Akari Free Port Ltd (the claimant) brought a claim against AK Energogarant PJSC (the defendant) for insurance compensation in the amount of USD 123,860.32. The claimant, as the buyer, entered into a supply agreement with Unitedgrain Export Free Port Ltd, as the seller, on 3 November 2017. The port of loading was Eysk, Russia. The port of destination was Famagusta, Cyprus. The seller concluded several cargo insurance contracts with the defendant. The beneficiary was the claimant. The insurance was all risk insurance. The insurance contracts included a clause that all issues regarding general average should be considered in accordance with the York-Antwerp Rules 2004.

On 28 November 2017, the main engine of the Umut, which was carrying the relevant cargo, broke down. The vessel needed to enter the port of Karadeniz Ereglu as a port of refuge. On 1 December 2017, general average was declared in accordance with the York-Antwerp Rules. The vessel was repaired. The cargo was delivered to the port of destination on 17 January 2018.

The claimant, Sarprmar Chartering Ltd (the charterer of the vessel), and Umut Shipping Inc (the shipowner) concluded an out-of-court settlement agreement on the distribution of the losses incurred due to general average. The claimant then claimed that sum from the defendant as insurance compensation.

The Court of first instance found in favour of the defendant in full. The claimant appealed.

Held: The appeal is dismissed.

According to r X.a.i of the York-Antwerp Rules 2004:

When a ship shall have entered a port or place of refuge or shall have returned to her port or place of loading in consequence of accident, sacrifice or other extraordinary circumstances which render that necessary for the common safety, the expenses of entering such port or place shall be allowed as general average; and when she shall have sailed thence with her original cargo, or a part of it, the corresponding expenses of leaving such port or place consequent upon such entry or return shall likewise be allowed as general average.

This provision is confirmed in art 284(1) of the Merchant Shipping Code of Russia (the MSC RF), under which general average includes losses caused by the intentional and reasonable expenditures and sacrifice incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure, ie, a vessel, cargo and freight. Under art 284(1) of the MSC RF, general average is borne by a vessel, cargo and freight according to the provisions of art 304 of the MSC RF.

According to art 304(1) of the MSC RF, the party claiming adjustment and distribution of general average bears the burden of proof that the relevant losses should be considered general average (r E of the York-Antwerp Rules 2016). The contributing value of the property involved in the common maritime adventure is adjusted under established rules on the basis of the net value of the property at the end of the maritime adventure. Under art 304(2), the contributing value of the cargo is adjusted at the moment of unloading of the cargo according to the value established based on the commercial invoice issued to the consignee or, if there is no invoice, based on the value of the cargo at the moment and at the place of discharge.

Parties whose rights are affected by the adjustment should apply to adjusters within 12 months after the end of the common maritime adventure. Under art 304(1) of the MSC RF, the adjustment is made by adjusters who have sufficient knowledge and experience. In the present case, the adjusters were an international organisation with sufficient knowledge and experience to conduct the adjustment.

However, due to the settlement, the adjusters did not provide the parties with their adjustment. The York-Antwerp Rules (it is not specified whether the 2004 or 2016 Rules) do not provide that general average distribution may be made without adjustments. Therefore, the settlement agreement could not provide a basis for insurance compensation for general average. The claimant thus failed to prove that the losses incurred were general average and did not provide the adjusters' report on the issue. The Court also concluded that the expenses incurred by the shipowner for the vessel repairs were not general average but the particular average of the shipowner.