International Journal

on Marine Navigation

and Safety of Sea Transportation

Volume 6

Number 3

September 2012

431

1 INTRODUCTION

Salvage covers section of maritime law under assis-

tance at sea and in port. Modern principles of mari-

time salvage law established in the early part of 19

century but the maritime salvage practice existed

long before that time. Modern day maritime salvage

constitutes on three basic principles: when there is

an imminent danger at sea concerning a marine per-

il; the salvor voluntarily render a service and; upon

successful completion he will be awarded the sal-

vage taking into consideration all the relevant factors

including the value of the property and the degree of

risk he has taken. Having its roots in the law of equi-

maritime salvage bears very peculiar set of laws

quite different from others. The well known princi-

ple “no cure no pay” is one of the yard stick taken in

determining the salvage award but exceptions to this

also have developed that is to considers further re-

covering some of expenses that have reasonably in-

curred in cases of contribution to marine environ-

mental protection even without the success of

salvaging the whole property. Salvors priority in

maritime liens, leniency on negligence observed by

the courts, allowed for limitation of liability by ex-

isting limitation liability convention and even depar-

ture from the no cure no pay principle were allowed

for salvors by 1989 International Salvage Conven-

tion but, these are not without controversies. Alt-

18 Set of legal principles under common law tradition

hough today salvage mainly depends upon 1989 In-

ternational Salvage Convention its interpretation de-

pends upon the national courts thus need the under-

standing of the interpretation under varies

jurisdictions specially the English and the American.

English law and the Lloyds Open Form played a his-

torical role in developing salvage law on the other

hand American salvage law have also shown steady

progress.

2 LEGAL INSTRUMENTS

Many of the countries are signatories to1989 Inter-

national Salvage Convention. About 58 contracting

states representing 47% of the world shipping ton-

nage including Poland, UK, USA, China, and

Greece are some of the countries. On the other hand

Lloyd Open Form has incorporated the provisions of

the convention to be applied contractually; therefore,

even a non contracting state will abide by salvage

convention’s terms and condition contractually pro-

vided the parties have signed the relevant Lloyd

Open form. By keeping the tradition paramount Sal-

vage Convention described the reward shall be fixed

with a view to encourage salvage operation

in ad-

Article 13 (1) The reward shall be fixed with a view to encouraging salvage

operations, taking into account the following criteria without regard to the or-

der in which they are presented below

(a) the salved value of the vessel and other property;

(b) the skill and efforts of the salvors in preventing or minimizing damage to

the environment;

Maritime Law of Salvage and Adequacy of

Laws Protecting the Salvors’ Interest

F. Lansakara

Master Mariner. LLM (Maritime Law) Consultant JMC NAUTICAL PTE LTD. Singapore

ABSTRACT: Under maritime law salvage is encouraged and given priority with respect to salvage awards in

many aspects such as maritime liens, leniency on salvors’ negligence, right to limit liability and to the extend

of departure from “no cure no pay principle” in the case of unsuccessful salvage but have saved the environ-

ment. These laws in favor of salvage affecting the salvors are not straight forward and have been criticized in

some cases. This paper discusses the relevant maritime law principles under each circumstances criticism they

face and legal remedies available to safeguard the interest of the salvors and access the adequacy of maritime

laws pro-tecting the salvors interest.

432

dition to these the Limitation Liability Convention

has the provisions for salvors to limit their liability

and also 1993 International Convention on Maritime

Liens and Mortgages in force ratified by few coun-

tries reestablishes that salvage claim having priority

above all other claims. On the domestic laws the

English Supreme Court Act

consider the salvage

claims attached to a maritime lien and the English

courts recognizes the priority available to a salvage

claim above all other maritime lien claims.

Although the United States of America has not

ratified the Limitation Liability Convention it has its

own statute on limitation they, instead of tonnage

limitation take into consideration the value of the

salved ship and the freight to be earned and base on

these values the salvor may limit his liabilities to the

salved.

Although English law widely in use other com-

mon law countries and USA can also be considered

for forum for handling salvage claims. Lloyd Open

From has provisions for English law but it can be al-

tered to suit the circumstances.

3 SALVAGE CLAIMS AND LIENS

English law embraces the salvage claim as a mari-

time lien as described under English Supreme Courts

Act states that under any contract in relation to sal-

vage services whether covered under salvage con-

vention or not. Under the English law salvage

awards are given priority on liens. They consider

among other things damage done by a ship, sea-

men’s wages, masters wages and disbursements. The

courts will determine the distribution of the funds in

order of their priorities

but there are no strict rules

of rankings.

