An overview of the Law of Salvage

The Modern Admiralty Law descends from an era, when the distinction between pirates and free booters on the one hand and honest seamen and salvors on the other was often only one of motivation and exception, while both were on a look out for a generous reward for their efforts, at least the latter hoped to come by it honestly. The purpose was to encourage honestly by generously rewarding those who restored property safely to the owner.1

The Law of Salvage is a concept of Maritime Law, which states that, a person who recovers another person’s ship or cargo, after peril or loss at sea, is entitled to a reward commensurate to the value of the property so saved.

The concept of salvage traces its origin to the principle of equity, according to which a person who puts himself and his own vessel, at risk to recover another should be appropriately rewarded and its earliest roots can be traced to the Rhodian era, 900 years before the Christian era. Rhodian laws were the first to allow a salvor to claim a reward based on a percentage of the cargo or ship recovered and the danger involved in the operation. Awards varied from ten percent for cargo washed ashore to between thirty three and fifty percent for recovered cargo, based on the depth of a shipwreck.2

Traditionally the term salvage only recognized a ship or craft (vessel), cargo on board, freight payable and bunkers carried on board, as the subject matter of the property in danger. However it is pertinent to mention that, in true terms for a salvage to commence, the danger to the ship or vessel needs to be real, though it may not necessarily be immediate or absolute, in other words the property in question must be exposed to danger and destruction.

Marine Salvage (Meaning):

“Salvage has been defined as a service voluntarily rendered in relieving property from an impending peril at sea or other navigable waters by those under no legal obligation to do so.3

A salvage service is considered to take place when a person, acting without any pre-existing contractual or other legal duty preserves or contributes to preserving at sea any vessel, cargo, freight or other recognized subject of salvage from danger4.

1 Andrew Anderson an Authority on Law of Salvage in U.S.A2 Mark A. Wilder, author of Application of salvage law and law of finds to sunken shipwreck and discoveries3 Martin J Norris, Benedict on Admiralty, the Law of Salvage at 1-4(7th Ed 91)4 Geoffrey Brice, Maritime Law of Salvage, London: Sweet and Maxwell 2003, 4th edition, p. 1. )[Type text]

Marine Salvage is the process of rescuing a ship, its cargo or other property from peril. Only “maritime property”; i.e., vessel, apparel, cargo, including flotsam, jetsam, lagan, derelict and wreck of these and freight can be subjects of salvage.5

Salvage is a wide term and encompasses several operations such as : Rescue Towing, Refloating a sunken or grounded vessel and patching or repairing a ship. Thus in other words the ones who will expose themselves to peril at sea and provide the fastest response to a ship in distress are said to be engaged in a venture popularly known as marine salvage and are commonly known as salvors.

In 1869 in the Blackwall Case6 The United States set forth the Basic Principle of Maritime Salvage, including the principle that, a salvor’s efforts need to be successful, in order to recover a reward, which is known as the No Cure No Pay Principle, in Contract Salvage.The Court Stated,”...salvage is the compensation allowed to persons by whose assistance, a ship or her cargo has been saved, in whole or in part, from impending peril on the sea, or in recovering such property from actual loss in cases of ship wreck, derelict or recapture. Success is essential to the claim, as if the property is not saved or if it perish or if in case of capture, if it is not re-taken, no compensation can be allowed. The court stated that providing compensation in the maritime context is consonant with the public policy of encouraging rescue at sea. Compensation as salvage is not viewed, by admiralty courts, merely as pay on the principle of Quantum Meriut, but as a reward for perilous services, voluntarily rendered and as an inducement to sea men and others to embark in such undertakings to save life and property. Public Policy encourages the hardy and adventurous mariner, to engage in these laborious and sometimes dangerous enterprises and with a view to withdraw him every temptation to embezzlement and Dishonesty, the law allows him, in case he is successful, a liberal compensation”.

Law of Salvage vs. Law of Finds:

Once an Admiralty court establishes jurisdiction, the next step is to decide, whether law of salvage or the law of finds applies, this enquiry ultimately requires, examination of particular facts and circumstances of each case, the key issue is whether, the owner of the vessel or an insurer that asserts ownership, through subrogation, has abandoned the wreck or its cargo.

According to Norris, “Abandonment in the maritime salvage context has been defined, as the act of leaving or deserting, such property by those who were in-charge of it, without hope on their part of recovering it.”

However the mere fact, that the property was lost at sea, does not divest the owner of title.7

As a general principle admiralty court, will favour salvage law, over the law of finds, because salvage law is more supportive of the public policy issues of preservation of maritime property and return of distressed property to a use beneficial to society.

5 In The Gas Float Whitton No. 2 (1895), P. 301; (1987), A.C. 337, a gas float adrift from moorings was considered not to be a subject of salvage.6 77 U.S 1, 18697 The Akaba , 54F, 197, 200( 4th CIR 1983)[Type text]

Commencement of a Right to Begin Salvage

A right to salvage can only arise where a “vessel”8 or other property as defined, above is in peril at sea or in navigable waters. It is pertinent to mention that rights of salvage are applicable to any property not permanently or intentionally attached to the shoreline and include freight adrift or at risk.

