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Joint Average
Joint average is the allocation of extraordinary costs and sacrifices that are deliberately made to protect a ship and its cargo from a common danger on a common sea voyage, to the values protected, in proportion to the ship and cargo being completely or partially saved.
Joint average is regulated in Article 1272 of the Turkish Commercial Code (TCC). The said article states:
“If an extraordinary sacrifice is made or an extraordinary expense is incurred, knowingly, in order to protect the ship, cargo, other goods and freight, which are together in a common maritime adventure, from a danger that threatens them, and in a way that constitutes a reasonable course of action, then there is a “joint average action” and the losses and expenses resulting directly from this action are considered to be joint average.”
1- Elements of Joint Average
The elements of joint average are regulated in Article 1273 of the Turkish Commercial Code. The said article states:
“(1) Joint average shall occur if the following elements are present together:
- The existence of a common maritime adventure: Joint average is valid for ships and cargoes that embark on a common sea voyage.
- The existence of a common danger: Joint average is made to protect ships and cargoes from a common danger. This danger includes any type of danger that could lead to the loss or damage of the ship or cargo.
- The making of an extraordinary sacrifice: Joint average may include an action that causes damage or loss to the ship or cargo.
- The absence of an opportunity to avoid: Joint average may be applied in a situation where it is not possible to avoid the danger.
- The taking of a necessary and reasonable measure: Joint average must be a necessary and reasonable measure to protect the ship or cargo.”
To be more clear, among these elements, joint average for a common sea adventure is valid for the ship and cargo embarking on a joint sea voyage. This does not mean that the ship and the cargo are owned by the same shipowner or are transported under the same transportation contract. What is sufficient is that the ship and the cargo are on the same sea voyage. Likewise, in terms of a common danger element, joint average action is made to protect the ship and cargo from a common danger. This hazard includes any danger that may cause loss or damage to the ship or cargo. Fire, storm, accident, freezing, pirate attack, sea obstacles and similar dangers can be considered common dangers. Joint average action requires extraordinary sacrifice or extraordinary expense. An extraordinary sacrifice involves an act that results in damage or destruction of the ship or cargo. For example, sinking a ship to avoid fire is an extraordinary sacrifice. An extraordinary expense refers to an expense that is incurred for the protection of the ship or cargo and that is not normally required. For example, renting a crane to salvage the ship is an extraordinary expense.
If these elements occur together, joint average action is considered to exist. Damages and expenses incurred as a result of joint average action are called joint average losses. Joint average losses are regulated in TCC art. 1274. Said article:
“(1) Damages that can be evaluated within the scope of joint average are as follows:
a) Expenses incurred due to joint average transaction: These expenses may be material or moral expenses.
b) Damages caused by joint average action: These damages may be material or moral damages.”
2- Types of Joint Average
Most common types are:
2.1. Load dumping into the sea:This type of joint average occurs by throwing some of the cargo from the ship overboard in order to reduce the weight of the ship or cargo. Joint average for dumping cargo at sea can only be applied in a situation that cannot be avoided. However, the implementation of this measure may also have some negative consequences. For example, cargo thrown overboard is not compensated by the ship owner or cargo owner. It is also possible that cargo thrown into the sea may harm the environment.
2.2. Stranding: This type of joint average is done to tow or save the ship to a safer place by grounding the ship. This is considered a precaution to protect the ship from sinking. Losses incurred as a result of grounding joint average are shared between the ship, cargo and freight by a proportioning method called the garame ratio. Garame rate, ship, cargo and freight values.
It is obtained by dividing by the total. Garame rate is regulated in TCC article 1275.The said article is as follows:
“(1) The sharing of joint average losses is done by a proportioning method called garame ratio. Garame rate is obtained by dividing the total of ship, cargo and freight values.
(2) The Garame rate is calculated as follows: Garame rate = (Ship value + Cargo value + Freight value) / (Total value)”
Grounding joint average is applicable in the following cases:
- If the ship loses control due to a storm or similar danger and is forced to run aground.
