Salvage

Chapter 10

Salvage

The word “salvage” comes from the Latin word meaning “to save”. This is the essence of salvage. However, maritime salvage is a very special concept devised by the courts to encourage the protection of

lives at sea and of maritime property. In 1824 it was said of a salvor in The Neptune:

“... one who, without any particular relation to the ship in distress, proffers useful service and gives it as a volunteer adventurer without any pre-existing covenant that connected him with the duty of employing himself for the preservation of that ship.”

Indeed, it could possibly be said that although salvage services may be provided under some form of agreement and this could lead to salvage being equated with “contract”, in fact, the law and practice of salvage may differ in some respects from the law of contract. There is no need for an agreement for salvage services to be carried out. The salvor is usually considered to be a “volunteer” and volunteers (i.e., those who have not provided “consideration” for the contracts are not permitted to have any benefits under the contract, under the English common law. Moreover, if agreed salvage services are carried out, the price is not agreed in advance but is open and left to be decided later as a “salvage award” and this also seems to distinguish salvage from contractual activities to save a vessel and/or the cargo on board.

One reason why salvage became so topical in the 1980s and 1990 was that the old “Lloyd’s Open Form of Salvage Agreement” (LOF) which originated in the 1 880s, dealt with one principle of maritime salvage—the “no cure, no pay principle—which meant that for a salvage award, there had to be success in the salvage services. However, the failure of the salvage tug to salve the tanker Amoco Cadiz, which went aground and caused very widespread oil pollution in March -1978, led to fears that salvors would not engage in providing salvage services. Very soon, the LOF was changed to LOF 1980 to take this into account. Salvors would be provided with a “safety net” to allow them to obtain some compensation for their efforts in attempting to save loaded oil tankers and averting or minimising oil pollution. This was payable even if the maritime property, the oil tanker, was not saved.

For a while this was acceptable until it began to be realised that salvors would again be reluctant to provide salvage services to non-tankers if there was a chance of failure, especially when the vessels they attempted to salve were loaded with other dangerous goods, such as chemicals. The criticism of LOF 1980 led to an International Salvage Convention being adopted in 1989. At that time Lloyd’s took the initiative to revise its internationally accepted standard form of salvage agreement to meet the demands of the salvage industry and introduced LOF 1990. For the first time, the standard form incorporated four articles of the 1989 Convention even before the Convention came into force.

Salvage does not have to be carried out under an agreement. A person or a group of persons may perform salvage services by simply coming upon a vessel or other “maritime property” that has been abandoned and the owner cannot be contacted. Indeed, even the crew of a vessel in distress can claim a salvage award if they are no longer employed on the vessel. While they are employed they have a duty (see The Neptune, above) to ensure the safety of the ship and the passengers and cargo on board. However, when they are not

employed they have no duty and can save their vessel, claiming a salvage award. For example, in The San Demetrio, 1941, the vessel was severely damaged by gunfire during the war. It was laden with petrol. The master ordered the ship to be abandoned. The crew did depart inlifeboats. The next day, the ship, which was on fire, was sighted by the persons in one of the lifeboats who boarded the vessel, and with great bravery and skill, brought the vessel many hundreds of miles to a British port. The crew who carried out this feat claimed salvage. They were held to be entitled to an award because the master’s order to abandon ship terminated their employment.

In this chapter we shall look at maritime salvage in general, with a brief discussion of the principles and life salvage and then briefly analyze the LOF 1990.

I

Salvage principles. In the last chapter, Chapter 9, on “General Average”, the essential elements of general average were discussed based on the definition in the York-Antwerp Rules 1990 and in the Marine Insurance Act 1906. Similar principles or elements are present in salvage but there is no legislative definition. The principles arise from what the courts have said over many hundreds of years. Just as in general average there had to be a voluntary and intentional act to save a marine adventure from real and imminent danger, so also to qualify for a salvage award the salvor must perform the service voluntarily to save the maritime property from danger at sea.

However, before a discussion of the elements, two issues need to be considered. First, the property that is saved must be property that is recognised as “maritime property”. Such property is a vessel, her fittings, cargo and the wreck t of a vessel. In recent years the salving of aircraft and hovercraft is also salving of maritime property. Salving of other property such as a navigation mark is not recognised as maritime salvage. In addition to property there may also be life salvage.

The second issue is that the salvage services are usually considered to take place on the high seas. For example, in The Goring, 1986, a small pleasure craft was salved in an inland waterway by private persons. Initially they were held to be entitled to a salvage award from the pleasure craft owners, but on appeal it was held that they were not entitled to a salvage award because of the location of the service. Although the court did not differentiate between non-tidal and tidal waters for the award, the difference lay in the amount of the award. Therefore, although salvage services can and should be performed in inland waters, the award may be lower.

The elements of maritime salvage, all of which must be proved by the salvor or claimant of a salvage award, are:

—the service must be to maritime property.

—the service must be voluntary.

—the maritime property must be in real danger.

—the operation must be successful.

The reason for this last element is simply that the property saved establishes a fund out of which the salvage award can be made. This leads to the phrase “no cure, no pay” which is the guiding principle of the Lloyd’s Open Form of Salvage Agreement.

