The introduction of SCOPIC ( The Special Compensation P&I Clause) UK P&I CLUB SALVAGE The introduction of SCOPIC ( The Special Compensation P&I Clause) Graham Daines Thomas Miller P & I Ltd.

SCOPIC Circulated paper: LOF and SCOPIC The development of LOF The introduction of SCOPIC The role of the SCR SCOPIC in practice

SCOPIC LOF Contract - used for over 100 years Why the need for radical change? The Development of SCOPIC Advantages and Disadvantages The role of the SCR SCOPIC – a review

SCOPIC International Convention on Salvage 1989 Extension of ‘Safety Net’ provisions Application beyond laden tankers

SCOPIC ARTICLE 14 PROVISIONS Special compensation payable to salvor: If threat of environmental damage Article 13 award less than special compensation Special compensation based upon ‘fair rate’ for expenses Uplift by up to 30 per cent (or up to 100 per cent if tribunal considers it to be fair and just) If: Salvor has prevented or minimised environmental damage

SCOPIC Difficulties experienced with interpretation of Article 14 Dissatisfaction not confined to one party Geographical restriction to environmental threat (compared to LOF80): “Coastal or inland waters or areas adjacent thereto” Uncertain assessment of special compensation – the uplift (Art.14.2) Uncertain assessment of fair rate (Art.14.3)

SCOPIC Lack of incentive for salvor due to uncertainty of reward Security for Art.14 awards not always available No P and I club involvement Inadequate information available from scene – no dialogue Lengthy Art.14 disputes – affecting cashflow Costly arbitrations

SCOPIC SPECIAL COMPENSATION P&I CLAUSE (SCOPIC) Developed by all parties to the salvage contract An attempt to resolve problems inherent in Article 14 – and to achieve certainty Not designed to replace 1989 Salvage Convention No geographical restriction Replaces Article 14 provisions Initial two-year trial period Not perfect? – but an improvement

SCOPIC SCOPIC Voluntary agreement: Parties may contract on LOF terms, lumpsum basis or daily rate SCOPIC must be invoked by salvor – ‘No cure – No pay’ without safety net until then May be invoked at any time – No geographical restriction – No need to establish environment threat

SCOPIC SCOPIC SCOPIC remuneration based upon agreed tariff plus 25 per cent uplift Salvage services still assessed under Art.13 SCOPIC remuneration payable by P and I club – only to extent it exceeds Art.13 award Discount applies if SCOPIC invoked unnecessarily – i.e. Art.13 award exceeds SCOPIC remuneration

SCOPIC SCOPIC Security for SCOPIC remuneration of US$3 million to be provided within 2 working days (adjustable later) Withdrawal from SCOPIC provisions - if no security is provided salvor may request tribunal to apply Art.14 Payment : SCOPIC remuneration payable within 30 days Shipowner may terminate under SCOPIC upon giving 5 days notice

SCOPIC SCOPIC Tariff schedule to be reviewed and agreed regularly Worldwide, commercial rates Banded tug rates based upon BHP Equipment rates capped at 150 per cent of replacement cost

SCOPIC SCOPIC Appointment of Special Casualty representative (SCR) achieves : Much improved access to current information Available to ALL parties Salvage master’s daily reports and SCR final report circulated SCR may record disagreement with salvor and report Disputes capable of being resolved earlier

SCOPIC SCOPIC Advantages and disadvantages for salvors Advantages No need to prove environmental threat No geographical uncertainty Profitable tug rates apply Improved cashflow Amount payable under SCOPIC usually guaranteed

SCOPIC SCOPIC Disadvantages for salvors Shipowner acquires right to terminate Uplift limited to 25 per cent

SCOPIC SCOPIC Advantages and disadvantages for shipowners and their P & I clubs Advantages Much improved flow of information important when pollution threatened or ship in danger of becoming a wreck Reduced legal costs Certainty of cost of operation Clear right to terminate

SCOPIC Disadvantages for shipowners Environmental threat/location of casualty - No longer factors Commercial rates plus, always apply

SCOPIC SCOPIC 2000 – AMENDMENTS SCOPIC may be used with any LOF e.g. LOF 2000 SCOPIC replaces Art.14 – ART.14 does not apply even if SCOPIC not invoked Right of withdrawal by contractor under SCOPIC only exercisable up to provision of initial security SCOPIC remuneration only payable in excess of potential Art.13 even if no Art.13 award is sought or paid Termination provision re-worded to achieve clarity Amendments / clarification of tariff rates and application

SCOPIC In the years for which figures are available there were: 123 LOF cases in 1999; SCOPIC was invoked in 14 cases, 133 cases in 2000; SCOPIC “ “ “ 16 cases 108 cases in 2001; SCOPIC “ “ “ 23 cases 104 cases in 2002; SCOPIC “ “ “ 18 cases 89 cases in 2003; SCOPIC “ “ “ 27 cases 91 cases in 2004; SCOPIC “ “ “ 13 cases To June there have been 52 LOF cases in 2005 and SCOPIC has been invoked in 7 cases

SCOPIC The role of the SCR from SCOPIC and the SCR Guidelines: “The primary duty of the SCR shall be the same as the contractor, namely to use his best endeavours to assist in the salvage of the vessel and the property thereon and in so doing to prevent and minimise damage to the environment”.

SCOPIC Role of the SCR Provider of up to date information to all parties – not just shipowner Salvage master in charge and responsible SCR has the right to consult with and be consulted by the salvage master – and to express his views SCR may issue dissenting report SCR should receive salvage plan and notice of changes

SCOPIC Role of the SCR Record daily expenditure based upon SCOPIC tariff Aim to discuss and agree calculations with salvage master Produce final salvage report Within one month Facts and circumstances Allowable tugs, personnel, equipment Total remuneration under SCOPIC

SCOPIC Role of the SCR Advantages For shipowners - knowledge and progress For salvors - line of communication to all parties For insurers - knowledge; ability to react immediately to changing events e.g. pollution threat

SCOPIC SCOPIC: A review Encouraging results from the first three years Increasing use of LOF with SCOPIC SCOPIC invoked in 15+ per cent of cases More cases capable of being settled swiftly Improved flow of information Adaptable format

SCOPIC SCOPIC: A review (2) Structured chain of communication Greater certainty over expenditure Improved cashflow Earlier resolution? Knowledge/influence over events