- If the ship runs aground to escape a danger.
- If the ship runs aground in order to enter a port or harbor of port.
2.3. Damage to machinery and boilers in flotation: In order to protect the ship from sinking, it is carried out by performing an operation that harms the operation of machinery and boilers. It is preferred if the ship is in danger of sinking. Joint average for damage to machinery and boilers in flotation may be applied in the following cases:
- If the ship starts to sink due to a storm or similar danger.
- If the ship begins to sink due to an accident or malfunction.
- If the ship starts to sink to escape a danger.
Some of the damages that can be considered within the scope of joint average for damage to machinery and boilers in flotation are as follows:
- Expenses incurred due to damage or destruction of machinery and boilers.
- Expenses incurred for the purchase of new machinery and boilers to operate the ship due to damage or destruction of machinery and boilers.
- Damage to the environment due to damage or destruction of machinery and boilers.
2.4. Palliation: This type of joint average is done by unloading a portion of the ship or cargo to reduce the weight of the ship or cargo. This is considered a precaution taken to protect the ship from sinking or damage to the cargo. Some of the damages that can be considered under mitigation joint average are:
- The value of the unloaded cargo.
- Damages caused by the discharged cargo to the environment.
- Expenses incurred for transportation of the unloaded cargo.
- Expenses incurred for reloading the unloaded cargo.
2.5. Fire extinguishing: This type of joint average relates to the expenses and sacrifices made to extinguish a fire on a ship.
2.6. Shelter: This type of joint average is carried out by taking the ship to a port or sheltered location to protect the ship from bad weather or other hazards. Expenses covered by housing joint average are as follows:
- Expenses for going to the shelter port or port of shelter: These costs include expenses such as fuel, food, water, crew wages, etc. to take the ship to the port to be hosted.
- Expenses incurred during the mandatory transition from one port of shelter to another port of shelter: These costs include expenses such as fuel, food, water and crew wages incurred to take the ship to a safer place.
- Expenses incurred to unload cargo, fuel or provisions at the harbor of shelter or to handle them within the ship are included in the scope of joint average, provided that they are mandatory. These expenses include labor, materials, equipment and other expenses incurred in unloading or handling the cargo on board.
- In cases where handling and unloading expenses of cargo, fuel and provisions are included in joint average, storage expenses, including insurance, and reloading and stowage expenses of this cargo, fuel or provisions, as long as they are reasonably made.
For example, if the ship anchors for a period of time due to bad weather conditions, it may be considered within the scope of shelter joint average if the ship and cargo will be safely protected during this period. However, if the ship will anchor for a period of time due to bad weather conditions and the ship and cargo will be safely protected during this period. If it is not securely maintained, it will not be considered for joint average.
2.7. Temporary repair: In these cases a temporary repair made to the ship or cargo to prevent damage to the ship or cargo. In cases of temporary repair, it is possible to continue sailing by making temporary repairs to the cargo or ship. In these cases, it is accomplished by creating a temporary solution to avoid disruption of trade. Some damages that can be evaluated within the scope of temporary repair joint average are as follows:
- Expenses incurred for temporary repairs.
- Losses in the value of the ship or cargo due to temporary repairs.
- When a more comprehensive repair of the ship or cargo becomes difficult or impossible due to temporary repairs.
2.8. Fuel or oil for hydraulic or electrical equipment: This type of joint average relates to the expenditure of fuel or oil to operate hydraulic or electrical equipment to keep the ship from sinking.
2.9. Rescue of the ship or cargo: This type of joint average relates to the salvage of the ship or cargo after the ship or cargo has sunk.
Deciding what type of joint average transaction is an important consideration regarding the apportionment of joint average losses. Because the type of joint average transaction determines the extent of losses and between which parties these losses can be shared.