Instances Where Right to Salvage Cannot be Exercised

It is pertinent to mention and interesting to note that the law of salvage does not apply to salvage of aircraft as well as oil and gas platforms.

Who Are Salvors’:

According to the Black’s Law Dictionary (2nd Ed). A Salvor is:

“...a person who, without any particular relation to a ship in distress, proffers useful service, and gives it as a volunteer adventurer, without any pre-existing covenant that connected him with the duty of employing himself for the preservation of that ship.”9

Salvors are usually Sea men and Engineers, who carry out salvage of vessels that are not owned by themselves and who are also not the members of the vessel’s original crew.

Definition of Wreck

According of the Merchant Shipping Act10, the definition of wreck includes “jetsam, flotsam, lagan and derelict found in or on the shores of the sea or any tidal water”.

The problems from wrecks are three fold. First, and depending on its location, a wreck may constitute a hazard to navigation, potentially endangering other vessels and their crews; second, and of equal concern, depending on the nature of the cargo, is the potential for a wreck to cause substantial damage to the marine and coastal environments; and third, in an age where goods and services are becoming increasingly expensive, is the issue of the costs involved in the marking and removal of hazardous wrecks.11

8 vessel is defined to include any ship or craft or any structure capable of navigation.9 The Clara,23 Wall.16,23L.Ed 150;The Dumper,129 Fed.99,63 C.C.A.600;Central Stockyard Co.v.Mears,89App.Div 452,85 N.Y.Supp.795.10 Section -255 Merchant Shipping Act,1995.11Law relating to Maritime Wrecks in India, V.M Syam Kumar, BAL, LLM (Maritime Law) Cochin India[Type text]

Salvage Includes Retrieval of: Floatism, Jetsam, Ligan & Derelict.

Flotsam describes goods lost from a ship which has sunk or otherwise perished. Goods are recoverable because they remain afloat on the sea.

Jetsam is when the ship is in danger of being sunk, and to lighten the ship the goods are cast overboard into the sea. Ligan (vel potius ligan) describes goods cast overboard from a ship which afterwards perishes, since these goods are so heavy that they sink to the bottom, and the mariners, with the intent to have them again, tie them to a buoy, or cork, or such other thing that will not sink, so that they may find them again, none of these goods which are called jetsam, flotsam or Ligan, are called wreck so long as they remain in or upon the sea; but if any of them by the sea be put upon the land, then they shall be said wreck.”

While term Derelict describes property, whether vessel or cargo, which has been abandoned and deserted at sea by those who were in charge of it without any hope of recovering it.

Difference Between Salvage & Wreck Removal

A salvage operation is generally distinguished from 'wreck removal' as its purpose is usually to save a vessel as a going concern, whereas a wreck removal generally concerns a vessel which is already agreed to be a total loss. Consequently salvage operations usually try to cause minimal damage to the concerned vessel whereas wreck removal operations often involve intentionally breaking the vessel involved into pieces.

Position of Salvage under Customary Law

Under the customary law, five prerequisites will be taken into consideration while qualifying an act of rendering assistance at sea as a salvage service, and comprises factors such as:

(a) Danger, (b) Voluntariness, (c) Success(d) Place of rendering the services, and (e) Type of property salved12.

Types of Salvage:-

I. Pure Salvage:

In “Pure Salvage” there is no pre-existing agreement between the parties.

Essential Pre-requisites For / Elements Of Salvage

The meanings of the first three ingredients – danger, voluntariness, success – have been interpreted by courts on numerous occasions. Not every act of rendering

12 William Tetley, Maritime Liens and Claims, 2nd edition, Montreal: International Shipping Publications, 1998, p.331. [Type text]

assistance at sea can be qualified as salvage under customary law. There are two other categories of human involvement at sea which are relatively proximate to salvage: towage and wreck removal. Principles are embraced by a laconic formula “no cure no pay”, which has been the cornerstone of the balance of interests in salvage for centuries. It is usually impossible to forecast success, while the chance for failure and “no pay” is always present. Salvage remuneration is only recoverable in cases of saving of a recognized subject of salvage, which traditionally would be the ship, her stores and apparel, cargo and freight at risk.

1. Concept of Property In Peril, and Its Relevance to The Law of Salvage:

A right to a salvage reward can only arise in respect of a vessel, or valuable freight, provided the property must be “in peril”. The right to salvage isn’t just restricted to ships in immediate danger of sinking but extends to any marine property, where there is a reasonable apprehension of danger and is applicable in respect of an abandoned vessel adrift at sea, or to one that has accidentally run aground, and one which is leaking or has otherwise become unseaworthy.

