The Law of Salvage Lecture 2008 Professor, jur. dr Svante O. Johansson

What salvage is about Marine salvage is the process of rescuing a ship, its cargo and sometimes the crew from peril from water. Salvage has two different meanings: See above as from Salvage convention and SMC The actual compensation payeble Salvage has four different forms: Civil salvage Salvage in Peace time of marine property Life salvage Liability salvage Military salvage (rescue of property from the enemy in wartime) Any act or activity to assist a vessel, or any other property in danger, in navigabel waters, or in any other waters watsoever

Intended purposes Counter the temptation to misappropriate property from shipwrecks Incentive for salvage operation in order to save Property Environment This has influenced the rules on The reward No reward without success

Unique to maritime law No direct counterpart on land Negotiorum gestio Lost property Act Relation to other statutory legislation Sea Finds Act Exclusive Right to Salve Act The negotiorum gestio was a Roman legal institution in which an individual acted on behalf of another, without his asking and without remuneration. It was considered a part of officium (duty), for instance, to defend a friend's or neighbor's interests while the friend or neighbor was away. However, no reward was originally intended for the defender. Example: two boats at quay. The inner starts to burn and threthens the outer and the buildings near the quey. The outer tugs the inner boat out from the quey where the baot burns down. Who will get the reward for rescuing the buildings?

The legal background 1910 Brussels Convention for the Unification of Certain Rules with Respect to Assistance and Salvage at Sea Incorporated into Ch. 16 SMC up until 1996 Amoco Cadiz demonstrated weaknesses International Convention On Salvage 1989 Incorporated in Ch. 16 SMC as from 1996 Lloyd’s Open Form (LOF) 2000 Agreement of Salvage The 1910 Brussels Convention for the Unification of Certain Rules with Respect to Assistance and Salvage at Sea reflects the traditional legal principles of marine salvage. The 1989 International Convention on Salvage incorporated the essential provisions of the 1910 Convention, and added some new provisions, as well. The 1989 Salvage Convention entered force on July 14, 1996, with nearly twenty parties. It replaces the 1910 Convention for states which are parties to both where the two conventions' provisions are incompatible. As can be seen there are two types of salvage, contract salvage and pure salvage. Contract salvage occurs when a contract is made prior to commencement of salvage operations, the amount of compensation is fixed and the salvor is paid regardless of whether the salvage is successful or not. When a ship or boat has been rescued or salvaged without prior agreement between the owner and salvor or an agreement is made but not for a fixed amount, this is known as pure salvage. In this case the salvor can legally claim recompense or a salvage claim. It is also pure salvage when the ship's master signs an open form salvage agreement with no fixed compensation. This is a contingency contract that leaves the value of the salvage operation to be decided at a later date and both parties agree to binding arbitration in the case of a dispute. The best-known open form is the Lloyd's Open Form salvage contract, which was developed by Lloyd's of London. AMOCO CADIS At about 0916, the tanker was about eight miles north of Ushant when her steering gear failed. Although Captain Pasquale Bandari hoisted the international signal for "Not Under Command" almost immediately, he did not request assistance until 1120, when his engineer determined that the damage was irreparable. The German salvage tug Pacific, under command of Captain Weinert, arrived on the scene at 1220. The first tow was secured at 1425 but parted at 1719. As Amoco Cadiz drifted toward shore, the port anchor was let go at about 2004, but it did not hold. A second tow was secured at 2023, but the sheer mass of Amoco Cadiz in the teeth of Force 10 weather conditions made it impossible for Pacific to do more than slow the ship's coastward drift. At 2104, Amoco Cadiz touched bottom for the first time, and her hull and storage tanks were ripped open.

The concept of salvage Interest or property subject to salvage Rewarded according to law under the following conditions Danger Voluntariness Useful result No cure - No pay Salvage under contract "no cure - no pay". Although this rule seems to the disadvantage of the owner of the ship, its purpose is to encourage potential salvors to risk their vessels and use their working time for the benefit of both themselves and the ship owner. In order for a claim to be awarded three requirements must be met: The vessel must be in peril, the services must be rendered voluntarily, in other words there is no contractual obligation, and finally the salvage must be successful.

