Engine Breakdown, Jettison and General Average on MV Ocean Trader
MV Ocean Trader, a 1,800 TEU container vessel, suffers main-engine failure in the Arabian Sea on 12 June while carrying 1,200 containers. She drifts toward a rocky lee shore in monsoon swells. A salvage tug is engaged under Lloyd's Open Form 2020 with SCOPIC; the tug holds her off, repairs are effected at a port of refuge, and later 30 containers are jettisoned to reduce draft after the vessel touches bottom. General average is declared. Values at termination: ship USD 7.6 million, cargo USD 12 million, bunkers USD 300,000, freight at risk USD 200,000. Salvage award USD 1.2 million, jettison loss USD 450,000, port of refuge expenses USD 250,000. Cargo receivers refuse to contribute, saying the salvage was for the shipowner's benefit and the jettison was the master's fault. How should the adjuster respond?
1. Identify which of the three items are allowable in general average under the York-Antwerp Rules 2016 and why.
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Salvage award. Salvage remuneration for services rendered to preserve property in a common maritime adventure is allowed in general average under Rule VI, provided it is not excessive and relates to the common adventure. However, any SCOPIC element must be separated: Rule VI(c) does not allow SCOPIC remuneration in general average. The adjuster must therefore obtain the salvage arbitration or settlement breakdown.
Jettison. The jettison of 30 containers is allowable under Rule I if it was reasonably made for the common safety. The fact that the master may have contributed to the casualty does not automatically defeat the GA allowance; fault is dealt with by cross-claims between the parties, not by denying the sacrifice itself.
Port of refuge expenses. Expenses of entering a port of refuge, repairs necessary for safe prosecution of the voyage, and related wages/maintenance/fuel may be allowed under Rules X and XI, but only the GA portion. Repair costs for damage not connected with the common safety are not allowable.
The cargo receivers' argument that the salvage was solely for the shipowner's benefit fails if the tug's services preserved the cargo as well as the ship. The adjuster should examine the salvage master's reports, the LOF/SCOPIC award and the casualty timeline.
2. Using the values given, outline the contributory values and approximate apportionment of the GA fund.
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The GA fund is the total allowable expenditure and sacrifice:
- Salvage award: USD 1,200,000
- Jettison: USD 450,000
- Port of refuge expenses: USD 250,000
- Total GA fund: USD 1,900,000
Simplified contributory values:
- Ship: USD 7,600,000
- Cargo: USD 12,000,000
- Bunkers: USD 300,000
- Freight at risk: USD 200,000
- Total: USD 20,100,000
Approximate contributions:
- Ship: 7.6/20.1 x 1.9 = USD 718,000
- Cargo: 12/20.1 x 1.9 = USD 1,134,000
- Bunkers: 0.3/20.1 x 1.9 = USD 28,400
- Freight: 0.2/20.1 x 1.9 = USD 18,900
These are simplified figures. The adjustment must net the made-good payment to the owner of the jettisoned cargo, exclude any SCOPIC element from the GA fund, and use the actual net arrived values under Rule XVII. The jettisoned cargo owner receives made good but does not contribute on cargo that never arrived, so the final adjustment will differ from the simple percentages above.
3. What security and procedural steps should be taken before releasing cargo?
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The shipowner/adjuster should not release cargo without adequate security. The steps are:
- General average bond and guarantee. Obtain a signed average bond and an insurer's or bank guarantee from each cargo interest for its estimated contribution.
- Salvage security. Ensure the salvage award is secured in the form required by the LOF/salvage arbitrator, separate from the GA security.
- GA adjustment. Appoint a qualified average adjuster, collect the casualty documents, salvage award, jettison records, port of refuge accounts and contributory values, and circulate the adjustment.
- Lien. If a cargo interest refuses to provide security, the shipowner may exercise a lien over the cargo and, where necessary, apply to court for arrest or other relief.
- Preserve rights. Notify cargo insurers and the hull/P&I insurers, reserve rights on fault and limitation, and keep the cargo interests informed without admitting liability.
The surveyor's role is to provide factual evidence on the casualty, the jettison, the extent of damage and the values, not to determine the legal liability of the parties.