Thus in other words, there must be a marine peril placing the property at risk of loss, destruction, or deterioration. In determining whether there is a marine peril, the court must decide whether, at the time the assistance was rendered, the vessel was in a situation that might expose her to loss or destruction13.Further to constitute a marine peril, the danger need not be imminent or actual. All that is necessary is a reasonable apprehension of peril.14

1.1 Salvage Operations Can only be Initiated In Case of Derelict Vessels

Technically, an abandoned vessel is referred to as a “Derelict “vessel, such vessels comprise of those vessels which have been left by its crew without intention to return, or hope of recovery of the vessel or property on board.

Whether or not a vessel may be considered a derelict and salvage operations in respect thereof be commenced depends upon the intentions of the master and crew when leaving, in instances where, having abandoned their vessel without an intention to return, the master and crew later change their mind, then also the vessel remains “derelict” for the purpose of the law of salvage.

1.2 Prior Acceptance of Salvage Services not a Necessary Criteria for ClaimingSalvage Award

One unusual aspect of the law of salvage is that rights to reward can arise without the vessel master or owner agreeing to accept salvage services. Sole criteria for the salvor commencing with a salvage would be as to whether , in the

13 Markakis v. S/S Volendam, 486 F. Supp. 508 (S.D.N.Y. 1995).14 Reynolds Leasing Corp. v. Tug Patrice McAllister, 572 F. Supp. 1131 (S.D.N.Y. 1983).

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circumstances the vessel was in, a prudent owner or master would have accepted salvage services, if an answer to this is in affirmative, it is sufficient to entitle the salvor to a reward. Usually in instances where a vessel is exposed to a marine peril and no one is aboard to refuse or accept the salvage services it is not necessarily for the salvor to attempt to locate the owner or to obtain anyone’s permission prior to undertaking the salvage operation, as any delay in such critical situation may lead to disastrous consequences causing substantial loss to the ship as well as its cargo.

Thus the salvor needs to be rewarded if he successfully saves the vessel, even without obtaining the consent of salvaging from the perilous ship’s owner.

In the absence of a salvaging agreement the amount of salvage reward would be fixed by a Court of Admiralty.

However salvage services cannot be thrust upon an unwilling vessel master or owner who positively refuses them.

2. For a Salvage Claim/Reward to arise the Services Must Have been Voluntary:-

The salvage service must be voluntarily rendered. Voluntariness is also perceived as a key element indicative of a salvage contract. Services rendered under a pre-existing duty are not merited to be identified as salvage.

Salvage services must have been rendered “voluntarily” in the sense of being rendered without a legal obligation or a duty to do so.

However it is pertinent to state that a Naval Vessel is an exception to the aforesaid rule , therefore such a vessel performing a rescue or saving any property, in the course of its duty, would not become entitled for any claims of salvage.

Signing of the LOF does not change the nature of rescue and does not affect the voluntary nature of the operation as it does not constitute the passing of consideration.15

3. Necessity of Success of Salvage Operation a Pre-requisite for Salvage Claims

The salvage efforts must be successful, in whole or in part16 , i.e there must be a success of Salvage Operation, though it may either be complete or partial, and the salvor must have rendered an active contribution in facilitating the same, but no salvage compensation may be claimed in circumstances where

15 Christopher Hill, supra, note 46 at p. 34716 Lathrop v. Unidentified, Wrecked & Abandoned Vessel, 817 F. Supp. 953 (M.D. Fla. 1993).

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the salvage services were rendered necessary on account of salving vessel’s fault itself, say where a vessel fails to give way and collides with another vessel , then such a vessel can in no way seek any salvage reward for saving the damaged vessel from sinking.

Criteria For Determining the Existence of a Need or Request for Salvage

i. Whether a reasonable master of the vessel, in distress would have under the circumstances accepted the salvor’s offer of assistance.

ii. Whether there was any real or reasonable apprehension of danger, even though such danger might not have been absolute or immediate.

iii. Whether such danger was merely fanciful or so remote as to only have been a distant possibility.

Salvage, Modern Day Scenario

In the modern world, the dispute normally is not merely, just about, whether there is existence of danger to the vessel, but also as to the degree or magnitude of the danger, since it comprises of a key factor relevant in determining the extent of the award.

Salvage Services Need to be Voluntary and Not ObligatoryFor the services to be categorized as salvage, they must be voluntary and not

obligatory. Therefore for services to be termed as an operation of salvage; they must not have been rendered under:

(a) a pre-existing contract agreement (b) an official duty or (c) or for purely self preservation interests of the salvor.

A pre-existing agreement means any agreement entered into before the time of the existence of the danger. It includes the ship’s master and crew, who have a pre-existing employment agreement with the ship owners. They have duty to preserve the ship and cargo and therefore cannot convert themselves into salvors in the event of trouble. Salvage can be rendered by these people, if the pilot of the crew or ship in peril rendered service outside or beyond the scope of their duties under the contract.

Ordinarily crewmen cannot claim themselves to be individual salvors’ , unless and until their employment contract has actually or constructively been, terminated before the salvage service commenced.

