Salvage

From Max-EuP 2012

by Tjard-Niklas Trümper

1. Subject matter and underlying rationale of the law of salvage

Salvage, understood from a maritime perspective, can be defined as the act of rescuing a distressed vessel from an imminent peril—and preventing the occurrence of damage—by those under no legal obligation to do so, which results in benefit to the property if eventually saved. The maritime law of salvage lays down the principles applying to circumstances in which seagoing vessels and related interests are in danger of becoming a total loss and where they have to resort to accepting emergency assistance rendered by other vessels. Salvage is thus inseparably linked to shipping and the navigation of the seas.

The principles of the law of salvage are primarily concerned with non-contractual obligations (PIL) and exhibit to some extent parallels to the management of another’s affairs without a mandate (negotiorum gestio) although the latter and salvage in its contemporary form developed independently from one another. The contemporary principles of salvage trace back to the common law, which traditionally does not recognize the doctrine of negotiorum gestio.

Although the salvage principles were first developed in a non-contractual context, the law of salvage was and remains flexible enough to embrace and acknowledge the fact that salvage services are nowadays usually rendered under salvage contracts. Contrary to its non-contractual origins, Art 6 of the 1989 International Convention on Salvage (London Salvage Convention) is concerned with salvage contracts and provides that (express or implied) contractual stipulations shall prevail over the provisions of the Convention which accordingly, and save as otherwise provided in Art 6(3), cannot be regarded as inescapable. At any rate, there have been reciprocal influences between the non-contractual principles of salvage and the terms of arm’s length salvage contracts most commonly concluded on the basis of the internationally prevailing Lloyd’s Open Form (LOF).

The underlying rationale of the law of salvage is to encourage salvors to render assistance to distressed vessels although this most commonly equates to risking the loss of life and property during the salvage operation. The incentive is provided in the form of an ample salvage award (Bergelohn, rémunération, rimunerazione). When determining a salvage award, the courts will not only take account of the value of the property saved in the particular case but also the financial burden of operating and manning a professional fleet of salvage vessels, comprising, inter alia, tugs and vessels equipped for lightening and heavy-lift operations equipment, since the likelihood of vessels becoming lost at sea is significantly decreased if there are professional salvors available.

Since dangerous goods, in particular crude oil and other petroleum products, are carried by sea in large amounts and represent extreme environmental hazards, the law of salvage in the second half of the 20th century also pursues the prevention or minimization of contamination of or damage to the environment.

2. History of the law of salvage and current perspectives

The concept of marine salvage can be found as early as in the Rhodian sea law dating back to 900 BC, later recodified and consolidated in the Byzantine Empire during the late antiquity (D. 45, 6th century; see in general Pandektensystem) and which enjoyed global acceptance in the Mediterranean. From the mid to late Middle Ages there also exist the Rôles d’Oléron (12th to 14th century) and the Llibre del Consolat de Mar (14th century) which represent two codifications of contemporary general maritime law and of the law of salvage in particular that were widely accepted and influential on the European continent. While the principles of maritime law contained in the Rôles d’Oléron—named after the French island Oléron off the Atlantic coast—were accepted and applied in western and northern Europe, the principles of the Llibre del Consolat de Mar were of corresponding importance in the Mediterranean. It was the Rôles d’Oléron that had the most significant influence on the maritime law of salvage of the Hanseatic League (Hanseatic League and pre-modern commercial law) in the following early modern period (16th century). With the advent of the concept of the nation state in the modern period in Europe, most nation states enacted national laws encompassing principles of maritime law and thus the law of salvage. The consequence was a fragmentation of legal principles applying in the different European states. Examples of such unilateral national codifications of maritime law are the Ordonnance de la marine of 1681 decreed by Ludwig XIV and the General state laws for the Prussian states of 1794, which, however, only mentions marine salvage but does not establish specific rules applying thereto. Nevertheless, both legal texts have to be regarded as the foundation for the contemporary codifications of the law of salvage in France and Germany. In France the Ordonnance de la marine of 1681 (ordonnances) was followed by the Code de commerce of 1807 and in Germany the General state laws for the Prussian states of 1794 were followed by the Allgemeines Deutsches Handelsgesetzbuch of 1861 (ADHGB) and the Handelsgesetzbuch of 1897 (HGB), which is still in force in Germany. By contrast, the common law, historically less exposed to the repercussions of legal codifications, has a history of reported salvage cases dating back to 1633.

