York Antwerp Rules

N; Geoffrey Hudson; M; A; and Michael D; Harvey

Document

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CHAPTER 34 Rule XXII: Treatment of Cash Deposits

(a) Where cash deposits have been collected in respect of general average, salvage or special charges, such sums shall be remitted forthwith to the average adjuster who shall deposit the sums into a special account, earning interest where possible, in the name of the average adjuster.
(b) The special account shall be constituted in accordance with the law regarding client or third party funds applicable in the domicile of the average adjuster. The account shall be held separately from the average adjuster’s own funds, in trust or in compliance with similar rules of law providing for the administration of the funds of third parties.
(c) The sums so deposited, together with accrued interest, if any, shall be held as security for payment to the parties entitled thereto, of the general average, salvage or special charges in respect of which the deposits have been collected. Payments on account or refunds of deposits may only be made when such payments are certified in writing by the average adjuster and notified to the depositor requesting their approval. Upon the receipt of the depositor’s approval, or in the absence of such approval within a period of 90 days, the average adjuster may deduct the amount of the payment on account or the final contribution from the deposit.
(d) All deposits and payments or refunds shall be without prejudice to the ultimate liability of the parties.

Introduction

34.01 The collection of cash deposits is but one of the means whereby security may be provided by the concerned in cargo for their eventual payment of general average contribution. In most jurisdictions a shipowner is invested with a possessory lien over the cargo onboard the ship for unpaid freight and for general average. On delivery of the cargo to the consignee, the shipowner loses his right of lien but may demand alternative security for the general average in return for so doing. The nature of such alternative security that may be demanded is not governed by the York-Antwerp Rules, and varies from case to case. Although there is no uniformity in this respect, such alternative security will normally consist of an average bond or other undertaking signed by the receiver of the cargo, supported by one of the following:

• a guarantee furnished by the cargo underwriters;
• a bank guarantee;
• a cash deposit.1

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34.02 Where there has been a sacrifice of cargo, a shipowner is obliged under English law to collect general average security from the other cargo interests in order to protect the position of the party whose goods have been sacrificed.2 In cases where the general average consists of the shipowner’s sacrifices and/or expenditure, he is at liberty to decide whether or not to take security for his own protection, and the form of such security is also within his own discretion, provided that it is reasonable in all the circumstances. The question as to what security is reasonable will be decided in accordance with the law prevailing at the place where security is demanded. In England a form of average bond which purported to make the average adjuster an arbitrator has been held to be unreasonable.3 34.03 It is usual for liner bills of lading, particularly for lines trading to a number of different countries whose domestic law may be rudimentary or uncertain, to include a clause to reinforce the shipowner’s right to take general average security, and in particular to collect general average deposits.

Evolution

34.04 The Rule was introduced in 1924 in order to regulate the treatment of cash deposits from the time they were collected until the time of settlement under the adjustment. Prior thereto, there was a great deal of variation in practice in the way in which general average deposits were handled, and it was apparent that in quite a number of cases the depositors were not accorded fair treatment.4 The Association of Average Adjusters therefore proposed a new Rule designed to protect the rights of depositors as far as possible, in particular by requiring that deposits be paid into a special account, earning interest whenever possible, in the joint names of two trustees. This Rule, which was numbered XXIII, read:

Treatment of Cash Deposits

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