In respect of such persons termination of contract shall be brought by: an authorized abandonment of ship under the master’s authority, the master’s discharge of the crew concerned or by the capture of the vessel in a hostile encounter.

When Salvage Shall Be Considered A Success

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The requirement for a salvage to be successful can be summed up from the common law expression ”NO CURE NO PAY” which signifies that only a successful salvor can anticipate to be rewarded, while the absence of an useful result precludes any remuneration, no matter how great the salvor’s exertions were, and this is precisely the basis and the genisis of the famous “no cure no pay” formula.

However the success need not be total. Even partial success, provided that there is some means of preservation to the owners is sufficient.In Tajo Maro Case17 where in certain characteristics of salvage contract were examined and it was concluded that the primary consideration is that, the person rendering the salvage service, is not entitled to any remuneration, unless he saves the property in whole or part.

Therefore if the ship’s peril following the service is as grave as before, no award would be given, similarly the salvage services which rescued a vessel from one danger, but eventually left her in a situation far more precarious than earlier and didnot therefore contribute to the ultimate success thereof would not amount to salvage.

Forms of Salvage:

i. Contract Salvage : In a contract salvage the owner of the property and the salvor enter into a salvage contract prior to the commencement of salvage operations and the amount that the salvor is to be paid is determined by the contract. Such contract may also state that the payment is only due, if the salvage operation is successful (No Cure No Pay) or the payment is due even if the operation is not is not successful.

ii. Pure Salvage: (Merit Salvage) There is no contract between the owner of the goods and the salvor, the relationship is one which is implied by law. The salvor of property under salvage must.a) Bring his claim for salvage in a court which has jurisdiction.b) Such court will then award salvage based upon the “merit”of the service

and the value of the salvaged property.

Pure Salvage is further Sub - Divided into:

High Order Salvage: In such kind of salvage the salvor exposes himself and his crew to the risk of injury and loss or damage to his equipment in order to salvage the property in peril, for example: Boarding a sinking ship in heavy weather or Boarding a Ship which is on fire.

Low Order Salvage: Occurs where the salvage is exposed to little or no personal risk, for example: towing another vessel in calm seas, supplying a vessel with fuel.

17 1972AC 242 HL[Type text]

The Salvors performing high order salvage, receive substantially greater salvage award, than those performing low order salvage.

Salvage under a Contract

A genuine salvage contract is expected to preserve the classic ingredients of salvage, namely : danger, voluntariness and success. Since salvage contract is entered into by the parties in written or oral form in the face of danger, even though the danger might not necessarily be immediate. It should be real and not too remote as to be a mere possibility.18

However in the practice of professional salvage, rendering salvage services, will be always supported by an agreement /contract.

A salvage contract per se is not a foundation for a legal relationship between the salvor and salvee , as the right to a salvage claim, to a salvage lien and eventually to salvage remuneration exists notwithstanding any agreement between the parties to the service. All those substantive rights owe their binding force to legal principles outside contract law19 as they spring from the very fact of delivering a useful result to someone by virtue of saving their property.

The salvage services are often rendered under severe time restrictions, where debate over the most efficient contractual terms would be counterproductive.

Salvage may not necessarily arise from an actual contract. However professional salvors’ with a fleet of vessels on a stand by crewed by professional salvors’ do provide these kinds of services under the internationally recognized, salvage agreement under the L.O.F (London Open Form). Under these contracts rewards are based on “NO CURE NO PAY” principle under which the salvor receives no reward, if no property is saved. Special compensation is however paid as a reward for efforts of salvors’ efforts to prevent or minimize the damage to the environment, even though no property has been saved .

However as a matter of general practice, under a contract of salvage, the owner of the property and the salvor enter into a salvage contract, prior to the commencement of salvage operations and the amount that the salvor is to be paid is determined by such contract. Such contract may also state that the payment is only due, if the salvage operations are successful(No Cure No Pay) or the payment is due even if the operation is not is not successful.

Lloyd’s Open Form and Its relevance to International Salvage Operations:

The salvage cases that arise worldwide are usually under English Law and in particular the Lloyds Open Form (LOF).As time is of the essence when a vessel is in distress, it is understood, that neither the salvor nor the captain / owner of the distressed vessel will generally have time to take lengthy legal advice and negotiate contractual terms for the salvage operation.

18 Christopher Hill, Maritime Law, 4th edition, Lloyd’s of London Press Ltd., p. 34019 Goode Roy, Commercial Law, 3rd edition, Penguin Books, 2004, at p.67[Type text]

For this reason procedures such as LOF (Lloyds Open Form), have evolved, which allow the parties to essentially agree that the operation will go ahead and if they are unable to agree on the appropriate amount of salvage reward afterwards then a specialist arbitrator appointed by Lloyds of London shall make the decision.