In substance, the law of salvage of the late antiquity had already focused on the claim to a reward for services rendered by a salvor. In continental Europe, though, there has been a traditional distinction between salvage (Bergung, sauvetage, salvataggio) on the one hand, viz the circumstances in which the crew of the distressed vessel has lost control over the distressed vessel, and assistance (Hilfeleistung, assistance, assistenza) on the other.

At the beginning of the 20th century the Comité Maritime International (CMI) started a harmonization process with respect to the law of salvage culminating in the Convention for the Unification of Certain Rules of Law respecting Assistance and Salvage at Sea, signed in Brussels on 23 September 1910 (Brussels Salvage Convention), which almost all European states have ratified (worldwide over 80 states). The 1910 Brussels Salvage Convention is based on the common law concept of salvage with the central principle of the salvage reward being earned only on a no cure/no pay basis (see Art 2(2) and Art 8(1)(a) Brussels Salvage Convention). Therefore, the aforementioned civil law distinction between salvage and assistance became obsolete even though the Convention refers to both in its title for diplomatic reasons. Over the course of the 20th century, the Brussels Salvage Convention proved to be inadequate and ineffective for resolving all problems arising in circumstances of marine distress. In the 20th century, shipping underwent a significant change in the sense that, on the one hand, the number of marine casualties decreased but, on the other, the threat every individual casualty poses to the public and environment has significantly increased. Due to the great dangers to the marine environment, there is nowadays a need for a fleet of salvage vessels operated on a highly professional basis. However, the problem remains that the operators of such a fleet face the fact that most of the time their vessels will lie idle at sea with no ship in need of salvage services. Accordingly, the underlying rationale of the law of salvage has shifted: the law of salvage now has to financially safeguard professional salvors against the costs of maintaining their fleet. Therefore it was again for the CMI to initiate a reform process with regard to the uniform law applying to salvage, which led to the adoption of the International Salvage Convention 1989 (London Salvage Convention) under the auspices of the International Maritime Organization (IMO). The most significant innovation was the introduction of so-called special compensation (Sondervergütung, indemnité spéciale, see Art 14 London Salvage Convention). The special compensation provides for a compensation of the salvor’s costs which is in part independent of the success of the salvage operation provided that the distressed vessel or its cargo posed a threat to the environment. The special compensation can thus be earned even though the salvage operation is not successful with respect to preventing the loss of the distressed vessel and is therefore usually referred to as a ‘safety net’. It is arguable that with the special compensation some elements of the principles of the negotiorum gestio have been introduced to the law of salvage. The London Salvage Convention has been ratified by most Member States of the European Union and also by Croatia, Norway, Russia and Switzerland (worldwide over 50 states). The United Kingdom attributed the force of law to the London Salvage Convention through the Merchant Shipping (Salvage and Pollution) Act of 1994; France ratified the Convention through loi no 2001–74 of 31 January 2001 and Italy by legge no 129/95 of 12 April 1995. Germany implemented the London Salvage Convention into its national law in §§ 740–753a HGB.

The London Salvage Convention and, in particular, the special compensation under Art 14 suffered a setback through the decision of the House of Lords in The Nagasaki Spirit [1997] AC 455 (HL) because it held that Art 14 special compensation only entitles the salvor to claim a fair rate of expenditure, which does not include any element of profit.

As a result of this decision, the International Salvage Union entered into a dialogue with the insurance industry, viz International Group of P&I Clubs, Lloyd’s Underwriters’ Association and Underwriters Association of London, with the result that these stakeholders agreed in 1999 to establish a system of salvage tariffs as a fall-back safety net available in every salvage operation. The core piece of this agreement is the LOF amended by the Special Compensation Protection & Indemnity (P&I) Club (SCOPIC) Clause. If a salvage contract contains the SCOPIC clause, the salvor may invoke remuneration calculated on the basis of the SCOPIC tariff, which is subject to annual revision of the Salvage Liaison Committee, composed of industry representatives in equal proportion. The SCOPIC System is a remarkable attempt to overcome the inadequacy of the law of salvage as established by the House of Lords in The Nagasaki Spirit. However, one can of late notice that some people, especially those organized in the International Salvage Union, are of the opinion that the law of salvage once again has to be revised.

3. Principles of the uniform law of salvage

The uniform law of salvage provides for the rights and obligations of the parties involved in a salvage operation. In this regard, reference has to be made to the provisions of the London Salvage Convention whenever judicial or arbitral proceedings concerning a salvage dispute are brought in a state that is party to the convention (Art 2). Although the law of salvage is primarily concerned with the entitlement of the salvor to a salvage award or a special compensation, representing therefore the very heart of the London Salvage Convention, the law of salvage as actually provided for in the Convention is not restricted thereto. The Convention moreover contains, for instance, provisions on the authority to conclude salvage contracts (Art 6(2); see representation) on the annulment and modification of salvage contracts (Art 7), on the apportionment of the salvage award between salvors (Art 15), on limitation of actions by the salvor relating to payment (Art 23) and on securities for the salvor’s claims (Arts 20, 21; see security interests in transport vehicles).

