo’s release. Contact your marine cargo insurer immediately, as they will invariably provide the required guaranty bond. Investigate the cause of the casualty; if evidence suggests carrier fault (e.g., unseaworthiness, negligent navigation not exempted under law), formally reserve rights to contest the General Average declaration and contribution. Demand a copy of the eventual General Average statement and have it reviewed by counsel or a surveyor. If fault is established, be prepared to litigate or arbitrate to recover any contribution paid, as the carrier’s breach of its duty of extraordinary diligence nullifies its claim for contribution. In all cases, preserve all documentation, including the bill of lading, commercial invoices, and all correspondence with the carrier and adjuster.
