The importance of a well-funded salvage industry

The International Salvage Union (ISU) has presented data illustrating the importance to both the shipping industry and the environment of a strong marine salvage industry.

The occasion, attended by MJ, was the ISU’s annual media seminar and lunch held in London and presented by senior officials of the organisation including: president John Witte, vice president Charo Coll, general manager Mark Hoddinott, communications adviser James Herbert and legal adviser Rob Wallis.

In 2015 ISU members carried out 185 salvage services with sobering statistics listing potential pollutants including: bunker fuel 66,000t; crude oil and refined products 666,000t; chemicals 36,000t; bulk 722,000t and 24,000teu, equating to 374,000t at a nominal 15t per box. These figures demonstrate the reality of the previous order of priorities of life, property and the environment giving way to life, the environment and then property.

Salvage is of course a commercial business and adequate reward is essential for continued investment in what is a complex and costly business and ISU has been vocal recently in encouraging use of Lloyd’s Open Form (LOF) contract which is seeing a disappointing decline in use. There is increasing use of ‘commercial terms’ involving for example daily hire and lump sum agreements, ISU recognising that BIMCO contracts, both towage and wreck removal are popular and well regarded.

LOF is one of, if not the oldest commercial contracts in the world and its principle of no cure, no pay means risks, financial and physical lie with the salvor. It is with emergency response that LOF is considered practical and worthwhile being simple and quick to agree with no up-front negotiations and cases settled after the job is completed. Arbitration is available but it was pointed out that 75% of cases are settled amicably and an indication of the simplicity of LOF is that the basic contract can be accommodated on two sides of an A4 sheet of paper.

Analysing the decline in LOF, Mr Hoddinott reminded everyone that advances in global communication are increasingly removing the ship’s master from decision-making processes, agreements now often negotiated far away from the front line in offices perhaps the other side of the world. Being removed from the stress (and danger) of the situation may make for a more business-like atmosphere but it is the professionals on the scene who can feel the wind in their face and are best placed to judge the urgency of the situation. The old saying that a ship’s master is answerable to no-one but God is no longer universal and the audience was reminded that the original LOF was created by Lloyds’ for the insurance industry not the salvors.

SCOPIC

History and reasoning behind the Special Compensation P&I Club clause (SCOPIC) and the role of the Special Casualty Representative, appointed by the owner to monitor the situation was explained.

As mentioned above, salvors must approach each salvage incident on a strictly business basis. On no cure, no pay arrangements however, risks lie with the salvor and in the absence of an alternative agreement can walk away from a potential contract if there is little or no prospect of saving property of sufficient value to allow recovery of costs and produce a profit.

Driven by growing public concern about the environment, coastal states are now adding to the pressure on preventing pollution from shipping casualties, this includes the ‘visual pollution’ of leaving a wreck in-situ for any length of time. One consequence of government involvement is an increase in state-sponsored salvage services or through provision of intervention tugs at accident hot-spots.

Protecting the environment has changed the whole dynamics of the industry as mentioned above and it was the loss of the tankers Torrey Canyon (1967) and Amoco Cadiz (1978) which led to the 1989 Salvage Convention and realisation of the importance of encouraging adequate and proportional rewards to salvors who prevent pollution in situations where they may otherwise face risk of loss or even ruin if they commit to a no-hope high risk operation, complicated by some governments’ refusals to offer a place of refuge with the environment being the ultimate loser.

The Salvage Convention introduced Article 14 and the concept of Special Compensation whereby salvors could at least recover their expenses with an ‘uplift’ if they prevented pollution, the so-called ‘safety net’. With this arrangement, P&I Clubs, who paid the compensation became involved in salvage for the first time and their concerns along with other aspects led to introduction of the SCOPIC clause in 1999 which avoided legal problems under Article 14.

The whole question of SCOPIC and the role of Special Casualty Representative is under constant review and Mr Wallis stated that making SCOPIC an opt-out rather than an opt-in clause is one possibility under discussion.

With many wrecks abandoned globally, wreck removal is another sector seeing growth for the industry with a variety of contracts available including those from BIMCO. Among the ISU contingent present was Captain Nicholas Sloane, best known for his role as lead salvor for the Titan Salvage/Micoperi consortium which removed the wreck of the cruise ship Costa Concordia. Smit Salvage had previously removed an estimated 2,400t of heavy fuel oil and other pollutants from the vessel.

This case alone with final costs estimated at around $2bn tells of the importance of a well-funded professional salvage industry but there are challenging times ahead as ships get bigger, accidents get fewer but potential consequences become more severe. Final word must be with Mr Hoddinott who stated that the industry is realigning but needs the influence of the ISU who are the sole voice of the industry with a seat at the top table of international legislators and bodies representing the shipping industry.