1 Admiralty Marshal’s cost

2 Claimant’s cost

3 Maritime Lienees

4 Mortgagees

5 Other in rem claimants

− When there are several salvors the last in time

take priority.

− When there are different category of maritime

liens the salvor take priority

(d) the nature and degree of the danger;

(e) the skill and efforts of the salvors in salving the vessel, other property and

life;

(f) the time used and expenses and losses incurred by the salvors;

(g) the risk of liability and other risks run by the salvors or their equipment;

(h) the promptness of the services rendered;

(i) the availability and use of vessels or other equipment intended for salvage

operations;

(j) the state of readiness and efficiency of the salvor's equipment and the value

thereof.

1976 Limitation Liability convention Article 1

Section 20 (2) of English Supreme Courts Act 1981 (SCA1981)

SCA 1981 S21(6)

− When a claimant has a damage lien subsequent

to lien that preserved the ship (salvage) the

damage lien will take priority over salvage

English law considers the extinction of maritime

liens under the following circumstances: Immunity;

delay of law suit; upon providing financial security

by the defendant; establishment of limitation fund;

wavier; destruction of property; Judgment on liabil-

ity; Judicial sale and; sister ship arrest.

1993 International Convention on Maritime Liens

and Mortgages came into force in Sept 2004. Few

countries have so far ratified this convention they

are: Indonesia, Ecuador, Estonia, Nigeria, Monaco,

Russia, St Vincent and Grenadians, Spain, Tunisia,

Ukraine and Vanuatu.

This convention contained

the provisions in relation to maritime liens similar to

that have generally accepted by major maritime na-

tions and it also has the provisions that each state

under its own law may grant maritime liens on a

vessel to secure claims other than those generally

recognized.

Maritime liens on salvage claims are less contro-

versial and, without conflict with other laws. They

are recognized equally by international conventions

and national laws.

4 SALVORS RIGHT TO LIMIT LIABILITY

Prior to 1976 Limitation Liability Convention, sal-

vors had no right to limit their liabilities in cases of

negligence or misconduct which blame on salvor

their liabilities were unlimited for example the Tojo

Maru Case in 1972

1976 Limitation of Liability Convention, states

that ship owners and salvors as defined, may limit

their liability in accordance with rules of this con-

vention for claims in respect of loss or damaged to

property occurring on board in relation to salvage

operation

subject to certain exceptions such as

gross negligence if proved limitations will not be al-

lowed. This new development was a direct conse-

23 The case “Veritas” 1901 the vessel was safely towed by the salvors but un-

fortunately her engine failed and a second salvor assisted her to prevent her

from sinking. During the operation the vessel came into contact with landing

stage belonging to the Dock Board. The Board used its statutory powers to re-

move the vessel and claim against the ship in this case priority was given to the

Boards claim against the ship before considering the salvage awards.

24 Article 4 (1) ( c ) Maritime Liens - Claim for reward for the salvage of the

ship

Article 5 - Priority of maritime liens; Article 15- Conflict of laws ; Article 16

- Extinction of maritime liens because of time limit

25 Article 6 –Other maritime liens Each State Party may, under its law, grant

other maritime liens on a vessel to secure claims…subject to condition which

include time bar and rank below Salvage lien.

26 Tojo Maru case salvors were not allowed to limit liability under the old sys-

tem existed before 1976 Limitation of liability Convention.

27 Article 2 (1) (a) claims in respect of loss of life or personal injury or loss of

or damage to property (including damage to harbor works, basins and water-

ways and aids to navigation), occurring on board or in direct connection with

the operation of the ship or with salvage operations, and consequential loss re-

sulting …

433

quence of 1972 Tojo Maru case. Limitation Liability

Convention, ratified by 52 States about 50% of

world shipping tonnage and its latest protocol with

higher amount of limits has ratified by 37 states

about 42 % of the world shipping tonnage. 1996

protocol to Limitation Liability Convention provides

an enhanced compensation regime compare to the

former. USA is not a party to these conventions but

thy have their own statutory provisions.

Inclusion of salvors for limitation of liability is a

recent development in favor of their rights.

5 NEGLIGENCE OF SALVORS

Salvor taking the risk to save the property and dur-

ing the salvage operation accidents occur due to sal-

vors negligence or misconduct the question is to

what extend these negligence or misconduct affect

the salvage award and whether the ship owner can

make a counterclaim for damages. Decisions on

these were difficult because of the extra ordinary na-

ture of the job and involvement of the high risk.