This option is popular with salvors and distressed vessels as in the heat of the moment it allows decisions to be made quickly without the risk of any gross injustice resulting to either side20

In its pure form LOF is not a contract in stricto sensu,21 as the requirement for consideration is not fulfilled completely. In 1908, the LOF form was first officially published and since then it has been undergoing systematic revision, following closely the changes in the convention law on salvage or sometimes forerunning these.

Since the salvage services are often rendered under severe time restrictions, where debate over the most efficient contractual terms would be counterproductive, it has therefore as a matter of convenience become quite common to use standard forms, the most popular of which is the Lloyd’s Standard Form of Salvage Agreement, usually in full referred to as Lloyd’s Open Form “No Cure No Pay”. By signing LOF the parties to the agreement give their consent to the arbitration in London to assess the sum of the salvage remuneration, and to English law to govern the settlement.

Special Compensation Protection & Insurance Club Clause(SCOPIC) & Its Influence upon Law of Salvage

SCOPIC22 is a complex instrument, representing a kind of a separate sub-contract within LOF and is supplementary to any Lloyd’s Form Salvage Agreement. It consists of fifteen clauses, three appendices and two codes of practice, running to no less than 20 pages in sum. It brings in a few significant improvements to the LOF.

This clause was introduced to prevent environmental damage when little or no salved value is involved in the salvage.

The SCOPIC solution is available only within the LOF forum. LOF remains the standard contract form, which is the most commonly, used, for salvage operations, but there are other open forms such as the Turkish Open Form, the Japanese Open Form and the Chinese Open Form, which are available regionally. Although not all of them take the approach of LOF in finding the middle path of balance of interests, ship owners might still be bound to sign one of those forms instead of LOF, should a casualty occur in a certain region. However the salvage agreement which has been generally recognized as the most marketable standard form is without doubt the Lloyd’s Open Form, which to a large extent owes its popularity to the formula of the balance of interests it fixes.Modern Approach towards Special Consideration to Salvors’, for their Efforts to Minimize Danger to the Environment;

20 http://www.theshippinglawblog.com/2010/09/salvage-claims.html21 In the strict sense.22 Special Compensation P&I(Protection and Indemnity Insurance ) Club Clause[Type text]

While the general principle of salvage law has been No Cure No Pay, yet the concept needed to be modernized in line with the current international shipping trends, wherein more and more vessels are now being propelled by internal combustion engines, which have unleashed their share of environmental hazards such as oil spills that are possible where one of these were to sink. Therefore one of the most interesting developments recently in salvage law has been the growing attention paid to environmental concerns.

Since at present, the pressure for further changes is rising with new vigour. Today the salvor is rendering assistance not only to the property in peril, but also and often to a much larger extent to the environment, being “an environmental responder in the first instance”23

Accordingly the L.O.F 198024, took steps to protect the environment from oil pollution, in consonance with the internationally acceptable concept of “safety net”. The Salvage Convention of 1989 introduced the concept of “Special Compensation”. This special compensation is obtainable from the owner of the vessel and is equivalent to the salvor’s expenses.

Under the 1989 International Convention on Salvage a salvor must now exercise due care to prevent or minimise damage to the environment in the course of a salvage operation.

Jurisdictional Aspect:

Under the LOF25 Contracts the parties submit to the jurisdiction of the Lloyd’s Arbitrator to determine the amount of award. However salvage is also a remedy that arises independently of a contract.

A salvage claim outside LOF Arbitration Agreement can be brought in the Admiralty Courts; for raising a claim for: Salvage, special compensation, for appointment of salvager and ones arising out of and connected with any contract of/ for salvage services.

Salvage claims are enforceable in personam as well as in rem , further a ship or its sister ship can be held in lien to enforce the salvor’s claim, in addition to this , a property salvage attracts a marine lien against all property saved.

Limitation or Time Period to claim Salvage

Article -23 of the 1989 Convention provides for a two year limit to commence judicial or arbitration proceedings arising from a salvage claim. The limitation commences on the date on which the salvage operations are terminated. During the two year period, an extension of time can be agreed by the parties. An action for indemnity by a

23 Witte A. (2008, September 16). Environmental Salvage. IUMI Vancouver Conference. Retrieved February 15, 2010 from the World Wide Web: http://www.iumi.com/index.cfm?id=724424 Lloyd’s Open Form 198025 Lloyd’s Open Form[Type text]

person liable may be instituted after the expiration of the limitation period, with the assumption that, it is brought within the time allowed by the states in which the proceedings are brought. However if the ship is not saved and the loss was due to the salvor’s negligence , the time limit to bring action against the salvor will be based upon the tort of Negligence.

Salvage Award Scope and Limitations:

Traditional justification for salvage remuneration evolved from the principles of unjust enrichment. Those who act on behalf of another in an emergency should be compensated for doing so. Admiralty law is the most ancient commercial law on the planet, and since at least 1500 years before Christ it has been recognized that those who through their efforts are able to save a ship from loss are entitled to an award – a salvage award.

