Environmental Salvage – What is all the fuss about?

Environmental salvage is firmly in the headlines, and everyone involved seems to have a strong word to say, either for or against. In his regular column Simon Tatham wades into the argument and outlines both sides of the deliberation.  One thing is certain: it is not easy being green, of finding a happy compromise.

I dip my toes very cautiously into waters boiling with debate over whether salvors should get paid more for “environmental salvage”. It all started, I recall as young man recently out of law school, with the arrival of LOF 1980 on our desks and the introduction of a “safety net” for salvors of laden oil tankers. This was the first break from the historic no-cure no-pay approach and was designed to ensure salvors did not go away empty handed for their efforts, for example in towing a sinking tanker away from shore, as they would receive their expenses plus 15%.

This had obvious limitations and these were addressed in the 1989 Salvage Convention which currently applies in 60 countries. Now salvors were under a general obligation to exercise care to prevent pollution. The payback was firstly that such efforts would be recognised as a factor in assessing and enhancing the level of award. Secondly, in cases where the saved ship or its cargo had threatened damage to the environment but the fund was too small to allow a full award, “special compensation” in the form of expenses and a mark-up would be paid by ship interests. Although immediately incorporated into LOF 1990, this well-meaning industry compromise backfired as, in practice, the measure of compensation proved cumbersome and difficult to assess. Discussion followed between the P&I Clubs, salvors and other interested parties and SCOPIC was introduced into LOF 2000. Where salved values were low, this allowed agreed tariff rates to be claimed with a 25% bonus. It has been a great success.

But the salvor community continues to feel that the potential reward/risk balance, when taking into account society’s overarching concern about shipping and the environment, is not fairly set in today’s world. To take just one example, bunker fuel capacity on latest generation ships might in itself exceed 5000 tonnes. The ISU has now drafted a proposed revision to the Convention and so has locked horns with the P&I Clubs. Firstly, it suggests a widening of the definition of pollution, extending this to beyond coastal waters. I suspect the shipping community might live with that. Secondly, they seek to turn the clock back to a conventional salvage award for all cases payable by property underwriters. The controversial bit now follows, namely to have a second enhanced award for saving damage to the environment restricted by a cap on liability related to a ship’s tonnage. This risk would fall onto a shipowner’s P&I cover.

The Clubs’ response has been that they are not persuaded that the salvage industry needs this additional income or that it will lead to a better service.  In particular, they argue that the assessment of the monetary value of environmental savage is a desperately tricky task. It would lead to complex theoretical models exploring what damage was actually avoided. They cite the difficulties that have resulted in the USA in the assessment of penalties for natural resource damage. Last but not least, they say this will lead to lengthy and expensive feasting by us lawyers.

The salvors for their part assert that within the LOF framework at least, arbitrators are pragmatic and experienced people who have for many years been applying unscientific methods to the facts of cases and that, in time, a body of precedent would emerge, guiding future deliberations. As I put pen to paper the proposals and counter proposals are being debated at the CMI conference in Beijing. Anticipating a feast and to quote Mark Twain in Tom Sawyer, I await the outcome “with parted lips and bated breath”.

[Since publication, the ISU’s proposal was not supported in Beijing]

Simon Tatham

Simon Tatham is a partner of Tatham Macinnes LLP and a founding member of its new service, TugAdvise.com. He has 30 years’ experience in shipping law.
Reproduced with kind permission of International Tug & OSV magazine
, November/December 2012.