Winson Global
2026-07-20 12:22
Accurate Application of General Average Adjustment Rules and Reasonable Apportionment of Maritime Transport Risks
On April 30, 2020, the master of the Hong Kong-registered bulk carrier M/V "Feng," owned by a Hong Kong shipping company, issued a clean bill of lading at the Port of Lima, Argentina. The bill of lading recorded the shipper as an Argentine grain trading company and the notify party as a certain oils and fats company. A clause on the reverse side of the bill of lading stipulated that general average should be adjusted, stated, and settled in London in accordance with the York-Antwerp Rules 1994. On the same day, after completing loading, the M/V "Feng" was involved in an allision incident while en route to a second loading port.
Following the incident, the Hong Kong shipping company immediately sought repair plans and quotations from multiple repair companies, and the American Bureau of Shipping approved the relevant plans. Subsequently, the shipowner engaged Repair Company A to carry out temporary repairs at anchorage. However, the anchorage repair could not be successfully completed due to weather conditions and the inability to dismantle the rudder blade. The shipowner then towed the vessel to a dock at Port M in Uruguay to continue and ultimately finish the repairs. Thereafter, the M/V "Feng" loaded the remaining cargo at Bahía Blanca, Argentina, and sailed for its destination, the Xinsha Port in Guangzhou. After completing cargo discharge, permanent repairs were carried out at the Wenchong Shipyard in Guangzhou, China. The oils and fats company and the Hunan Branch of a property insurance company issued a general average bond and a letter of guarantee for the release of cargo. In June 2022, the general average adjustment was completed. The adjustment report recorded the total general average expenditure as over USD 3 million, with the cargo's contribution amounting to over USD 1.7 million. As the parties could not agree on the contribution expenses, the Hong Kong shipping company filed a lawsuit with the Guangzhou Maritime Court.
This case presents two prominent practical difficulties. The first is whether the shipowner exercised due diligence in its choice of repair plan. After the incident, the shipowner was faced with various repair plans, involving temporary or permanent repairs at different locations, with significant cost differences between the plans. The choice of plan directly affected the determination of the scope of general average expenses, and the cargo interests raised a defense based on fault. The second difficulty is the determination of the reasonableness of the general average expenses. The move to dock repairs after the failure of anchorage repairs resulted in additional costs such as tugboat escort and shifting berth. Furthermore, costs were further expanded by the impact of weather and the pandemic. How to reasonably delineate the boundary between controllable and objectively uncontrollable costs for the shipowner became the core challenge of the trial.
In response to these difficulties, the Guangzhou Maritime Court accurately applied the York-Antwerp Rules 1994 and conducted a comprehensive review of the shipowner's actions. The court found that the Hong Kong shipping company, having consulted multiple units for repair plans and quotations and fully considering various factors—such as restrictions on vessel draft and length, the necessity of cargo discharge, and the possibility of entering a floating dock for repairs—and having provided full notice to the oils and fats company and the Hunan Branch of the property insurance company, had ultimately selected the repair plan in dispute. This was sufficient to establish that it had exercised due diligence. Regarding the increased costs incurred due to weather-related operational delays during the anchorage repair, the requirement by port authorities to use tugboat escort, and the transfer to dock repairs because the rudder blade could not be removed, the court held that these facts not only exceeded the shipowner's normal expectations but were also matters beyond its subjective control. Therefore, the shipowner should not be found at fault regarding the repair plan. Furthermore, the court carefully reviewed the general average adjustment report, reasonably determined the scope of the general average loss by comprehensively considering the impact of the pandemic on the adjustment of hypothetical permanent repair time, and ultimately ordered the oils and fats company to pay a general average contribution of over USD 1.5 million plus interest, with the Hunan Branch of the property insurance company bearing joint and several liability.
This case is a typical general average dispute characterized by high technical specialization, multiple foreign-related elements, and significant trial difficulty. The vessel was registered in Hong Kong, China, and operated by an offshore company established in the British Virgin Islands by Xiamen-based Group G; the incident occurred in Argentina; temporary repairs were conducted in Uruguay, and permanent repairs in China; the repair plan was reviewed by the American Bureau of Shipping; and the general average adjustment took place in London, UK. Regarding the contentious issue of the reasonableness of repair costs, the Chinese court took multiple measures, including notifying the average adjuster and expert assistant to appear in court for questioning, proactively conducting on-site investigations at local shipbuilding and repair yards, and actively holding professional seminars with university experts. Through these measures, it accurately applied the York-Antwerp Rules 1994, prudently judged the reasonableness of the repair actions, comprehensively reviewed the general average adjustment report, and reasonably determined the scope of the general average loss. This case serves as a vivid illustration of a Chinese maritime court's lawful application of international maritime practices to fairly and efficiently resolve international maritime disputes and its active efforts to establish itself as a preferred venue for international maritime dispute resolution.
