1. Vidar Solemdal Senior Claims Executive, Gard AS January 15th, 2014
SALVAGE
Vidar Solemdal
Senior Claims Executive, Gard AS
January 15th, 2014
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2. Introduction to salvage
Principle of salvage
Salvage contracts
LOF/SCOPIC
Examples
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3. 1. The principle of salvage:
No Cure, No Pay
Award are based on salved values and nine other factors based on article 13 of the 1989 Salvage convention
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4. The principle of salvage – criteria for the Award
1989 Salvage Convention Article 13
Salved value
Skills and efforts in preventing damage to environment
Measure of success
Nature and degree of danger
Skills and efforts in salving vessel, property, life
Time used and expenses and losses incurred
Risk of liability and other risks
The promptness of the service rendered
Availability and use of vessels and other equipment
State of readiness and efficiency of salvors equipment
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5. The principle of salvage, cont.
A salvage situation is a situation where the vessel need assistance from third parties (Salvors) to avoid damage to the vessel:
Refloat the vessel if grounded
Put out fire
Tow to safe port
etc.
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6. The principle of Salvage, cont.
Most Salvors, in any part of the world will try to demand/persuade the master to sign a salvage contract (LOF/TOF etc) prior to commencing the salvage operation. Is this OK? Yes, if the vessel, crew or cargo is in immediate danger. No, if the situation is relatively stable and Owner/Insurer can be contacted prior to signing.
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7. The principle of salvage, cont.
Depending on vessel location and the level of danger the vessel is in, it is very often time to negotiate with the salvors. A fixed priced agreement (lump sum, hourly rate, day rate etc) will always be preferred if time permits. The main responsibility of the Master in a perilous situation is to protect human life, the environment and the property under his charge, and if these are seriously threatened there will be no time to negotiate alternative contracts to an open form.
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8. 2. Salvage contracts Standard contracts LOF 2011 – Lloyds Open Form
TOF – Turkish Open Form
Salvage contract for Turkish monopoly area
Towcon
Ocean towage agreement (lump sum)
Towhire
Ocean towage agreement (daily hire)
Wreckhire
Wreck removal and marine services agreement (daily hire)
Wreckfixed
Wreck removal and marine services agreement (fixed price – no cure, no pay)
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9. Contracts – LOF Purpose of the LOF Contract
Recognized all over the world
Simple to fill in – one page
For all situations
Disputes to be solved by the Lloyds Arbitration
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10. Contracts – LOF
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11. Contracts – LOF
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12. Contracts – LOF 2000 vs LOF 2011 Minor changes to the LOF:
Details of LOF award will be «public» on Lloyds website
All contracts made shall be reported to Lloyds
Changes to LSSA (Lloyds Standard form of Salvage Agreement)
Salvor can demand Security for fees incurred or (reasonably) anticipated. (Clause 6.6 and 10.8)
New Clause 13: Cargo security. Notice to cargo insurers only.
New Clause 14: Salvor can apply to Arbitrator to bind the minority of cargo Owners (when 75% agree)
New Clause 15: Excuse liability for salvage for low value cargo.
(Clause 13, 14 and 15 only applicable for container cargo)
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13. LOF Statistics
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14. LOF Statistics
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15. 3. Salvage - SCOPIC
No Cure, No Pay Award can not be higher than salved values Severe casualty – high risk – low value
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16. Salvage - SCOPIC 1989 Salvage convention Article 13 – Salvage Award
Article 14 – Special compensation
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17. Salvage - SCOPIC 1989 Salvage Convention Article 13 Salved value
Skills and efforts in preventing damage to environment
Measure of success
Nature and degree of danger
Skills and efforts in salving vessel, property, life
Time used and expenses and losses incurred
Risk of liability and other risks
The promptness of the service rendered
Availability and use of vessels and other equipment
State of readiness and efficiency of salvors equipment
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18. Salvage - SCOPIC Article 14 of the 1989 Salvage convention
Expenses covered if threat or damage to the marine environment.
Increased if damage avoided
SCOPIC = Special Compensation P&I Clause
ISU and IG – replaces article 14
Article 14 still applies where SCOPIC not applicable
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19. Salvage - SCOPIC SCOPIC Must be incorporated in LOF and invoked
Replaces article 14
SCOPIC remuneration
Based on tariff rates + 25% + out of pocket expenses
Subject to speedy payment provisions
Paid for excess Art. 13 awards
Control of tariffs and ”Taxi –meter”
Special Casualty Representative (SCR)
Tariff rates are relatively generous, and the 25% is the salvage bonus.
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20. SCOPIC Typical tariff details
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21. SCOPIC – invoke or not
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22. SCOPIC – invoke or not
Can be invoked at any time by contractor (in writing). SCOPIC cost start counting from time of written notice. Salvage services according to Art. 13 Scopic tariffs only when exceeding Art. 13 Discount If Art. 13 exceeds SCOPIC tariffs, the Art. 13 award or settlement shall be discounted with 25% of the difference between the award and the SCOPIC remuneration (but then counted from day 1)
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23. Salvage Case study (14.9, page 325 in Gard guidance)
A fully laden container vessel of 9,567 GT suffered Main Engine breakdown in the Atlantic Ocean, approximately 50 nm SW of Madeira. Weather conditions at the time favourable but the attempts to rectify the problem failed. Vessel drifted slowly towards Madeira.
