The procedures for solving disputes concerning maritime trade were established in early 19th century, given the essential role of seaborne conveyance and ever since, the law on maritime remains a very significant part of commercial law. In my essay, through theoretical and practical analysis of real case situations, I will critically analyse the current laws laid down for resolving salvage rewards.
Salvage has been defined in the Article 1 of the International Convention Salvage Act 1989, as “any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever”1. Principles of maritime salvage were established in the 19th century but maritime salvage operations came into existence long before that time. Current maritime salvage focuses on three simple ideologies: there is an imminent danger at sea, but keeping in mind, in a salvage claim the burden of proving that the real danger existed is on the person who is claiming the reward. “Furthermore, the danger can be proved to exist not only from the state of the salved vessel but the ignorance and lack of skill of master and crew”2. If the crew and the captain assist in salvaging the cargo, then they will receive the reward accordingly. This was shown in the case of Mauitoga v Consort Shipping Line Ltd 1995, where it was decided that “75% of the reward will go to the owner and 25% to Captain and crew”3.Despite the fact that the crew and captain were given their usually salary but according to the maritime law they had the right to receive the reward.
Secondly, Article 10 of the Salvage Convention act says “every master is bound, so far as he can do so without serious danger to his vessel and persons thereon, to render assistance to any person in danger of being lost at sea. However, this obligation does not extend to saving property and there is no positive obligation in law requiring a passing or nearby vessel to provide assistance to a vessel in distress on a voluntary basis”4. Therefore, suggesting that the people who provide help are doing it voluntary and without being under any obligation to do so.
Finally, all the factors will be taken into account such as the risk taken by the salvor and the total value of the salvaged property before giving the reward to the salvor for his successful procedure of salvage. “However, Salvors should note that the right to claim a salvage reward in countries which implement the Salvage Convention expires two years from the date the salvage services are terminated”5.The type of services provided by the salvor will be taken into account whilst assessing the salvage reward. However, in Owners of the Vessel Ocean Crown v Five Oceans Salvage Consultants Ltd, it was held that “in assessing the remuneration that should be awarded to a salvor, and in particular in applying the principle of encouragement, the risk of future economic downturn was not a factor that should be considered”6 and this “should be applied in all cases, regardless of their complexity”7.
Abstaining its origins in the law of impartiality, maritime salvage endures very unusual set of laws rather diverse from others. “The renowned source of “no cure no pay” is a one of the yard stick taken in defining the salvage award but exceptions to this also have developed that is to consider further recovering some of expenses that have reasonably incurred in cases of contribution to marine environmental protection even without the success of salvaging the whole property”8.
Even though International Salvage Convention Act 1989, allowed the courts to move away from the no cure no pay principle, it is still surrounded by a lot of controversies. Salvors importance in maritime liens, lenience on carelessness was observed by the courts and as a result the courts allowed for the restrictions of responsibility under the current limitation liability convention act. Although, even if today’s salvage is largely governed by the 1989 International Salvage Convention, it’s clarification is determined by the courts therefore, the explanation of the interpretation under different jurisdiction varies. Lloyds Open Form (LOF) has an historical role in developing salvage law in English law. “Such contract forms have introduced a clause concerning the standard of conduct indicating the term best endeavours as a best appropriate measure of performance for a professional salvor”9.
The requirements were merged by the Lloyd Open Form of the convention that needs to be applied contractually. This means that the conditions laid down by the salvage convention must be accepted even by the non-contracting state providing that the LOF is signed by the both parties. This can include any employee who signs the form on behalf of his agent. As illustrated in the case of Tojo Maru 1972, “where the both parties signed the Lloyd’s Standard Form of Salvage Agreement headed “No Cure, No Pay”. It only contained one clause: “The services shall be rendered and accepted as salvage services upon the principle of ‘No Cure — No Pay'”10. It was held in this case that “Within maritime law it is accepted that a person who recovers or aids recovery of another person’s ship/cargo after “peril” or “loss” at sea is entitled to seek a recompense in line with the value of the property saved”11. Ultimately, it was decided that you can still receive a reward for partial success if you can show that the “persons actions mitigated the loss then the salvor may still claim a reward”12. Similary, In Savliris Salvage (International) Limited v. Grain Board of Iraq (2008), it was held that the “article 6.2 of the1989 act applies when the salvage contract is concluded by an employee of the agents of the owners and, therefore the signature by him of the LOF 2000 entails the jurisdiction of the arbitrator appointed pursuant to the arbitration clause thereof in respect of the salvage reward due by the owners of the cargo laden on board the salved ship”13.