An act of assistance at sea may only be considered as salvage in the sense of maritime law if the case has a certain geographical (marine) element, a proprietary element, an element of danger and also if the salvage service was rendered voluntarily.

The principles of marine salvage require that there must be some marine element whereby salvage is distinguished from acts of assistance in situations of emergency rendered ashore (see management of another’s affairs without a mandate (negotiorum gestio)). Article 1(a) of the London Salvage Convention therefore requires that a vessel or any other property must be in danger in navigable waters or in any other waters whatsoever. In addition to this, the parties to the London Salvage Convention have in Art 30(1) reserved the right to exclude the following circumstances from the ambit of the Convention: (a) salvage operations in inland waters in which only inland waterway transport vessels are involved; (b) salvage operations in inland waters in which no vessels at all are involved; (c) salvage cases whose interested parties are nationals of the same state; and finally (d) maritime cultural property on the sea-bed (see in this respect the Nairobi International Convention on the Removal of Wrecks of 2007 and in general International Maritime Organization (IMO)). However, in Europe these exceptions only apply in Croatia, Lithuania, Poland and the United Kingdom.

Moreover, the term ‘salvage’ in the sense of maritime law traditionally only applies to situations in which there are property interests involved (see Art 1(a) London Salvage Convention: ‘a vessel or any other property in danger’). In other words, there has to be a proprietary element; in this respect the London Salvage Convention defines property as ‘any property not permanently and intentionally attached to the shoreline and includes freight at risk’. By reverse argument (see in general interpretation of international uniform law) this distinguishes salvage as understood in maritime law from salvage of persons only (see also Art 16 London Salvage Convention).

As a vessel is in marine matters the principal type of property involved in a salvage operation, it is only consistent that the London Salvage Convention also contains a definition of the term ‘vessel’. Article 1(b) of the Convention therefore provides that vessel ‘means any ship or craft, or any structure capable of navigation’. For clarification reasons, an express definition of vessel is also helpful in order to establish an internationally accepted notion of this term in uniform law. Despite this broad definition of a vessel, the London Salvage Convention limits its scope of application considerably by Art 3 whereupon the Convention ‘shall not apply to fixed or floating platforms or to mobile offshore drilling units when such platforms or units are on location engaged in the exploration, exploitation or production of sea-bed mineral resources’.

Finally, the parties to the London Salvage Convention have restricted its scope significantly by reserving the right to apply a different set of legal rules if the salvage operation directly involves public interests. Public interests, first, have to be considered as involved within the aforementioned meaning if public authorities immediately undertake the salvage operation or if they, at least, control them (Art 5 London Salvage Convention). Secondly, public interests are involved within the aforementioned meaning if state owned vessels are involved. Therefore, the Convention excludes from its scope of application ‘warships or other non-commercial vessels owned or operated by a State and entitled, at the time of salvage operations, to sovereign immunity under generally recognized principles of international law’ (Art 4(1)).

Salvage invariably involves an element of danger, viz a marine peril or peril of the sea exposing the vessel to imminent danger of being lost. The reference in the London Salvage Convention to merely ‘danger in ... waters’ (Art 1(1)) might be a little misleading in this respect. At any rate, the test of whether there was danger or more specifically imminent danger is a rigid one and depends highly on the circumstances of the specific case. Nevertheless, it is generally accepted that a reasonable apprehension of danger suffices to fulfil this requirement. Accordingly, in circumstances in which loss of the vessel is wholly improbable, the principles of salvage will not apply. The approach of the London Salvage Convention is to establish a fairly wide notion of salvage operations within the meaning of Arts 1(1) and 12(1) but also to render the level of remuneration (salvage award) dependent upon ‘the nature and degree of the danger’ (Art 13(1)(d)), viz on the secondary level.

The final characteristic element of salvage is the element of voluntariness. That is to say that there will be no salvage in the meaning of maritime law if the alleged salvor did not render the salvage service voluntarily, namely when the salvor undertook by contract or was under a statutory duty to assist the vessel before occurrence of the peril. However, notwithstanding such a duty, the service will fall within the meaning of salvage if ‘the services rendered exceed what can be reasonably considered as due performance of a contract entered into before the danger arose’ (Art 17 London Salvage Convention).