Factors to be Considered by The Court In Establishing the Salvor’s Award

a) Difficulty in operation.b) Risk involved to the salvor.c) The value of the property saved.d) The degree of the danger to which the property was exposed.e) The potential environmental impacts.

However it would be a rare case in which the salvage award would be greater than 50% of the value of the property salvaged .More commonly the salvage award amounts to 10% to 25% of the value of the property.

There is no reward for saving life at sea as distinct from property. Where both property and life are saved, the salvage reward relating to the property may be fixed at a higher rate than would be the case otherwise.

But, regardless of reward, the master of a ship is under a duty of law to render assistance to any person found at sea in danger of being lost if this can be done without danger to the rescuing ship, its crew or passengers.

The concept of liability salvage implies that the liability for potential damage should be treated as a distinct basis for fixing a salvage award. Accordingly, the assessment of salvage remuneration should rest on the assumption what the consequences could have been, had the salvor taken no action.

A voluntary act of preserving or saving the property of another from a danger gives rise to a reward only if that act takes place in navigable waters.

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However by no means can such award exceed the value of the salved property, assessed at the date and place of termination of the salvage services.26

Even in instances where the salvor is successful only in minimizing damage to the environment, it shall be entitled to seek special compensation. However in order to claim such special compensation, it must be shown by the salvor, that the vessel salvaged or any cargo thereon, threatened to damage the environment , but negligence if any, on the part of the salvor, would deprive it of the right of whole or part of any such special compensation.

Salvage Claims:

There are three broad areas related to the Salvage Claims viz: (a) property salvage, (b) life salvage, and (c) treasure salvage. Of these property salvage is the wider as well as popular concept as compared to the others.

Concept of Safety Net & Its Impact upon Determination of Salvage Award

In its bold sense, the safety-net concept abolishes the requirement for success in salving property and transfers the calculation of the remuneration on to the basis of compensating for the expenses reasonably incurred by the salvor, plus an increment.

Important Legal Provisions Pertaining to Salvage Reward & Special Compensation

Salient Features of International Convention on Salvage, 1989.

Article.1, of the International Convention on Salvage recognizes Environnemental considerations, and defines the term “Damage to Environment”.

Article.5 of the Convention provides for the Control of salvage operations by Public Authorities.

Article.8- Lays down the Duties of salvor, owner and master to exercise due care to prevent or minimize damage to environment.

Article.9 provides for the Rights of coastal State to protect their coastlines; right to give directions to salvor.

Article 13 provides for the Criteria for Fixing the Reward for Salvage

1. The reward shall be fixed with a view to encouraging salvage operations, taking into

26 (source Geoffrey Brice, Maritime Law of Salvage, London: Sweet and Maxwell 2003, 4th edition, p. 1. )

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account the following criteria without regard to the order 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; c. the measure of success obtained by the salvor; 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.

2. Payment of a reward fixed according to paragraph 1 shall be made by all of the vessel and other property interests in proportion to their respective salved values. However, a State Party may in its national law provide that the payment of a reward has to be made by one of these interests, subject to a right of recourse of this interest against the other interests for their respective shares. Nothing in this Article shall prevent any right of defence

3. The rewards, exclusive of any interests and recoverable legal costs that may be payable thereon, shall not exceed the salved value of the vessel and other property.

Article 14 of the International Convention on Salvage, lays down the provisions entitling the salvor to Special compensation , for Salvage In Certain Situations such as :

1. If the salvor has carried out salvage operations in respect of a vessel which by itself or its cargo threatened damage to the environment and has failed to earn a reward under Article 13 at least equivalent to the special compensation assessable in accordance with this Article, he shall be entitled to special compensation from the owner of that vessel equivalent to his expenses as herein defined.

2. If, in the circumstances set out in paragraph 1, the salvor by his salvage operations has prevented or minimized damage to the environment, the special compensation payable by the owner to the salvor under paragraph 1 may be increased up to a maximum of 30% of the expenses incurred by the salvor. However, the tribunal, if it deems it fair and just to do so and bearing in mind the relevant criteria set out in Article 13, paragraph 1, may increase such special compensation further, but in no event shall the total increase be more than 100% of the expenses incurred by the salvor.

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

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the salvage operation, taking into consideration the criteria set out in Article 13, paragraph 1(h), (i) and (j).

4. The total special compensation under this Article shall be paid only if and to the extent that such compensation is greater than any reward recoverable by the salvor under Article 13.

5. If the salvor has been negligent and has thereby failed to prevent or minimize damage to the environment, he may be deprived of the whole or part of any special compensation due under this Article.

6. Nothing in this Article shall affect any right of recourse on the part of the owner of the vessel. The rewards exclusive of any interest and recoverable legal costs, that may be payable thereon, shall not exceed the salved value of the vessel and another property.

Salvor’s Right to Maritime Lien, in respect of Salved Property:

In instances where services have been rendered to a Ship, to facilitate its use in navigation and the ship owner has not paid for the services, a maritime lien can be placed on the ship. A maritime lien is a special property right in a ship, given to a creditor by law as security for a debt or claim. The ship may be sold and the debt paid out of the proceeds.