Common salvage operations and services Stranding and Grounding Sinking Rescue Towage Included services Refloating Pumping, raising and repair Hook up and Tow in Surveys Fire fighting - assistance Cargo/equipment recovery Wreck removal Standing by Prevention of third party damage Salvage encompasses rescue towing, refloating a grounded ship or patching or repairing a ship. Today the protection of the environment from cargoes such as oil is often considered a higher priority than saving the ship or cargo. We now consider the various types of salvage which occur in practice. A major category is the towage of disabled ships following the breakdown of machinery. In such cases, there may be danger of grounding or shipwreck and normally the conditions for salvage will be satisfied. As examples see ND 1989.442 NCA SORVIER (S was considered to be in danger after its fishing net caught in the propeller while it was in a difficult ice area near Spitsbergen) and ND 1949.249 NCA NOREFJORD (N was considered to be in danger after a shaft broke in mid-Atlantic in storm conditions). Another important category is the refloating of grounded vessels. If a ship is unable to refloat under its own power, it will usually be considered to be in dan-ger under the salvage rules. Even if there is a reasonable possibility that the snip will eventually be able to refloat on its own, it is necessary to make a comprehen­sive evaluation, where the risk of damage to the snip during the period it remains grounded must be considered. In such cases, it is important to consider the man-ner in which the snip has grounded, the bottom conditions at the site, the expo-sure of the snip to the elements, etc. For examples, see ND 1970.178 NSC SAMS and ND 1980.78 NCA FEIEBAS. Other examples include bilge pumping on a sintring ship (see ND 1970.323NA TOM STROMER) and the extinguishing of a fire on board a vessel or at a place where the fire could spread to the vessel (see ND 1932.510 NSC GURE HERRIA and ND 1996.110 DSC MI€RSK MASTER). An interesting situation is the act of "standing by", where the salvage service is the act of remaining close to the disabled ship, thereby providing comfort neces­sary so the crew does not have to abandon ship. The salvor thereby indirectly as­sists in the salving of property. An example of this is ND 1938.139 NCC VENI.

Interests subject to salvage Vessels 16:1 1 (441 a and b) SMC Mobile drilling units 16:2 3 (special in Sweden) 507.2 SMC Other property Not permanently attached to shoreline 16:1 1 and 2 (441 a and c) SMC NB! 16:2 3 (442.4) SMC (fixed units) No Salvage alone of Persons NB! 16:5.2 (445.2) SMC Liability NB! Environmental damage 16:1 3 (441(d)) SMC Loss of time

In danger, foundered or wrecked Danger 16:1 (441) SMC Risk of damage Types of danger Total loss or physical damage Total loss or extensive damage Delay is not excluded Degree of danger Severe peril of the sea Actual danger as opposed to perceived danger Loran ND 1996 p. 238 Los 102 ND 1999 p. 74 Norsk Viking ND 2004 p. 383 A somewhat odd issue arises where both the salvor and the saved believe the ship is in danger, but it later becomes clear that this was not actually the case ("perceived danger"). The issue has come up in recent years: ND 1996.238 NSC LORAN: On the way back to Norway after fishing in the Shetland Islands, L suffered engine problems. There were strong winds at the time. L asked V - another vessel also re­turring from fishing - to provide assistance. Contact was established with the engine maker, and the tug MM was talled in from Norway. After a few hours V took L under tow, with the towage opera­tion later overtaken by MM. Subsequently it was determined that L's engine would have had suffi­cient capacity such that the vessel could have made it to port without assistance. Thus L argued that the vessel had not been in danger, which was accepted by the Supreme Court (4-1). The majority found that the statutory language and the legislative history of the 1893 Code led to a requirement of "actual danger". Commentary in the legal literature was cited in support of the said interpretation, but the actual issue raised by the facts in this particular case had not in fact been the subject of specific commentary. The question, however, had been touched upon in a foreign legal text. Policy considerations did not seem to favour one interpretation over the other. The minority did not find any guidance in the statutory language nor the legislative history. De­spite the statements in the legislative history, the danger should according to the minority be evalu­ated as it appeared at the time assistance was requested. Policy considerations suggested that one should give weight to the information then available to the masters of the involved vessels. They had no alternative but to take decisions based on what was known to them, and it would therefore cause uncertainty if they should be allowed to clarify/correct the factual circumstances prevailing at the start of the salvage operation. ND 1999.269 NSC LOS 102: When the pilot boat L was in the process of bringing the pilot to sea, it lost some of its power and the rudder became locked in a starboard position. Shortly thereaf­ter L lost all power, but the power was partly restored after half an hour. The redder, however, was still locked. A came to the scene and connected a towline. After half an hour the towline broke, but a rescue vessel AW had then arrived and took over based on an express agreement. It was later es­tablished that by way of intermittent use of the starboard and port engines, along with an appropri­ate angle on the propeller wings, it would have been possible to manoeuvre L at fairly good speed, even with the rudder locked. An unanimous Supreme Court held that L was in danger, and com­mented on the evaluation: "As ... expressed in (ND 1996.238 NSC) the question of whether there is danger must be determined objectively. But even though the evaluation is objective, the question of whether there was danger must be evaluated as the situation appeared at the time of salvage. As a first consequence this means that even though an existing risk at the time does not later materialise, this fact does not prevent the possibility of there being a salvage situation. Secondly, the question of whether there is danger must be evaluated based on the competence and skin of the crew onboard. In addition, the evaluation of the evidence must take into account how the crew onboard and the crew on the salving vessel actually evaluated the situation" (p. 275). In their evaluation of the danger the Supreme Court placed determinative weight on how the involved parties on both vessels perceived the situation on the spot. On this basis it had to be assumed that the crew onboard L did not manage to get sufficient control over the vessel when the power was only partially restored, while the vessel at the same time was located in an exposed area. It was "most probable that, under the prevailing circumstances, the pilot boat was exposed to a risk of damage sufficiently high to be cov­ered by the Maritime Code's `danger' criteria" Once a ship is brought out of danger and to a position of safety, any subsequent services will not qualify for salvage remuneration, see as an illustration ND 1996.85 FCA CONFIDANTE.

