This was a claim brought by Barrus Logistics LLC (the claimant) against SOGAZ JSC (the defendant) to obligate the defendant to provide a general average guarantee on behalf of the beneficiary under a insurance contract, NovaWind JSC (the cargo owner).

The claimant and cargo owner concluded a freight forwarding contract under which the claimant was obligated to organise transportation of the cargo from Tuticorin, India, to Novorossiysk, Russia, and to obtain insurance in favour of the cargo owner. In order to do so, the claimant concluded a carriage contract with Segara BV, and an 'all risks' cargo insurance contract with the defendant. The cargo was transported on the Beautrophy.

On 24 August 2019, after the vessel left Tuticorin with the cargo onboard, its engine broke down on the high seas. The vessel went adrift. In order to prevent damage to the vessel and the cargo, the vessel was towed to a port of refuge, Colombo, Sri Lanka, for repairs from 26-28 August 2019. On 29 October 2019, after the repairs were completed, the vessel continued its voyage to Novorossiysk.

On 26 September 2019, the vessel’s representatives sent the claimant a notice of general average from the adjuster. On 30 September 2019, the claimant notified the defendant of general average and the necessity of giving a general average guarantee. On 22 October 2019, the defendant refused to issue a general average guarantee.

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

Held: The appeal is dismissed. The judgment of the Court of first instance is upheld.

Under art 284.1 of the Merchant Shipping Code of Russia (the MSC RF), general average constitutes losses incurred as a result of intentional and reasonable extraordinary sacrifice or expenditure for the common safety and preservation of property involved in the common maritime adventure, ie vessel, cargo, and freight. General average only includes losses incurred directly as a result of this sacrifice or expenditure (art 284.2 of the MSC RF). According to art 306.1 of the MSC RF, the burden of proof of general average is upon the claimant.

Article 273 of the MSC RF stipulates that the insurer is obligated on the request of the beneficiary or the insured to issue security equal to the insured amount for the general average contribution. At the same time, this provision does not provide for an unconditional obligation on the part of the insurer to give such security, but only when the insurance covers the general average.

It is commonly understood that general average contributions are contributions made by the insurers of interests in the maritime adventure. The amount of contributions is determined based on the percentage of the insured’s or beneficiary’s interest in the common adventure.

The Court of Appeal concluded that the claimant failed to prove general average. If general average is not proved by the insured, the insurer is not obliged to give security.

Another point made by the Court of Appeal was that the vessel was not insured by the defendant, and the cargo did not suffer any damage as a result of the incident. The cargo was not in danger, and there was no risk of its detention. Therefore, the cargo was not involved in a general average peril. The defects of the engine and the danger in which the vessel found itself could be qualified as a general average peril, but the cargo was not part of it.

The Court of Appeal found that the Court of first instance correctly applied r 7 of the York-Antwerp Rules 2016. The Court concluded that the damage to the vessel was caused by the ‘forced’ working of the engine since it was the defects of the main engine that had caused the incident. This damage was not covered by general average. Thus, even if the cargo could be detained, the losses incurred could not amount to a general average loss.