The salvor has a maritime lien on the salved property (in an amount determined by

national statute or juridical custom) and need not return the property to the owner

until his claim is satisfied or until security to meet an award is given. An owner who

elects not to reclaim his property cannot be made liable for a salvage reward.27

Law of Salvage Under Various Jurisdictions:

Abandoned Ship Wreck Act 1987 ;( U.S.A)

In response to the competing interests of sport divers, professional salvors and preservationists, advances in technology and confusion over the state’s role in applying their laws, to the ownership of the abandoned ship wrecks, lying in their territorial waters, the U.S Congress enacted the, Abandoned Ship Wreck Act, 1987, under the Act the United States, asserts title to any abandoned ship wreck that is: (a) embedded in submerged lands of a state;(b) embedded in coralline formations protected by a state on submerged lands of a state or (c) on submerged lands of a state and is included in the National Register.28

The Law Relating to Wrecks in (U.K)

In the UK, there are three main laws which apply to shipwrecks:

27 www.britannica.com/EBchecked/topic/519995/salvage)28 Timothy T Stevens, the Abandoned Ship Wreck Act of 1987, Finding the Proper Ballast for the States,37 VILL REV 573,574- 80(1992).[Type text]

Merchant Shipping Act 1995 Protection of Wrecks Act 1973 Protection of Military Remains Act 1986

Depending on where the wreck site is, the Ancient Monuments & Archaeological Areas Act 1979 may also apply.

Merchant Shipping Act 1995

Under the Merchant Shipping Act 1995, you must report to the Receiver of Wreck all wreck material recovered from UK territorial waters and any wreck material brought into the UK from outside UK territorial waters. This includes:

wreck material found in or on the sea wreck material washed ashore in tidal waters material recovered from a wreck site - regardless of age, size or apparent

importance or value

When you report recovered wreck material to the Receiver, you may be entitled to a salvage award.

Protection of Military Remains Act 1986

The Protection of Military Remains Act 1986 deals with wrecks of both aircraft and ships, and all military aircraft is automatically protected under this legislation. This act is administered by the Ministry of Defence (MOD) - RAF for aircraft, Navy for vessels.

Under this act, vessels may be designated either as a protected place or as a controlled site. Divers may visit a protected place on a ‘look but don’t touch’ basis, however they are prohibited from visiting controlled sites.

Since, there are myriad laws around the world concerning salvage and each situation will turn on the particular laws and contracts that apply, as well as the court which has jurisdiction, but there are some general principles which are useful as a basis for knowledge of key general principles involved in any salvage.

Law of Salvage an Indian Perspective:

India has ratified 1989 Salvage Convention and The Merchant Shipping Act , 1958 is the Legislation dealing with the Law of Salvage in India, the Key provisions of the provision are enumerated as under:

Section 402 In The Merchant Shipping Act, 1958

402. Salvage payable for saving life, cargo or wreck.—

(1)  Where services are rendered—

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(a)  wholly or in part within the territorial waters of India in saving life from any vessel, or elsewhere in saving life from a vessel registered in India; or

(b)  in assisting a vessel or saving the cargo or equipment of a vessel which is wrecked, stranded or in distress at any place on or near the coasts of India; or

(c)  by any person other than the receiver of wreck in saving any wreck, there shall be payable to the salvor by the owner of the vessel, cargo, equipment or wreck, a reasonable sum for salvage having regard to all the circumstances of the case.

(2)  Salvage in respect of the preservation of life when payable by the owner of the vessel shall be payable in priority to all other claims for salvage.

(3)  Where salvage services are rendered by or on behalf of the Government or by a vessel of the Indian Navy 1[or of the Coast Guard] or the commander or crew of any such vessel, the Government, the commander or the crew, as the case may be, shall be entitled to salvage and shall have the same rights and remedies in respect of those services as any other salvor. 1[Explanation—“Coast Guard” means the Coast Guard constituted under section 3 of the Coast Guard Act, 1978 (30 of 1978).]

(4)  Any dispute arising concerning the amount due under this section shall be determined upon application made by either of the disputing parties—

(a)  to a 2[Judicial Magistrate of the first class or Metropolitan Magistrate, as the case may be,] where the amount claimed does not exceed ten thousand rupees; or

(b)  to the High Court, where the amount claimed exceeds ten thousand rupees.

(5)  Where there is any dispute as to the persons who are entitled to the salvage amount under this section, 3[the Judicial Magistrate of the first class or the Metropolitan Magistrate or the High Court, as the case may be,] shall decide the dispute and if there are more persons than one entitled to such amount, 4[such Magistrate] or the High Court sliall apportion the amount thereof among such persons.