Determination of joint average action is usually made by a specialized joint average dispatcher. The joint average dispatcher evaluates all the circumstances of the case and determines whether a joint average transaction exists and what type it is.
3- Consequences of Joint Average
The consequences of joint average vary depending on whether a joint average transaction occurs, what losses can be considered within the scope of joint average, and how joint average losses are shared.
In cases where it is not sure whether joint average action has occurred or not, ship, cargo and freight owners cannot be held responsible for joint average losses. In cases where it cannot be decided what losses can be considered within the scope of joint average, these losses may not be included in the scope of joint average. Since the sharing of joint average losses is made according to the proportioning method called garame rate in accordance with TCC Article 1276, if this rate is determined incorrectly, injustice may arise against the rights of ship, cargo and freight owners. If the parties do not agree on joint average, a lawsuit regarding may be filed.
4- Lawsuits Regarding Joint Average
Joint average cases are lawsuits filed to determine who and how the damages arising from this action will be covered in the event of a joint average action. Joint average cases must be filed within one year from the realization of the joint average action in accordance with TCC Article 1279. Who can file joint average cases is regulated in TCC Article 127. According to the regulation, these lawsuits can be filed by ship, cargo or freight owners or their representatives. At the same time, the competent court for the mentioned cases is the port courts where the ship and cargo are located.
In joint average cases, the court determines whether joint average action has occurred, what damages can be considered within the scope of joint average, and in what proportion these damages should be shared. In joint average cases, it must be determined what damages can be evaluated within the scope of joint average. Losses that can be evaluated within the scope of joint average are the losses that occur due to the realization of joint average action.
Damages that can be assessed within the scope of joint average are as follows:
• Actual expenses: Expenses incurred due to joint average action can be evaluated within the scope of joint average. These expenses may be material or moral expenses.
• Damages incurred: Damages incurred due to joint average action can be evaluated within the scope of joint average. These damages may be material or moral damages.
In what proportion these damages should be shared: In joint average cases, thirdly, it should be determined in what proportion these damages should be shared. The sharing of joint average losses is done by a proportioning method called the garme ratio.
Garame rate is obtained by dividing the total of ship, cargo and freight values. It is calculated as below :
Garame rate = (Ship value + Cargo value + Freight value) / (Total value)
For example, a cargo worth 10 million TL on a ship was damaged due to a storm. The ship owner, cargo owner and freight owner spent 1 million TL to save the cargo as joint average transaction. In this case, the losses that can be assessed within the scope of joint average are 11 million TL. Garame rate is 11/21 = 52.38%. Therefore, the ship owner, cargo owner and freight owner will share joint average losses in the ratio of 52.38%, 38.62% and 9%.
CONCLUSION
Joint average is the process of sharing the extraordinary expenses and sacrifices made by ship, cargo and freight owners for the protection of the ship and cargo entering a common sea adventure, with a proportioning method called garame ratio between the ship, cargo and freight. Joint average is an important subject of maritime law.
Joint average is an important mechanism to protect the rights of ship, cargo and freight owners. However, correct implementation of the legal provisions regarding joint average is of great importance in terms of protecting the rights of ship, cargo and freight owners.
In cases related to joint average, the following points must be taken into consideration in order to protect the rights of ship, cargo and freight owners:
• It must be determined precisely whether joint average movement has occurred or not.
• Damages that can be evaluated within the scope of joint average should be determined.
• Garame ratio must be calculated accurately.
Relevant Legislation and Resources:
1. 6102 Sayılı Türk Ticaret Kanunu
2. Mehtap Civir Engin, 6102 Sayılı Türk Ticaret Kanunu ve Müşterek Avarya (2012), Marmara Üniversitesi Hukuk Fakültesi Hukuk Araştırmaları Dergisi,
3. Samim Ünan, Rayegan Kender, Ergon Çetingil, Müşterek Avarya Hukuku (2011), On İki Levha Yayıncılık
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Demet OZKAYA COLGECEN
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