Life salvage. Under English law a salvage award was not recognised for life salvage because there was no saved object, which could establish a fund out of which the award could be made. However, if both property and life were salved by the same salvors, courts would generally order a larger salvage award than if only property had been saved. .It was only in 1854 that the preservation of human life was first made a distinct ground of salvage award in the Merchant Shipping Act of that year. The Act also gave a life salvor priority over other claimants where the property was insufficient for the total award. It also allowed the life salvor to claim a reward out of any property that was not destroyed and, finally, if there was no property saved, it allowed the Government to award a satisfactory amount to the salvor out of a Mercantile Marine Fund.

It must be stated that life salvage is very rare. Under the new International Salvage Convention 1989 there is no remuneration for life salvage. The Convention does, however, allow for the possibility of national law concerning life salvage to prevail. The Convention also reflects what courts and salvage arbitrators would do in the past with regard to increasing the salvage reward if there was also life saved.

Lloyd’s Open Form 1990. This standard form of salvage agreement which originated in the 1880s has been amended considerably in 1980 and 1990. The principle of the previous forms, i.e., “no cure, no pay” is still maintained, except that in both 1980 and 1990 there were circumstances which allow a salvor to

claim payment even if the salvage services are unsuccessful.

In the 1980s it became obvious that the salvage industry was unhappy with the previous LOF and the 19e0 form permitted a salvor of a tanker laden or partly laden with a cargo of oil to obtain an award amounting to the salvor’s expenses, plus an increment of 15 per cent in case the salvage services were unsuccessful or partly successful. This was a departure from the “no cure, no pay” principle but it still was unsatisfactory in many situations. Accordingly, in April 1989, IMO promoted the International Salvage Convention which extended the criteria for assessing a salvage award to include the prevention or minimisation of damage to the marine environment. This therefore extended the “safety net” in LOF 80 because it was applicable to any dangerous or noxious cargo. Moreover, under the Convention, salvors have a duty to prevent or minimize environmental damage and when they perform this duty they can be paid “special compensation” despite the salvage service being unsuccessful.

The Convention needs to be ratified by 15 countries before entering into force and therefore Lloyd’s introduced LOF 1990, which incorporates certain articles of the Convention. It is interesting that the draft LOF 90 was approved by Lloyd’s in early September 1990 and the first salvage contract on the basis of this form was made on 17 September 1990 (The Mahsuri). -—In LOF 1990 the salvor (who is called the “contractor ) must use his best efforts to salve the vessel and/or her cargo, freight, bunkers, stores, etc., and takethem to a named place or a place of safety if no place is named. This service is subject to Article 14 of the Convention but is performed on the general principle of “no cure, no pay”. Article 14 concerns special compensation whereby if the salvor carries out salvage operations for a vessel which, by itself or its cargo, threatens damage to the environment, but is unsuccessful, the owner of the vessel must pay him special compensation equivalent to the expenses. The special compensation can be increased by a maximum of 30 per cent of the expenses if the salvor has averted or minimised environmental damage. The salvage arbitrators are allowed to increase this special compensation to 100 per cent of the expenses if the salvor uses extraordinary efforts. The salvor’s expenses are the usual out-of-pocket expenses which must be reasonable. If the salvor is negligent and fails in minimising the environmental damage, he may obtain no special compensation.

The salvage award is determined by salvage arbitrators in London. The owners of the salved property may be required to pay a security to the Council of Lloyd’s before the arbitration and this security will generally be advised by the salvor depending on his expected expenses. When the award is made, the security provided will be taken into account.

Article 13 of the Convention, which is also incorporated into LOF 90, establishes criteria to be taken into account when assessing a potential salvage award. These criteria include:

—The salved value of the vessel and other property.

—The skill and efforts of the salvors in preventing or minimising environmental damage. —The amount of success of the salvors.

—The nature and degree of danger.

—The salvors’ skill and efforts in saving the vessel, other property and life. —The salvors’ time, expenses and losses.

—The risk of liability run bythe salvors. —The promptness of the services performed.

—The availability and use of vessels or other salvage equipment. —The state of readiness and efficiency of the salvor’s equipment.

The total award, including interest and recoverable legal costs, will not exceed the salved value of the vessel and other property.

Under LOF 1990 both the salvor and the owner/master have certain specified duties . These are contained in Article 8 of the Convention which is also incorporated.

The salvor’s duties to the shipowner or other maritime property owners include:

—To carry out the salvage operations with due care.

—To exercise due care to prevent or minimise environmental damage. —To seek assistance from other salvors if necessary.

—To accept the intervention of other salvors when reasonably requested to do so by the owner or master of the property being salved. (The amount of the salvage award will not be prejudiced if the request by the owner or master was unreasonable.)

The owner and master of the ship or the owner of other property in danger also have certain duties to the salvor:

—To co-operate fully during the course of the salvage operations. —To exercise due care to prevent or minimise environmental damage.

—To accept redelivery of the vessel or maritime property when it has been brought to a place of safety when reasonably requested by the salvor to do so.