Factors at play in common law salvage claims

One of the scenarios explored in Simon Tatham’s paper at ITS 2012 Barcelona involved a harbour tug deviating from a coastal passage to assist a bulk carrier in distress. Here he explains more as he considers common law salvage claims.

One of the salvage case scenarios explored at my talk during a very enjoyable week at ITS Barcelona involved a harbour tug deviating from a coastal passage to assist a bulk carrier in distress. The Japanese built ship was dragging her anchor in very heavy weather. Twice the tug held her and dramatically prevented her from grounding, as the photos taken by an observer onshore graphically demonstrated.

It was all over in a few hours. In such cases there is often no agreement to a salvage contract, LOF or otherwise. Strictly speaking such “common law” claims should be pursued in the local courts. Why then should such a case have ended up being settled in London arbitration?

In theory at least, the outcome of a salvage claim in most maritime jurisdictions should be the same. That is because most countries have adopted the 1989 Salvage Convention. This sets out the criteria for assessing a salvage award such as the value of the property salved, the dangers faced (by ship and salvors), the efforts made to avoid damage to the environment and what work was done to successfully bring the ship to safety.

It is however generally acknowledged that in the English jurisdiction the principle enshrined in the Convention, that salvage should be encouraged for the general good of shipping, is rather more enthusiastically applied than elsewhere, and in London legal costs can also be recovered in a very simplified procedure. Great for the salvors, not always so great for underwriters.

So why would any shipowner in his right mind ever agree to refer the case to London? Why not just sit it out in the local jurisdiction?

This is usually a matter for discussion and negotiation, always depending on the circumstances of the particular case and the skill and knowledge of the parties who will play their hand to their best advantage. The stakes can be high, the difference between salvors having to compromise with a small payment or maybe collecting a substantial award. What factors are at play in this tussle?

In many places the first issue is that the local courts have no experience of such specialised claims. This can mean uncertainty of outcome for both parties increasing the risk of lengthy proceedings and appeals, and making it difficult to reach a settlement. If a salvor is forced into making a ship arrest to assert his claim both sides have to consider carefully the implications. A salvor may however prefer not to proceed in the local courts but to bide his time and arrest the vessel or a sistership in a more favourable jurisdiction. However he cannot do that if there is cargo about to be discharged. Perhaps there is a market sensitive or perishable cargo or from owners’ perspective, a liner service that cannot be delayed?  These and other factors, often assessed very quickly, should in capable hands, result in an early agreement. With recent Lloyd’s Appeal Awards now showing a tendency towards more modest reward levels, London still remains an option, as it was in our case above. Incidentally it then settled very quickly. Job done.

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
, July/August 2012.