Voluntariness Legal or official obligation to act determines Coastguard Crew The proper abandon of the ship Pilot Tug Salvage operation by public authorities now permitted

Useful result No cure no pay-principle 16:5 (445) SMC Reward or remuneration or compensation Reward cannot exceed the saved value What is success? Out of danger Damage to the environment treated outside the principle Special compensation 16:9 (449) SMC Unsuccessful efforts: Expenses Successful efforts: Expenses + 30 to 100 percent

Assessment of the reward Aim to encouraging salvage efforts Criteria 16:6.1 (446.1) SMC the saved value of the vessel and other property; the skill and efforts of the salvors in preventing or minimizing damage to the environment; the measure of success obtained by the salvor; the nature and degree of the danger; the skill and efforts of the salvors in salving the vessel, other property and life; the time used and expenses and losses incurred by the salvors; the risk of liability and other risks run by the salvors or their equipment; the promptness of the services rendered; the availability and use of vessels or other equipment intended for salvage operations; the state of readiness and efficiency of the salvor's equipment and the value thereof Without regard to the order of the criteria Never to exceed the saved value 16:5.1 (445.1) SMC Reduction (16:3 4 (443.3), 16:9 4 (449.4) and 16:10 3 (450.3))

Background to the treatment of special compensation Salvage Background to the treatment of special compensation PIOPIC 1972 assuming liability from salvors in oil pollution salvage New Salvage Convention 1989 introducing “Special Compensation”. 1996 July 14th. The Salvage Convention came into force Article 14 Special Compensation included in LOF salvage contract since 1990. 1995 UK ratified the Salvage Convention.

Special compensation Requirements for compensation Problems The vessel must threaten to damage the environment Damage means substantial physical damage to human health or to marine life or recourses Causes only from certain pollutant Problems What constitute expenses? Can profit be included? How to measure success? How to assess the uplift (+30-100 %)? Insurers exposed to unmonitored risks The solution to the problems SCOPIC-clause into the salvage contract Special compensation scheme not applicable

SCOPIC-clause Main advantages compared to art. 14 of the salvage convention No threat of damage to the environment required No geographical restrictions A fixed uplift (25%) not linked to success Agreed tariff rates for tugs personnel and equipment Firm agreement on security P&I clubs’ and property underwriters’ rights to be represented during the salvage operation

Salvage under contract The parties can agree on other conditions Contractual salvage Fixed rate Pure salvage No cure no pay A salvage contract can be modified and annulled 16:3 (443) SMC

LOF 2000

Salvage versus Towage Towage Salvage Agreed price Daily hourly rate (BIMCO Towhire) Lump sum (BIMCO Towcon) No claim for salvage compensation, if not in danger Salvage Danger Open form of pure salvage

Special salvage operations Salvage operations by sister vessels 16:2 para. 2 (442.1) SMC Salvage operations by public authorities Compare voluntariness 16:11 para. 5 (442.2 and 451) SMC

Exceptions to the right of compensation Services rendered under existing contracts Compare voluntariness 16:10.1 (450.1) SMC If extraordinary it should be rewarded Express and reasonable prohibition of the owner 16:10.2 (450.2) SMC Salvor’s misconduct 16:10.3, cf. 16:3 para.4 (450.3) SMC Caused danger Have damaged during operation Acted dishonestly Cf. on relation to 16:9 para. 4 (449) SMC on special compensation

Apportionment between salvors Apportionment between independent salvors 16:8 (448) SMC Apportionment between owner, master and crew 16:11 (451) SMC Apportionment between owner and time charterer 14:66 (386) SMC

Related rules Maritime lien General Average Marine Insurance In ship 3:36.5 (51) SMC and cargo 3:43.1 (61) SMC General Average Allowed in YAR 1994 rule VI Outside YAR 2004 (complicated rules) Marine Insurance NMIP § 4-8.1 CICG § 40

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