Provided proof of all four of the above elements can be established, the rights and obligations of the parties will be determined by the principles of salvage. If applicable, these principles will in particular provide for the salvor’s claim of a salvage award, an entitlement to special compensation and rights as to invoking a SCOPIC clause. Under the uniform law of salvage as represented by the London Salvage Convention (Art 12(1): ‘useful result’; see also Art 2 of the Brussels Salvage Convention), the entitlement as to a salvage award invariably depends upon the principle of no cure/no pay, and this is also true for the salvage contract having the greatest international acceptance, the LOF salvage contract. The amount of the reward has to be assessed on the basis of all relevant circumstances of the case, inter alia, the measure of success, the value of property saved (vessel, goods on board, freight at risk, etc), efforts of the salvors and also their state of efficiency and readiness (Art 13 London Salvage Convention; Art 8 Brussels Salvage Convention; see also The City of Chester (1884) 33 WR 104 CA per Sir William Brett MR). Since the reward has to be determined with ‘a view to encouraging salvage operations’, it is not uncommon that the salvors will be rewarded with a claim reaching 10 per cent or more of the value of the property saved. In this respect, salvage is more comparable with the contract for work and labour than with the principles of the management of another’s affairs according to which the intervener might only become entitled to reimbursement or remuneration (quantum meruit, see also above the comparable ‘special compensation’ of Art 14 London Salvage Convention). The special compensation will, due to its restricted effect (see above The Nagasaki Spirit), only be of relevance if there was no cure in the above sense. All claims of salvage reward or other remuneration of the salvors can be brought forward and directed against ‘all of the vessel and other interests in proportion to their respective salved values’ (Art 13(2) London Salvage Convention). However, a salvor can only claim SCOPIC remuneration from owners and from their hull and machinery underwriters/ insurers or P&I club if and insofar as the parties to the salvage operation concluded a contract on the terms of the LOF with a SCOPIC clause.

Apart from the claims of the salvor as to any payment for their services rendered, there are also obligations, rights and duties which apply ab initio. All salvors must, for example, handle the matter with due care (Art 8(1)(a) London Salvage Convention; LOF clause A). In addition, all parties have to exercise due care to prevent or minimize damage to the environment (Art 8(1) and (2) London Salvage Convention; LOF clause B). The parties must also cooperate during the course of the salvage operation (Art 8(1) and (2) London Salvage Convention; LOF clause F).

The owners of the property saved have, inter alia, to confer satisfactory security to the salvor upon his request (Art 21 London Salvage Convention). The most prominent form of security interest in transport vehicles is in this respect the maritime lien, which vests in the salvor the right to arrest the vessel and has priority over ship mortgages.

4. Uniform law

The Brussels Salvage Convention and the London Salvage Convention outlined above, represent in principle the uniform law of salvage. In this respect, both Conventions can be described as good examples of international harmonization of maritime (uniform) law. It should be noted, though, that in practice the provisions of the LOF are most determinative in salvage matters.

Literature

Georg Schaps, Hans Jürgen Abraham and Klaus H Abraham, Das Seerecht in der Bundesrepublik Deutschland (4th edn, 1978) Part II, §§ 740 ff; René Rodière and Emmanuel du Pontavice, Droit maritime (12th edn, 1997) 446; Dieter Rabe, Seehandelsrecht (4th edn, 2000) §§ 740 ff; John Reeder, Brice on Maritime Law of Salvage (4th edn, 2003); Rhys Clift and Robert Gay, ‘The Shifting Nature of Salvage Law: A View from a Distance’ (2005) 79 Tul L Rev 1355; MBW Sinclair, ‘The Cherry Valley Case: How Wrong Can Economists Be About Salvage?’ (2006) 31 Tul Mar L J 57; José Luis Gabaldón García and José María Ruiz Soroa, Manual de Derecho de la Navegación Marítima (3rd edn, 2006) 712; Aleka Mandaraka-Sheppard, Modern Maritime Law and Risk Management (2nd edn, 2007) 633; Martin J Norris, John D Kimball and Thomas H Belknap in John A Edginton and others (eds), Benedict on Admiralty, Volume 3A, The Law of Salvage (7th edn, 2008); Francis D Rose and David Steel, Kennedy and Rose—Law of Salvage (7th edn, 2010); Thor Falkanger, Hans Jacob Bull and Lasse Brautaset, Scandinavian Maritime Law: The Norwegian Perspective (3rd edn, 2011) 472; Sergio M Carbone, Pierangelo Celle and Marco Lopez de Gonzalo, Il Diritto Marittimo (4th edn, 2011).

Retrieved from Salvage – Max-EuP 2012 on 06 December 2022.

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