Although both UK and USA are the signatories to

the 1989 Salvage Convention the interpretation of

provisions on salvors negligence by the courts have

been different. Under the convention the salvor shall

owes a duty to the owner of the vessel or other prop-

erty in danger to carry out the salvage operations

with due care also to exercise due care to prevent

minimize damages to the environment and take as-

sistance when reasonably requested

. The salvor’s

negligence may also deprive him of whole or part of

the award

the convention is silence on how they

are measured and, it has left the decisions to national

courts.

The case “Alenquer” courts description to what

extend the leniency can be granted has a notable

value. A brief outcome of the English law cases de-

scribed below.

Case 1947 The Delphinula (Court of Appeal)

28Article 8 - Duties of the salvor and of the owner and master

1. The salvor shall owe a duty to the owner of the vessel or other property in

danger:

(a) to carry out the salvage operations with due care;

(b) in performing the duty specified in subparagraph (a), to exercise due care to

prevent or minimize damage to the environment;

salvors; and

(d) to accept the intervention of other salvors when reasonably requested to do

so by the owner or master of the vessel or other property in danger; provided

however that the amount of his reward shall not be prejudiced should it be

found that such a request was unreasonable.

Article 8 has been incorporated in LOF 2000 cl J

The consequences of salvors misconduct is laid down in conventions article 18

29 Article 18 - The effect of salvor's misconduct

A salvor may be deprived of the whole or part of the payment due under this

Convention to the extent that the salvage operations have become necessary or

more difficult because of fault or neglect on his part or if the salvor has been

guilty of fraud or other dishonest conduct.

The salvor guilty of misconduct reduction in

salved value due to his misconduct was taken into

consideration and also a counter claim or independ-

ent action.

Case 1955 The Alenquer

No salvage award was made but the damage

claim had to be paid in full the judge adhered to the

general principle and described why leniency cannot

be applied here “ when the their behavior is criti-

cized contrary to public interest, the result of the

courts decision as such to discourage salvors of tak-

ing unnecessary risks”

Case 1972 Tojo Maru

(House of Lords)

It was held that when the salvage operation is

successful but there is negligence of the salvor in the

case of successful salvage the owners can counter-

claim damages from the salvor and the measure of

damage is the difference between undamaged value

of the ship base on “no negligence” of the salvor and

damaged value of the ship and, the salvage award to

be calculated base on undamaged value of the ship.

Finally the salvage award and owners counter-

claim will set off against each other the balance will

be due owner or salvor. It was also held that when

there is no success in salvage there can be no coun-

ter claims as well.

This case has the highest authority the House of

Lords however its calculation of the award taking in-

to account undamaged value of the ship although

there were “no negligence” has created a friction be-

tween it and “no cure no pay” principle. There are

also other concerns on application of this case law to

cases with two or more salvors with only one at fault

and how it can affect the one who is not at fault.

With regard to Limitation of liability of the sal-

vors the Court of Appeal in the above case held that

limitation of liability can be applied before setting

off owners counter claim.

When considering the salvors’ negligence or mis-

conduct the American method is different from the

English courts. They categorize them as distin-

guishable damages and independent damages. Dis-

tinguishable damages means they inherit in the situa-

tion for example the Tojo Maru case was a

distinguishable damage and the independent damag-

es means they were caused independently by the

salvaor any counter claim for damages the inde-

pendent damages may only consider. Limitation of

liability under the American statute is the damaged

30 1972 Tojo Maru collision accident in Persian Gulf salvors agreed to tow her

to Kobe during the salvage operation, the salvors negligence caused an explo-

sion and heavy damages to the ship. They however were successful in towing

her to final destination. The owners counterclaim damages from salvor due to

negligence.

434

value of the ship plus the freight in the course of be-

ing earned.

Under the Llloyd Open Form 2000 the salvor is

required to have observed best endeavors

, there

has been no definition of best endeavors it is com-

monly used in industry and widely known therefore

best endeavor means Standard of reasonableness is

that of a prudent sailor acting properly in the interest

of salved property.

The law with respect to negligence and miscon-

duct of salvors their interpretations by English

Courts are conflicting and the American Courts in-

terpretations much preferred with respect to preser-

vation of salvors rights.

