LOF award supports French ETV services

1st September 2023

Simon Tatham describes the latest reported Lloyd’s arbitration award and the route to a fair payout

Now Lloyd’s of London publishes Lloyd’s Open Form (LOF) awards it is useful to occasionally report on the latest cases. Such awards assist in managing the expectations of salvors and underwriters alike and act as guidance for future negotiations, assisting in the resolution of cases. They also make for a good read.

The latest report concerns a case first heard in November 2022 which concluded with a final award in June 2023, testament to the quick despatch of LOF hearings.
The casualty was a Handymax bulk carrier laden with 15,000 tonnes of barley drifting in severe weather, having suffered an engine breakdown in the English Channel.

The salvor was the French emergency towage vessel (ETV) operator Les Abeilles. Unlike some ETV operators, Les Abeilles is free to undertake a rescue on salvage terms and this is one means by which the French state is able indirectly to recuperate some of its investment in these coastal protection services.

It proceeded about 18 nautical miles to the casualty and stood by for 12 nautical miles as the vessel drifted shorewards. The French authorities, concerned at the master’s reluctance to accept assistance, then issued an order that he do so, on threat of intervention.

A French naval helicopter intervened to assist in transferring two salvage officers onto the casualty after which a connection was established.

The large tug, with 200 tonnes of bollard pull and constructed in 2004 at a cost of €60M (US$66M), towed the casualty 120 nautical miles in very rough weather to Le Havre where the vessel was able to anchor. The whole operation lasted 37 hours.

The value of the salved fund, ship, cargo, bunkers and freight, was agreed at €20M (US$22M). As the services were readily apparent, the key issue for consideration was the dangers faced by the casualty and, in turn, a fitting award.

Evidently, the parties were unable to agree on that, so the matter was put before a Lloyd’s arbitrator. In smaller cases this is done with documents alone.

In this case, the parties would have each submitted their evidence and a bundle of documents detailing their case in advance of an oral hearing.

The evidence typically consists of masters’ statements of fact, salvor’s SitReps, ship/shore communications, voyage data recorder transcripts, logbooks, ship’s plans including bunker tank distribution, survey and repair reports, weather reports, ship’s electronic chart extracts and AIS records, together with charts depicting drift, underwater obstructions and proximity of land, and so on. Usually, a chronology is also prepared.

In common with the simple procedure in Lloyd’s arbitration, there are no formal written submissions exchanged between the parties (claim/defence/reply), only verbal submissions made on the day by counsel supported, to assist the tribunal, by a written summary of their arguments.

Some find this surprising, but no financial claim or demand is made, nor is the arbitrator made aware of the amount of security demanded and provided.

This is in case this information might colour the arbitrator’s judgement in making an objective assessment of the award, pursuant to his duty to reach a balanced and fair resolution between the competing parties.

One of the issues was, if the vessel had deployed anchors, whether they would have snagged on disused submarine cables, and whether in turn that would have assisted the vessel.

It was found most unlikely that the anchors would have snagged a cable and the chances of slowing the rate of drift were minimal at a time when the casualty was only hours from grounding.

Another detailed debate was around the nature and effect of the co-operation between the French Navy (in providing helicopter services) and Les Abeilles, who claimed the benefit of that intervention as part of the services, while in turn having to account with half of its award to the French Navy.

Such cases, where the dangers are both high and imminent, but the successful services are relatively short and do not require the deployment of a broad range of salvage skills, craft and equipment, are always difficult to assess. The decision of the Lloyd’s Appeal Arbitrator was that an award of €3.0M (US$3.3M) was the right figure.

We settled a ’nick of time’ salvage service on a similar fund for less than US$2.5M a few years ago, but in that case the services were carried out by a local harbour tug operator. In the above case, Les Abeilles is acknowledged as one of the leading professionals with enormous investment in salvage. On balance, the view from this armchair at least is that, marginally, the underwriters probably got the better of the deal. Of course, some might disagree, indeed who am I to argue with the learned Appeal Arbitrator?

A version of this article first appeared in the publication “International Tug & Salvage” – Click here to read it.