(6)  The costs of and incidental to all proceedings before 5[a Judicial Magistrate of the first class or Metropolitan Magistrate] or the High Court under this section shall be in the discretion of 6[such Magistrate] or the High Court, and 6[such Magistrate] or the High Court shall have full power to determine by whom or out of what property and to what extent such costs are to be paid and to give all necessary directions for the purpose aforesaid.

Section 398 in The Merchant Shipping Act, 1958

398. Immediate sale of wreck by receiver in certain cases.—A receiver of wreck may at any time sell any wreck in his custody if, in his opinion,—[Type text]

(a)  it is under the value of five hundred rupees; or

(b)  it is so much damaged or of so perishable a nature that it cannot with advantage be kept; or

(c)  it is not of sufficient value for warehousing, and the proceeds of the sale shall, after defraying the expenses thereof, be held by the receiver for the same purposes and subject to the same claims, rights and liabilities as if the wreck had remained unsold

Section 404 , of The Merchant Shipping Act, 1958

404. Power to make rules respecting wreck and salvage.—

(1)  The Central Government may make rules to carry out the purposes of this Part.

(2)  In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:—

(a)  the procedure to be followed by a receiver of wreck in respect of the taking possession of wrecks and their disposal;

(b)  the fees payable to receivers in respect of the work done by them;

(c)  the procedure to be followed for dealing with claims relating to ownership of wrecks;

(d)  the appointment of valuers in salvage cases;

(e)  the principles to be followed in awarding the salvage and the apportioning of salvage;

(f)  the procedure to be followed for dealing with claims for salvage;

(g)  the detention of property in the custody of a receiver of wreck for the purpose of enforcing payment of salvage.

General Principles of Salvage:

i. Normal contractual assistance will not generally constitute a salvage operation.

ii. It is generally accepted that the salvor has a right to a reward for saving the vessel because as we have seen above his service in this regard can be priceless but clearly he cannot merely decide the ship is his own property.

iii. an amount of reward should be given to the salvor by the distressed vessel, which is appropriate to the value of the vessel saved, the level of distress it was in and the level of risk which the salvor(s) had to take to salve the vessel.

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Arbitration vs. Litigation

Most salvage is preformed under contract as opposed to “pure” salvage. Both of the LOF &MARSALV contracts provide for arbitration should any dispute arises from the agreement.

The LOF requires London arbitration while the MARSALV form requires arbitration in the United States.

As such, should the yacht owner or its underwriters wish to challenge the amount charged for the salvage operation, it has little choice but to arbitrate the case as opposed to litigate it in court

Arbitration does have its advantages as it is more cost effective and resolution of the claim will be quicker than proceeding in Court.

CONCLUSION

In ordinary parlance 'Salvage' is the term used in maritime law to refer to the process whereby a third party rescues a vessel from a danger which would have likely destroyed it by sinking, breaking it up or otherwise. 

Only “maritime property”; i.e., vessel, apparel, cargo, including flotsam, jetsam, lagan, derelict and wreck of these and freight can be subjects of salvage.

Financially, salvage has always been a risky enterprise due to the principle “no cure no pay”. A professional salvor, who has made salvage his daily business, is doubly exposed to the risks, for as an entrepreneur he may be unsuccessful in his operations and suffer losses. On account of the scale of investments incurred in fleet maintenance and other salvage response related logistics, salvaging has in fact turned out to be a “virtually unforgiving business”.

The third party is generally entitled to a financial reward for such an action as their assistance can often lead to a saving of several thousands or millions of dollars for the vessel's owner (the vessel may be worth a considerable amount, its cargo may be worth a considerable amount and In shipping law, salvage is the compensation allowed to persons who voluntarily assist in saving a vessel or its cargo from impending or actual peril from the sea. Generally salvage is limited to vessels and their cargoes, or to property lost in the sea or other navigable waters, that have been subsequently found and rescued.

Except for salvage performed under contract, the rescuer, known as the salvor, must act voluntarily without being under any legal duty to do so. As long as the owner or the owner's agent remains on the ship, unwanted offers of salvage may be refused. Typical acts of salvage include releasing ships that have run aground or on reefs, raising sunken ships or their cargo, or putting out fires.

The salvor has a maritime lien on the salvaged property, in an amount determined by a court based on the facts and circumstances of the case. The salvor may retain the property until the claim is satisfied or until security to meet an award is given. [Type text]

The owner may elect to pay salvage money to the salvor or to not reclaim the property.

It can be safely stated that the genesis of the law of salvage lies in cardinal legal principles, such as those concerning prevention of unjust enrichment, providing restitution, implied contract, quasi contract and quantum meriut.

Salvage as matter of fact is the compensation allowed to persons by whose assistance, a ship or her cargo has been saved, in whole or in part, from impending peril on the sea, or in recovering such property from actual loss in cases of ship wreck, derelict or recapture.

Success is essential to the claim, as if the property is not saved or if it perish or if in case of capture, if it is not re-taken, no compensation can be allowed as providing compensation in the maritime context is consonant with the public policy of encouraging rescue at sea.

Adv. Aniket Datta Allahabad High Court

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