On the other hand, the case of Tojo maru can be used to explain how salvors were unable to limit their liability before 1976 Limitation Liability Convention act came into force due to the fact that there were many loop-holes with regards to the salvor’s right to limit their liability. Due to this case several changes were made in their laws
and stated “that ship owners and salvors as defined, may limit their liability in accordance with rules of this convention for claims in respect of loss or damaged to property occurring on board in relation to salvage operation subject to certain exceptions such as gross negligence if proved limitations will not be allowed”14. This suggests that it is a positive development in favour of the salvors rights to be able to limit their liability in case of a misconduct or negligence.
According to the 1976 Limitation of Liability Convention, salvor’s can “calculate the limitation fund by one of the two following methods: through a general provision of Article 6(1), according to which a salvage tug is understood as being equivalent to any other vessel”15,or else, “through the special provision of Article 6(4), according to which under certain conditions, the salvor has a right to limit his liability according to a specified tonnage value (1.500 tons)”16. You can apply this in 2 ways, firstly, “the typical situation being when a “chief” salvor is conducting a salvage operation from the salvage firm headquarters”17. Secondly, when a salvor is performing on the salvee’s vessel”18. The 1996 Limitation of Liability Protocol sets the limit to the figure of 2.000 tons making the overall limitation figure for personal injury claims up to 2 million SDR, and for other claims 1 million SDR”19.
On the other hand, “By keeping the tradition paramount Salvage Convention described the reward shall be fixed with a view to encourage salvage Operation”20. Similarly, the “Limitation Liability Convention act has the provisions Persons (salvors) are entitled to limit their liability”21. Domestic laws of the English Supreme Court take into account that the salvage claims joined with a maritime lien should be given priority over all other claims. As we know whilst salvor’s trying to save the property in a dangerous situation accidents occur, therefore, we need to keep in mind to what degree salvor’s carelessness affects the award they receive and whether a counterclaim can be made from the owner of the ship for his loss.
Article 8 of the 1989 act states that “the salvor shall owes a duty to the owner of the vessel or other property in danger to carry out the salvage operations with due care also to exercise due care to prevent minimize damages to the environment and take assistance when reasonably requested”22. If it can be proven that salvor performed negligently, then his salvage reward can be reduced, or even forfeited. In addition, a salvor may have to pay for the damages exceeding the forfeiture of the reward “even if such liability goes beyond the threshold regulated by the Salvage Convention”23 and this principle was seen in Tojo Maru case. In this case, “The salvage operator planned to bolt the plate to the hull of the Tojo Maru using a Cox bolt gun. The chief diver in the employ of the salvage operator negligently fired the bolt earlier than instructed in to a tank which had not been gas-freed which resulted in an explosion which caused more damage to the vessel”24. After a long debate, it was held by the House of Lords, that salvor’s right to receive an award and his duty to pay for the damages are two separate things. “Furthermore, the salvor’s negligent performance is not just one of the factors to be taken into account when assessing the (diminution or forfeiture of) salvage award, but can also serve as a separate cause of action in damage”25 and finally we should not differentiate between the people who receives an award for their performance “at the same time being exposed to liability for negligent performance”26
In contrast, the fact that the convention left the decision on the courts to decide how they will measure the amount of reward received by the salvor or if he gets any at all because he was negligent. This can be seen as unfair, as there are no guidelines to follow which means the salvors have to keep their faith in their judges that they will make a fair decision. In addition, as every judge has his own way to decide if the salvor receives the reward or not can be very problematic as one judges point of view differ from the other. Thus to prevent these problems it is important that some form of guideline is given to the judges to follow to ensure everyone is treated equally and fairly.
Identifying salvage as predominantly a bona fide service guarding and preserving life and goods at sea and keeping in mind the potential dangers encountered by the salvor’s when boarding the imperilled vessels, the public body puts forward an exceptional legal incentive of reducing the scope of salvor’s accountability. In the Alenquer case 1955, the judge describing their public policy of leniency stated that it is the role of the judges “err, if anything, on the side of leniency towards salvors in so far as their behaviour is criticized”27. This suggests that anyone who claims misconduct of a salvor will have to overcome the difficulty of proving the salvor’s negligent act, as well as the discretionary authority of a magistrate or a negotiator who would at least try to take into account all the necessary factors that would “reduce or even deny the salvor’s negligence”28 to avoid salvors from being dejected to decrease salvage services out of distress from extreme liability entitlements.
