Explanatory notes

Background

A declaration of General Average (GA) often leads to time being spent and costs incurred obtaining GA security from individual cargo interests and their insurers. The  purpose of the Average Bond Clause is, as far as possible, to minimise the time it takes to obtain such security and reduce delay in the delivery of cargo after the general average event. This is achieved by inserting the terms of an Average Bond in the contract of carriage thus removing the need to obtain the consignee’s or the shipper’s signature to a separate document.

Incorporating the Average Bond Clause in your contracts of carriage is intended to:

a) reduce delay in the delivery of cargo following a GA event; and

b) reduce the costs of the average adjustment.

The BIMCO Average Bond Clause was first published in June 2005.  It was revised in 2007 following  concerns expressed by the Association of Average Adjusters (AAA) in London about practical issues surrounding the requirements for the provision of insurers’ identity, contact details and policy information when the bill of lading was presented. This could also create difficulties for cargo underwriters providing a guarantee after the cargo had been released against the bill of lading.

In order to address the concerns, proposed new wording, for incorporation into the preamble, was put forward. The amended Clause was endorsed by the Documentary Committee at its meeting in May 2007.

The Clause was further amended in 2017 in line with the updated York Antwerp Rules (YAR) 2016 which were adopted in May 2016 by the Comité Maritime International. BIMCO subsequently endorsed the new provisions and agreed that all new and revised charter parties, bills of lading and waybills should refer to general average being adjusted in accordance with YAR 2016.

Subclause (b) was therefore modified for use in agreements where the underlying contract of carriage provides for the settlement of general average in accordance with YAR 2016. The reference to “York Antwerp Rules 1994” was replaced by “York Antwerp Rules 2016”. This ensures that non-separation agreements reflect the updated provisions in Rule G (the “Bigham” cap) and Rule XVII (discretionary exclusion of cargo where the cost of inclusion in the adjustment would be disproportionate to its eventual contribution).

The latest amendments were approved by the Documentary Committee at its meeting in May 2018.

The Secretariat is grateful to the AAA for their involvement in the development of the Average Bond Clause and for the practical comments submitted.

Commentary

Preamble requires the presenter of the bill of lading to provide satisfactory security to cover general average, salvage and special charges in addition to the payment of any freight.

Subclause (a) identifies the party presenting the bill of lading as the party liable to pay, among others, the General Average contribution.

Subclause (b) incorporates a form of non-separation wording in line with the provisions of the York Antwerp Rules 2016. This is expected to result, in appropriate cases, in considerable savings of time in obtaining security.

Subclause (c)(i) provides that the party presenting the bill of lading must promptly furnish details of the value of the cargo, to expedite any GA proceedings.

Subclause (c)(ii)  places the burden of providing details of any loss or damage to cargo, giving rise to either a claim in GA or a reduction in the contributory value of the cargo, on the party presenting the bill of lading or his assigns.

Subclause (d) obliges the presenter of the bill of lading or his assigns to make a payment on account of their contribution when this is certified by the average adjuster, but only when there is no defence to such a claim under the contract of carriage, or otherwise.

The final paragraph provides that, in all cases, the time limit for claiming a contribution under  the clause is to be the same as that presently  applicable under English law i.e., six years from the date of the average adjustment.

Originally published in BIMCO Special Circular No 6, June 2005 - BIMCO Average Bond Clause, modified in October 2007, June 2017 and July 2018.