Legal Definitions - FGA

FGA is an acronym that can stand for two different terms in maritime law: Free from General Average or Foreign General Average. While both relate to the principle of general average, the term Foreign General Average is the more commonly elaborated meaning in legal contexts, referring to a specific contractual provision.

To understand FGA, it's important to first understand General Average. In maritime shipping, a general average event occurs when a voluntary sacrifice (like jettisoning cargo) or expenditure (like emergency repairs at a port of refuge) is made to save the entire ship and its remaining cargo from an imminent peril. When this happens, all parties with an interest in the voyage – the ship owner and all cargo owners – must proportionally share the costs of the sacrifice or expenditure, even if their specific cargo was not directly damaged.

The term Foreign General Average specifically refers to a clause in a shipping contract or marine insurance policy. This clause dictates that if a general average event occurs, the rules and laws of a foreign port – typically the port of destination or the port where the ship seeks refuge – will be used to calculate and adjust the shared losses, rather than the rules of the ship's home country or another jurisdiction. This is significant because the specific rules for general average can vary considerably between different countries' legal systems.

• Example 1: Emergency Diversion

  A cargo ship carrying electronics from South Korea to Germany encounters a severe storm in the Mediterranean Sea. To prevent the ship from capsizing, the captain orders the jettisoning of several containers and then diverts to an emergency port in Malta for urgent repairs. If the shipping contract includes an FGA clause specifying the port of refuge, then Maltese maritime law rules for calculating and adjusting the general average contributions would apply to all cargo owners and the ship owner, even though the cargo was destined for Germany.

• Example 2: Salvage Operation

  An oil tanker transporting crude oil from Saudi Arabia to a refinery in Houston, Texas, runs aground in the Suez Canal. A salvage operation is required to free the vessel and prevent an environmental disaster. The FGA clause in the cargo owner's insurance policy states that the rules of the port of destination will govern any general average adjustment. In this scenario, despite the incident occurring in Egypt, the general average calculation and distribution of costs would be performed according to U.S. maritime law, specifically as applied in Houston.

• Example 3: Varying National Laws

  A vessel carrying textiles from Vietnam to France experiences an engine room fire, forcing it to put into a port in Singapore for extensive repairs. The ship's owner is based in Greece, and the cargo owner is based in France. Because the shipping agreement contains an FGA clause, the general average adjustment would be conducted under the maritime laws of Singapore, the port of refuge. This ensures a consistent legal framework for all parties, regardless of their own national laws, which might differ on specific aspects of general average calculations.