Demystifying the myths around salvage law
13th July 2022
Simon Tatham examines misconceptions on salvage and the use of LOF
Most mariners will spend their life at sea without ever being on a ship in need of salvage assistance. But when things go wrong, any mariner on a ship in trouble should be only too pleased to see a salvage tug coming over the horizon.
However, from a law point of view, there are still many mistaken myths around salvage, the first being that salvors are a derivation from piracy.
Certainly, when the privateer Sir Francis Drake sailed in the name of the English monarch there was little distinction between the seizure of foreign ships and piracy, and personal fortunes were made. Modern salvage law in part arose out of the need to legitimise and regulate this and so the Law of Prize developed.
Over the subsequent centuries, naval commanders likewise made fortunes from the capture of enemy ships but were obliged to render the prize up to the Crown before being rewarded with a share assessed by a board appointed to that end. Thus developed the concept of an award independently assessed.
The most common misconception is the salvor takes over command of the ship in place of the ship’s master during the salvage services. However, during salvage, the owners of ship and cargo retain their ownership, and likewise the master remains in command of his ship.
There can of course be situations where a vessel has been abandoned by its crew, and then boarded by a salvage team. At that stage, the salvors are ‘salvors in possession’ of the ship and cargo, but they certainly do not become the owners.
The ship and cargo owners remain the owners, and the shipowner remains responsible for the ship and its cargo throughout the salvage services, including for example for pollution caused by its bunkers. The shipowner cannot shrug his shoulders and say, “it is not my problem.”
Yet another mistaken belief is the salvor is awarded a fixed percentage of the value of the ship and its cargo.
Any award or negotiated settlement can be converted into a percentage of the values salved, but that is most certainly not the way arbitrators approach the assessment of remuneration for a salvage service.
The correct approach is to consider the criteria set out in the 1989 Salvage Convention, as they apply to a particular salvage service.
That said, a former mariner colleague of mine told me the story of a time when his ship was requested to escort a US-owned vessel to the Azores. The ship’s cook assured everyone that he knew all about salvage, and 40% of the value of the escorted ship and its cargo would be shared between the crew and the owners. How wrong can you be?
There are many shipowners who try to avoid engaging a salvor under Lloyd’s Open Form in the mistaken belief the awards are always a huge proportion of the value of the ship and its cargo.
There are cases where the values are small in comparison to the time involved and expenses incurred by the salvor, so the award or settlement is high in relation to the property values, but statistics show that on average, the awards made by Lloyd’s arbitrators are in the region of 10%.
We are frequently reminded that insurance of the ship and its cargo is a business where the many involved in shipping are paying for the few who suffer a casualty at sea.
While on the other hand, salvage is a business where the few maritime casualties are paying for the benefit of the many involved in shipping who might one day need the assistance of a marine salvor.
Another misconception is that salvage companies receive an award for saving environmental damage. The 1989 Salvage Convention requires a salvor to exercise due care to prevent or minimise damage to the environment, but there is no specific amount awarded to a salvor in this respect.
The obligation and degree of success in that regard is simply one of the elements taken into consideration by an arbitrator or court when arriving at the award.
Yet another misconception is that salvage arbitrations are long and expensive. Again, most salvage arbitrations occupy less than a day, but as with any legal issue, there are exceptions.
These will invariably be cases where there were lengthy salvage services and/or there was some particular legal dispute between the parties.
The costs of going to arbitration in the overall scheme of things is not that high. It is a myth however, that frequently arbitration is avoided where experienced practitioners on each side meet, followed by lunch and a bottle of red wine, and reach a settlement figure acceptable to all parties. Incorrect: white wine is equally acceptable.