Notes on marine salvage - How to settle salvage awards?
Sea is unpredictable, and shipping is an inherently risky business. Sometimes, despite the most well-maintained ship, accidents will happen. Likewise, there might be a fire onboard
or a vessel collision. Either way, professional salvors may be called upon to
provide prompt assistance.
Reputed salvage company's/ or salvors manage
and operate a fleet of specially designed vessels (and their related equipment)
that provide emergency services as and where needed.
Salvage contracts fall into two main categories.
First, those which enable salvage services to be rendered on the basis
that the compensation to be paid to the salvors will be determined after the
completion of the services. It can be done through a direct settlement or if the parties cannot agree,
then by a court or by an arbitrator.
Although there are several different forms of salvage contract in use
worldwide, by far the most common is Lloyd's Form of Salvage Agreement
(LOF). That contract provides that compensation is payable on a "no cure-no
pay" basis. The salvor is entitled to a generous salvage award if the salvor saves property (if there is a "cure"). If there is no cure, the salvor earns nothing.
The amount of the award is determined by following the longstanding guidance provided by the U.S. Supreme Court more than a century ago. In the
famous Supreme Court case involving the ship BLACKWALL, the Court set out
the six factors to be considered in determining the amount of the salvage award.
The degree of danger from which the vessel was rescued;
The post-casualty value of the property saved;
The risk incurred in saving the property from impending peril;
The promptitude, skill, and energy displayed in rendering the service and
salving the property;
The value of the property employed by the salvors and the danger to which it
was exposed;
The costs in terms of labor and materials expended by the salvors in
rendering the salvage service.
The use of these “Blackwall Factors”, with some modification, remains the
practice today.
Marine Salvage operation at sea
The second type of contract for salvage services is specially
negotiated and tailored for the work. A lump
sum rate or daily rate for services is usually agreed upon. In other words, the amount of
compensation payable to the salvor is agreed in advance.
The salvage services provided may be very high profile, such as the
intense efforts to refloat the stranded passenger ship, M.V. Costa Concordia, from
the Italian coast (at significant risk to the environment).
On the other hand, it may be the simple towing of a broken down
merchant ship into a port of refuge.
Either way, under the principle of marine salvage, the efforts of a salvor
who has voluntarily risked himself and his property to save lives, ships, and
property of others imperiled at sea should be amply rewarded. This policy not
only promotes the social and humanitarian benefits of the saving of life and
property at sea but also preserves and enhances maritime commerce
Salvage services may also be provided on a "pure" basis. For example, it would occur when no contract is entered into, for example, the salving of
an abandoned vessel. To earn salvage under this scenario, the purported salvor
must demonstrate that:
The property saved was imperiled;
The services were voluntarily rendered (the salvor was under no legal or
official duty to render assistance); and,
The salvor’s efforts, in whole or in part, contributed to the saving of the
property.
An award will be payable by the Owner of the property saved (or its
insurer). The salvor has a maritime lien against the property saved. Therefore, if
no payment is made, the salvor may foreclose the lien and have the vessel sold
by a maritime court. The proceeds of the sale will be applied towards the award
payable.
Salvage awards can be very lucrative. Anywhere from 3% to 15% of the
value of the property saved, sometimes more – sometimes less.
Despite advances in ship design and construction, improved navigation
systems and enhanced maritime training, ships, and other types of maritime
property will become imperiled. Today, as in the past, salvors are called upon to
provide assistance to protect life, property, and the marine environment.
The Society of Maritime Arbitrators, Inc.
has established the U.S. Open Form of
Salvage Agreement (MARSALV), which is used routinely for the rescuing /
salvage of yachts and small pleasure craft. Free copy available on their
web site.
Ardent Marine, Inc.: Is a leading marine and offshore services company, delivering effective and innovative solutions on marine salvage.
Merit-Chapman and Scott
It was a very famous salvage company and worth
learning about for historical purposes. Merritt-Chapman & Scott, nicknamed "The Black Horse of the Sea", was a noted marine salvage and construction firm of the United States, with worldwide services
Related articles
General Average & The York Antwerp Rules The law of General Average is a principle of maritime law whereby all stakeholders in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency. It is a unique maritime concept. One of the most
ancient aspects of shipping is the general average. When an intentional sacrifice of property is made on board a ship to avoid a common peril, the law of general average requires all of the parties to the maritime adventure that benefited by the intentional sacrifice to contribute money on a pro-rata basis.
P&I Clubs guideline The P&I Clubs are correctly called Protection and Indemnity Associations and number around 20 worldwide, with the majority being the United Kingdom-based. The shipowner in taking out insurance with a particular association becomes a member of that Club. The Clubs are mutual, which means that all costs involved in providing cover or paying out a claim to anyone member are shared by all members. It is achieved by setting a rating or premium for the OwnerOwner, known as an "advance call," and is based on the Owner'sOwner's history and exposure to risk.
Marine cargo insurance underwriters Ships operate in a difficult environment, and cargo may be lost or damaged
during domestic and international transit. However, ocean carriers are well protected under the law
against responsibility for loss or damage to cargo that might arise during the
transportation of goods.
Hull & Machinery underwriters
A hull and machinery underwriter provides insurance coverage for boats, ships, and other naval assets. It gives protection to shipowners against the hull, machinery, and onboard equipment damages in the event of any perils encountered while on the water, including collision with another vessel, natural obstacles, and other structures as well as storms and other natural disasters.
