General Average

General average is one of the oldest concepts in maritime law, dating back thousands of years to the practices of ancient Mediterranean traders. Its principle is one of fairness in the face of shared danger: if, to save a ship and its cargo from a common peril, a sacrifice is deliberately made or an extraordinary expense is incurred, then the loss should not fall solely on whoever happened to own the property sacrificed. Instead it is shared proportionally among all those whose property was saved by the action. The classic example is jettison (cargo thrown overboard to lighten a grounded or endangered ship) where the owner of the jettisoned goods is compensated by contributions from the owners of the ship and the cargo that survived.

General average can arise in many situations beyond jettison: the cost of putting into a port of refuge after damage, the expense of firefighting that damages cargo, the hire of tugs or salvors to save the venture, or damage caused to the ship's own machinery in extreme efforts to refloat it. What all these have in common is that the sacrifice or expenditure was intentional, reasonable and made for the common safety of the whole adventure, not merely for one party's benefit.

When general average is declared, a specialist called an average adjuster calculates the total allowable losses and expenses and apportions them among the interests according to the value of the property each had at risk. The calculation follows internationally recognised rules, chiefly the York-Antwerp Rules, which are incorporated into most bills of lading and charter parties. Because the process can be lengthy and the sums large, cargo interests are usually required to provide a general average bond and security before their goods are released, and marine insurance ordinarily covers a party's general average contribution. Though rooted in antiquity, general average remains a live and important part of modern shipping practice.