6 SPECIAL COMPENSATION

Special compensation was introduced in 1989 Sal-

vage Convention to compensate the salvors if their

salvage operation has contributed to protection of

the marine environment even though they could not

earn full or any salvage award.

Under the 1989 Salvage Convention if a salvor

has carried out salvage operation in respect of a ves-

sel which by itself or its cargo threatened damage to

the environment and has failed to earn reward under

article 13 he shall be entitled to special compensa-

tion from the owner of the vessel equivalent to his

expenses as defined in article 14. This appear to be a

another step to encourage the salvor for saving the

environment but the calculation of the salvage ex-

penses without considering the profits or bonuses

turn out to be an unpractical one. The principle issue

in the Nagasaki Spirit case was concern with the def-

inition of expenses in Article 14(3) and, in particu-

lar, that part of it which refers to “fair rate for

equipment and personnel actually and reasonably

used in the salvage operation…

”. The question was

whether is it permissible to include a market or prof-

itable rate, or whether the salvor was entitled to sole-

ly to reimbursement of expenditure. House of Lords

delivering the judgment held that fair rate under arti-

cle 14(3) meant fair rate of expenditure and did not

include any element of profits. This draws strong re-

action from the salvors and after lengthy discussions

the marine salvage community arrived with the solu-

31 LOF 2000 cl A

32 14(3) Salvor's expenses for the purpose of paragraphs 1 and 2 means the

out-of-pocket expenses reasonably incurred by the salvor in the salvage opera-

tion and a fair rate for equipment and personnel actually and reasonably used in

the salvage operation, taking into consideration the criteria set out in article 13,

paragraph 1 (h), (i) and (j).

Article 13 the Criteria for fixing the rewards

(h)the promptness of the services rendered;

(i) the availability and use of vessels or other equipment intended for salvage

operations;

(j) the state of readiness and efficiency of the salvor's equipment and the value

thereof.

tion. This was a set of clause giving the basis for

calculation of special compensation including bo-

nuses under the guide lines set up by International

Salvage Union (ISU) and clarifying other relevant

criteria known as Special Compensation and Indem-

nity Clause (SCOPIC). The solution provided by

SCOPIC is, the parties to a salvage contract may

agree to incorporate SCOPIC into any LOF contract

by reference, therefore contracting out of Article 14

of the Convention. Such contracting out is allowed

under article 6 of the Salvage Convention

. The

ship owners P&I clubs have agreed through a code

of conduct (a gentlemen agreement between P& I

Clubs and ISU) to provide financial security re-

quired for SCOPIC compensation by a standard

guarantee form known as ISU5.

Special compensation available to salvors under

the convention have faced with problems in practical

application, SCOPIC so introduced is a contractual

obligation and not a statutory one. Salvage conven-

tion compensation limits to apply if SCOPIC is not

agreed.

7 SUMMARY AND CONCLUSION

Conflict of law with respect to maritime liens on

salvage less likely priority for salvor has maintained

throughout, but uncertainty exists in the English law

with respect to claims on salvors negligence Ameri-

can law appears to be more settled on this regard.

Limitation of liability conventions applied to salvors

but under American law different limits will consid-

er since they are not party to international Limitation

Liability Conventions. Special compensation appli-

cable to salvor under the 1989 Salvage Convention

not practical therefore contracts shall insert SCOPIC

clause in order for the salvor to get reasonable rate

including bonus.

The adequacy of the laws protecting the salvors

interest today depends upon international conven-

tions and national laws. The existing set of maritime

salvage laws covering the interest of the salvors with

respect to limitation of liability and priority in mari-

time liens appeared to be adequate, with regard to

judgment on salvors misconduct and negligence the

existing laws are not universal therefore inadequate.

Similarly, special compensation provisions which

are available under the salvage convention do not

encourage the salvor and seems inadequate unless

SCOPIC is inserted.

33 Article 6 - Salvage contracts. 1. This Convention shall apply to any salvage

operations save to the extent that a contract otherwise provides expressly or by

implication

435

REFERENCE LIST

[1] 1989 International Salvage Convention

[2] 1976 Limitation of Liability Convention

[3] 1996 Protocol to Limitation of liability Convention

[4] Limitation of Liability Act USA 46 U.S.C SS181 -196

[5] 1993 International Convention on Maritime Liens and

Mortgages.

[6] English Supreme Courts Act 1981.

[7] Lloyd Open From 2000

[8] International Salvage Union Form ISU5 and SCOPIC

clause