4 joanna waterfall the lof salvage contract in practice
Transcript of 4 joanna waterfall the lof salvage contract in practice
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LOF Salvage Contract in Practice
By Joanna Waterfall
BDM Seminar
15 March 2012
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• Look at the LOF Contract in practice
• By reference to the “RENA”
– What is salvage?
– Overview of Incident
– Brief photo review the salvage operation
• Look at procedure
• Explain how the salvage reward will be determined
– Review Article 13 of the Salvage Convention
– SCOPIC
• Who will pay?
Aims Today
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What is Salvage?• A service to save maritime property
• Payment for this service
• Without a salvage contract salvors must prove
– Volunteers
– Success – partial or full
– Element of danger – not imminent
– At sea or in tidal waters or any waters whatsoever*
• LOF is contractual
• Salvage (and agreement to pay) is admitted
• Assessment by Art. 13 Salvage Convention 1989
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Key Features of Salvage
• Requires
• water
• “No cure No
Pay”
• Reward not to
exceed value
• Reward fixed
• by agreement
• assessed at
Arbitration
• English Law
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The RENA grounding
• 47,230 dwt
• 1,368 containers
• 1,700m/t HFO
• 200m/t MDO
• Grounded at 17 knots
• 4 October 2011…
• Astrolabe Reef, NZ
• LOF 2011 agreed
• Svitzer BV
• SCOPIC invoked
• Note the remote location
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The Implications of SCOPIC being invoked
• Special Compensation P&I Club Clause
• Reward
• By reference to Article 13 criteria
• By reference to agreed tariff rates
• Property u/w pay Art. 13 award
• Club pay any SCOPIC expenses over Art. 13 award
• No salved property - Club pay in full
• If Art. 13 exceeds SCOPIC expenses
• P&I Club don’t pay anything
• Salvors award reduced by 25% of the difference
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The Salvage Service in pictures
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The Salvage Service in pictures
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What happens next?
• Salvage security
• Arbitrator must be
appointed within 2 years
• Negotiations for early
settlement -or
• Arbitration
• Unlikely due to costs
• Classic case for LOF 2011
• Amendment which relate to
laden container vessels
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Salvage Security• Art. 13 - usually demand made post termination
• Rena demand made early to enable cargo to go forward
• Provided by property owners/insurers
• Must be provided within 21 days of termination
• SCOPIC security
• Amount of USD3million
• Provided by the vessel’s P&I Club
• Within 2 days of contract being invoked
• Can be increased post termination
• No security – claim can be made under Article 14
• Notice to be given
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• 1989 International
Convention on Salvage
• Article 13
• 10 criteria all relevant
• Underlying concept of
encouraging salvage
operations
• Reward must not be out of
proportion to the services
• Must reflect the benefit
conferred
Assessment of Salvage
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• Only what is salved by
salvors!
• Values from RENA modest
• Bunkers, cargo & containers
• Including freight
• No ship value
• The higher the fund the
higher the likely Award
(a) The Salved Fund
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• Clause B of LOF 2011
– salvors to “use their
best endeavours to
prevent…”
• Removed bunkers
• Clean up not covered
• Conferred benefit on
P&I Club
– paid by property
underwriters
(b) Preventing or minimising damage to environment
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(c) The Measure of Success
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(d) Nature and Degree of Danger
• Assess Benefit conferred
and have regard to
• Nature
• Degree
• No risk of imminent loss
• Physical dangers
increase award
• Alternative Assistance
• Other salvors offering
assistance
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(e) The skill and the efforts of the salvor in
salving the vessel, other property and life
• The greater the range
of skill, the more
arduous the effort, the
more meritorious the
service
• Bunker removal
• Container discharge
• Tagging containers
• Naval architecture
• Considerable dangers
facing those on board
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(f) Time used and expenses & losses incurred
by the salvors
• Essential to have regard to this
• Failure to do so may lead to a discouraging award
• Does not follow the award will be equal to or more
than expenses
• In the case of the RENA the expenses will far
exceed value of property saved
• These are not SCOPIC expenses
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(g) The risk of liability and other risks
run by salvors or their equipment
• Salvors may
incur liability
• Risks to salvor’s
craft, equipment
and personnel
• RENA extremely
dangerous
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(h) Promptness of services rendered
• Immediateness of
response is
encouraged
• Always rewarded
• Removes dangers
facing the property
sooner
• Speculation – more
meritorious and further
enhancement
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(i) The availability and use of vessels or other equipment
intended for salvage operations
(j) The state of readiness of efficiency of the salvors’
equipment and value thereof
• Hallmark of professional salvors
• Investment in salvage
• Maintain tugs on salvage station
• Idle time can be expensive
• Three or four companies worldwide could do this
• Significant benefit to maritime community
• Large funds reward and encourage this investment
• If own craft used it enhances the award
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Key aspects
• Required professional salvage assistance
• Prompt response
• Ability to provide comfort to the local authorities
• Ever increasing risk of total loss
• Six month service
• Valuable property salved, would otherwise have
been lost
• High profile
• Worthy of generous award
• Award will not cover the expenses
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Awards in excess of 50%
• On increase since SCOPIC
• Guidance from Lloyd’s
Arbitrators – requires one of
the following:
• Imminent and/or significant
danger
• Lengthy and difficult services
• Extensive expenses (OOPs)
• Low salved values
• “RENA” ticks 3 out of 4
boxes
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The end game….
• Wreck removal
• Much of the cargo has
been abandoned
• Salvage sales necessary
• Individual settlements
• LOF 2011 will enable
salvors to avoid having to
go to Arbitration
• The clean up continues…
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SHW+Partners is regulated by the Solicitors Regulation Authority
© SHW+Partners 2012
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