It is important to take into account any imminent danger in salvage cases before trying to establish the salvor’s liability. If the circumstances of a specific salvage manoeuvre be extreme, with the imminent danger putting the salvor in danger, things can get worse regardless of the salvor’s effort. Especially, in the cases where people’s lives are at risk supersedes all other efforts to save the threatened property. In such circumstances, the case law has decided to not hold a salvor legally responsible for any damage caused. “It is, however, possible that the immediate danger may very well subside during the performance of a salvage service. In such a case, no allowance is to be made for the second phase of the salvage operation, absent from immediate danger”29.
Under article 14 of the 1989 Salvage Convention act the notion of special compensation was introduced in an attempt to reward the salvors if operations conducted by the salvors helped to protect that marine environment even if they were unable to receive the full salvage award. Under this article “If the salvor has carried out salvage operations in respect of a vessel which by itself or its cargo threatened damage to the environment and has failed to earn a reward under article 13 at least equivalent to the special compensation assessable in accordance with this article, he shall be entitled to special compensation from the owner of that vessel equivalent to his expenses as herein defined”30. This seems to be encouraging for the salvor’s to try to save the marine environment but trying to figure out the salvage expense without bearing in mind the potential bonuses and profits can be viewed as unreasonable. For example, in the case of Nagasaki Spirit 1992, the main issue was concerning the definition of expenses mentioned in Article 14 (3). Specifically, focusing on the part which talks about “fair rate for equipment and personnel actually and reasonably used in the savage operation”31. It was held “that expenses referred to expenditure and contained no element of profit. “The preparatory documents to the Convention confirmed that clear intention”32 as they thought it is necessary to review the convention by “highlighting the alleged failure of the Convention to reward salvors for protecting the environment”33.
International salvage union (ISU), laid down some guidelines which contained different clauses covering the calculations and meanings of special compensations and indemnity clause (SCOPIC). This was due to the decision made by House of Lords, to exclude everything else under article 14 (3), when considering the fair rate of the disbursement which attracted a lot of attention from the salvor’s community and as a result ISU created some guidelines. It was decided that the parties should include SCOPIC clause into their LOC contract by referencing, which allows them to move away from the article 14 according to the salvage convention under article 6. By adding SCOPIC clause in their contracts meant that the salvor’s will be able to receive a reasonable compensation as well as bonuses.
Overall, despite many problems the creation of the LOF and the SCOPIC clause made it easier for the salvor’s to claim for high salvage awards. Salvor’s can also easily limit their liability providing they meet the requirements. The laws on maritime law are constantly developing as this was shown in the case of Tojo Maru as explained in the essay. On the down side, too much reliance is put on the judges to make a fair decision whether the salvor’s receives an award or not without any set guidelines which needs to be changed.
1 International Convention Salvage Act 1989
3 Mauitoga v Consort Shipping Line Ltd 1995,
4 Article 10 (N1)
6 Owners of the Vessel Ocean Crown v Five Oceans Salvage Consultants Ltd
7 Soyer B, ‘Assessment Of Salvage Award.’ Journal of International Maritime Law 2009 470-472
9 M. MUDRI?, Standard Salvage Contract Forms: The Scope of Best
Endeavours – Reasonableness and Foreseeability, in The Journal of International Maritime Law, 2013, 19, 220
10 Tojo Maru 1972
13 Savliris Salvage (International) Limited v. Grain Board of Iraq (2008)
14 Article 2 (a) Limitation Liability Convention act 1976
15 Article 6(1), 1976 LLMC Convention (Convention on Limitation of Liability for Maritime Claims 1976)
16 Ibid (s.4)
18 Article 3, 1996 LLMC Protocol
20 Article 13 (n1)
21 Article 1 (n10)
22 Article 8 (n1)
23 Vincenzini, Enrico, International Salvage Law (London: Lloyd’s of London Press, 1992), 185
25 Kerr, Donald A.,The 1989 salvage Convention: Expediency or Equity: J. Mar. L. & Com. 20 (1989) 505, 517
26 Davison, Richard/Snelson, Anthony,The Law of Towage (London, Hamburg: Lloyd’s of London Press,1990), 71-72.
27 Alenquer case 1955
28 Rose, Francis D., Kennedy and Rose –Law of Salvage (London: Sweet & Maxwell,6th ed., 2002),162
29 Claiming against a Negligent Salvor: Elements Necessary to Establish a Case of Salvor’s Liability:https://www.researchgate.net/publication/313838749_Claiming_against_a_Negligent_SalvorElements_Necessary_to_Establish_a_Case_of_Salvor%27s_Liability accessed Dec 19 2017.
30 Article 14 (n1)
31 Ibid (s.3)
32 Nagasaki Spirit 1992
33 Fairplay, Salvage Review Is No Quick Fix’ insights for profitable shipping (2003) 22