After some back and forth, H&M confirmed to Owner that they were ready to conclude a contract with salvage company X, on a daily hire basis. Salvor had suitable tug and equipment two days away.
Shipowner, unfortunately, had in the meantime signed a LOF with SCOPIC incorporated with salvage company Y. Salvage company Y resources were 4 days away.
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24. Salvage Case study, cont.
One day later weather deriorated. Vessel continued her drifting towards the shoreline of Madeira, and was estimated to run aground in 30 hours.
Salvor Y invoked SCOPIC.
Salvor Y sub-contracted Salvor X to prevent grounding/save vessel.
Vessel grounded before Salvor X tug arrived.
Salvor Y successfully refloated the vessel in 18 days.
Lloyds Arbitration Panel awarded Salvor Y the sum of USD 4,150,000 – pursuant to article 13 of the Salvage Convention. This was based on a saved value (ship, cargo and bunker) of MUSD 42.
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25. Salvage Case study, cont.
Article 13 award was higher than the total SCOPIC cost, which were assessed/calculated to USD 3,320,000.-
A deduction of 25% of the difference between SCOPIC and Article 13 was deducted from the award ((4,150,000 – 3,320,000) * 0.25 = 207,500)
Salvage award = 4,150,000 – 207,500 = USD 3,942,500 paid by Property insurers (H&M and Cargo)
What went wrong?
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26. SCOPIC example
6 day service SCOPIC invoked on day 3 Art. 13 award MUSD 1.5 SCOPIC expenses from date invoked USD 400,000.- SCOPIC recalculated from day 1, USD 700,000.- Diff between Art. 13 and SCOPIC = USD Salvage award = USD 700’ + USD 600’ = MUSD 1,3
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27. Scopic Example - illustrated
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28. 4. Practical examples
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29. Salvage case 1 - Voutakos
Voutakos Engine damage off Ushan
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30. Salvage case 1 - Voutakos
Please be advised that during the vessel's voyage from Colombia to Rotterdam the vessel sustained major Main Engine breakdown at position Lat: N Long W (abt 120 miles off Ushant). The vessel is loaded with 174, mt of cargo of ' Colombian Steam coal'. Efforts by the crew to repair the damage have been unsuccessful and the Master requested tug assistance. LOF 2000 has been signed with Tsavliris Salvage (International) Ltd. Towage commenced this morning.
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31. Salvage case 1 - Voutakos
Voutakas, cont.
Salvor contracted two commercial tugs
Vessel towed to Rotterdam
Salvor awarded MUSD 1.8 by Lloyds arbitration
Out of pocket expenses MUSD 0.8
Award appealed – MUSD 2.7
Sent to High Court for ”disparity principle”
Award kept – MUSD 2.7
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32. Salvage case 2 – CSCL Hamburg
CSCL Hamburg Grounding on coral reef in Egypt
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33. Salvage case 2 – CSCL Hamburg
Value of vessel / cargo in damaged condition MUSD 25
Claim from Egyptian Authorities MUSD 14.5
11 days of negotiations – prior to refloating
Final result MUSD 6 mill (+ P&I compensation for reef)
Refloating in 12 minutes
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34. Salvage case 3 – DS Splendour
Grounding in Orinoco river
DS Splendour, Multi purpose/Dry cargo/Container carrier, Dwt, Loaded with 17330mt Aluminum products On her way from Puerto Ordaz to Veracruz, Mexico
Three vessels formed a pilot assisted convoy, and were to pass through the dredged channel from mile 40 into the open sea in the Orinoco River Delta. DS Splendour was the first vessel.
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35. Salvage case 3 – DS Splendour
Offer from commercial Salvor – LOF 2000 Offer from local tug company – lumpsum + bonus 4 days ligthering and refloating – USD 350,000,- Value of vessel and cargo – MUSD Award with LOF 2000?
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36. Salvage case 4 – MS Nordlys
15th September 2011 – Fire in Engine room and flooding outside Ålesund.
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37. Salvage case 4 – MS Nordlys
Issue: One company (BuBE) appointed by local fire brigade (IUA) BuBe contracted diving company Gard contracted specialists – SMIT Vessel was saved. All the above companies contributed in the salvage. Problem: all the above claimed that they were the «key» to salving the vessel. Salvage award to who and what proportion?
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38. Almost Salvage case 5 – Laden LNG
Vessel drifting in Red Sea December 2013
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39. Almost Salvage case 5 – Laden LNG, cont.
Fixed offer received by Tug company A in Yanbu – USD 350,000 for assisting vessel. Very high price….
Fixed offer received from Tug company B in Jeddah – USD 1,500,000.- ….!!
Tug offer A suddenly a bit more digestable…
Fortunately vessel regained engine power, and no need for tug.
Tug company A and B had the same owners…
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40. Finally - Salvage – general approach
In a salvage situation:
Close contact with Owners
Appoint local representative
Inform authorities
Get the facts
Degree of danger
Weather
Damage
Commercial world – use it
Stay calm - usually more time available than salvors want you to believe.
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41. The Nordic Association of Marine Insurers
Thank you
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