On 25 October 2017, the English Supreme Court handed down judgment in Mitsui & Co Ltd and Others v Beteiligungsgesellschaft LPG Tankerflotte MBH & Co KG and Another (The “Longchamp”). The case provided the Supreme Court a rare opportunity to consider and interpret the York Antwerp Rules 1974 (in particular Rule F), which are more commonly applied in accordance with the practices of General Average adjusters – practices which, as the court was quick to point out, do not constitute law.
The Longchamp was commandeered by pirates off Somalia in 2009, who demanded a US$6 million ransom. After a 51 day negotiation, the vessel was released against a payment of US$1.85 million. The owners of the vessel sought to recover both the US$1.85 million ransom payment (under Rule A) and certain vessel operating expenses incurred during the period of negotiation (some US$160,000), under Rule F. The Advisory Committee of the Association of Average Adjusters, in line with the views of leading commentaries on the subject, was of the opinion that these latter expenses were irrecoverable under Rule F.
The Supreme Court disagreed that the operating expenses were irrecoverable under GA, a decision with potentially broader implications than that of piracy negotiations. Where an owner negotiates with a third party to reduce expenses allowable in general average, it now appears likely that operating expenses incurred during that period will be included in the adjustment under Rule F, provided the expenses do not exceed the amount of the general average expense avoided. This may equally hold true where an owner negotiates repair costs with a yard or salvage expenditure with salvors.
The decision is likely to be welcomed by owners, allowing them to approach post casualty negotiations from a position of greater strength. Conversely, however, the decision may also give rise to uncertainty surrounding previously accepted orthodoxy, and heightened scrutiny of adjustments made under the York Antwerp 1974 Rules.