Procedure for insurance claim
A ship is insured against various risks by the OwnerOwner taking out different insurance policies. However, for many reasons, insurance claims often being denied by marine insurance providers. So that a shipowner can prosecute a claim accurately and successfully, the Master needs to send full details and documentation relating to any accidents or incidents resulting in damage to the ship, property, cargo, or personal injury. Nautical Institute publication, "The Mariner's Role in Collecting Evidence," is a good source of guidance to shipmasters.
The role of a insurance broker
Marine insurance brokers play a significant role in helping companies and individuals procure marine cargo insurance, hull and machinery insurance, P and I cover, and other forms of insurance as the case may be. They can canvas the worldwide marine insurance market. The goal is to assist in getting the best terms of insurance cover at the most competitive premium rates.
Marine salvage procedures
Marine salvage contracts fall into two main categories. First, those which enable salvage services to be rendered on the basis that the compensation to be paid to the salvors will be determined after the completion of the services. It can be done through settlement or if the parties cannot agree, then by a court or by an arbitrator
Role of a freight forwarder
A freight forwarder, forwarder, or forwarding agent, is a person or a business entity that organizes shipments for individuals or corporations to get the goods from the point of origin to the desired market or from a producer directly to the customer or a distribution center. A freight forwarder dispatches shipments via a common carrier and books or otherwise arranges space for those shipments on behalf of shippers.
How a Non-Vessel Operating Common Carrier ( NVOCC) differs from a freight forwarder?
A NVOCC (Non-vessel Operating Common Carrier) is "a common carrier that holds itself out to the public to provide ocean transportation, issues its bills of lading or equivalent documents, but does not operate the vessels that transport cargo." An NVOCC is a carrier. It enters into a contract of carriage with the cargo shipper. It undertakes responsibility for the carriage like a shipowner that owns a vessel. However, the NVOCC is a carrier that does not own or operate the vessel used to perform the carriage.
P & I Insurance cover and Members of IG club
At the heart of P and I is the concept of "mutuality." Shipowners form a nonprofit association to protect and indemnify one another against third party liabilities. Unlike commercial insurance, the insured ship owners, meaning the "members" of the Club, are both the insurer and the insured. Each P and I Club is controlled by its members.
Role of shipbrokers
London and New York have always been viewed as major shipbroking centers. In recent years, many U.S. ship brokerage firms have relocated to offices in Stamford and Greenwich, Connecticut, and nearby communities. Of course, there is a large shipbroking presence in Singapore, Hamburg, as well as other cities.
Sale & purchase brokers
Sale and Purchase Brokers (S and P Brokers) are highly specialized shipbrokers. Their clients are typically ship owners. S and P Brokers serve as intermediaries in the business of selling and buying ships. They assist in the sale and purchase of second-hand tonnage and newbuilding. Their compensation is normally in the form of a commission.
Ship agency services
A ship's agent works on the front lines, and there might involve an unlimited number of issues in port. The agent must work towards solving these problems. An agent needs to learn a lot fast about ships and cargo.
Role of a ship management company
Ship management companies are located in the world's maritime centers. Many companies manage large fleets on behalf of numerous ship owners. Many of the larger management companies also own vessels. Essentially, the decision to outsource a ship management function is a financially driven one. In most cases, outsourcing of ship management services means that the shipowner can conduct business at a reduced cost, primarily due to the reduction of in-house staff and resources.
Ship finance considerations
Ship finance is somewhat different from other asset-based lendings such as real estate finance. After all, shipping business earnings can be quite volatile and therefore less predictable. Additionally, the collateralized asset (the ship) is extremely mobile. The traditional method for ship finance was private resources.
Ship recycling industry
Scrapping ships (also known as ship breaking or ship demolition) is a dangerous and controversial part of the shipping business. Ships have a life span of 20 – 30 years – sometimes a little more -sometimes a little less. Ships wear out and/or there may be a lack of spare parts. After a while they no longer make sense economically. The shipowner needs to make a decision – continue to repair or scrap.
Ship registry procedure
To trade internationally a ship must have a nationality. Without being registered under certain flag state a ship cannot enter the geographic limit of another state. Once registered a ship becomes subject to the laws of a registering nation. Registration makes the ship entitled to military protection and therefore it is an extension of that nation anywhere in the world.
Maritime security concerns
Maritime security issues affect the way ship owners, charterers, cargo interests, ports and terminals, and their insurers do business. There is the added expense to deal with. There has also been an increase in the number of international conventions and domestic legislation geared towards furthering maritime security.
How maritime law works in the United States? Maritime law used to apply only to American waters within the ebb and flow of the tide. However, it now covers any waters navigable within the United States for interstate or foreign commerce. Admiralty jurisdiction also includes some maritime matters not involving interstate commerce, for example, recreational boating.
The Master’s Responsibility during Salvage Operation
Request for Salvage -
The Master shall normally request salvage after consultation with the Company. However he has complete authority to seek salvage assistance without reference to the Company if he considers this necessary.
Requirement of towing arrangement in oil tankers, readyness, & training onboard
All Oil, Chemical and Gas Tankers above 20000 DWT, constructed on or after 1st July, 2002, are equipped with an “Emergency Towing Arrangement (E.T.A.) both Forward And aft to provide the ship with a rapidly deployed towage capacity in an emergency.
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