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The salvage industry in 2009

ISU contribution to Marine and Port Review

Mike Lacey, Secretary General of the International Salvage Union

Over the past four decades, the 20 largest marine oil spills released some three million tonnes of pollutants into the sea. Three of the most well known casualties – involving the tankers ‘Exxon Valdez’, ‘Erika’ and ‘Prestige’ – resulted in spills totaling around 120,000 tonnes of crude oil, but gave rise to costs in clean-up and compensation running into billions of dollars.

In contrast, salvors of the International Salvage Union (ISU) render services every year to oil tankers carrying on average a total of over 400,000 tonnes of crude oil. . Since 1994 (when the ISU began its annual survey of pollutants salved), ISU members have rendered services to more than 3,000 marine casualties laden with some 15 million tonnes of oils and chemicals.

The shipping industry has been successful in reducing the incidence of accidents and spills in recent decades. Significant events (defined as over 7,000 (?) barrels each) have fallen from more than 20 annually in the 1970s to fewer than five annually in the current decade. Nevertheless ISU salvors typically conduct over 200 operations each year where their intervention prevents or minimises pollution. In doing so, they save shipowners and their liability insurers billions of dollars and protect both the coastal environment and corporate reputations.

Salvors have an excellent track record in saving property and preventing spills, but they do not achieve these successes by acting in isolation. The outcome depends on effective cooperation between many parties, including the authorities ashore. A good working relationship between the salvor and shore agencies is a major success factor.

The key salvage contract

After 100 years of constant use, Lloyd’s Standard Form of Salvage Contract – known as Lloyd’s Form or LOF – remains the world’s most frequently used salvage agreement. LOF promotes rapid response and fast reaction is often the key to preventing a spill and, possibly, catastrophic environmental damage. LOF is the ideal contract when there is no time to lose – when, for example, fire has broken out or cargo is leaking into the sea.

The contract has been revised many times over the past century, to take account of both commercial and legal changes affecting global shipping. One of its key features is the principle of “no cure, no pay” and the obligation on the salvor that he must use his “best endeavours” to complete the salvage services.

With LOF agreed, the salvor can get on with the task of saving the ship and its cargo, together with his obligation that whilst salving the property he must use his best endeavours to prevent or minimize damage to the environment. LOF can be agreed with no pre-contract discussion about terms and conditions. LOF 2000 is a streamlined edition of the contract. It is a document with just seven boxes to complete. There is no need for commercial argument as the LOF system offers impartial arbitration, should those involved fail to reach an amicable settlement after the services are completed. It has undoubtedly been a major contributor to the prevention of maritime catastrophies over the years.

The regulatory framework

The significant improvements already achieved in maritime safety and spill avoidance over the past 30 years are unlikely to be replicated. The regulators have entered the territory of diminishing returns. Naturally, it is impossible to eradicate all risks, and accidents will continue to occur due to natural perils, human error and occasional mechanical failures. As a result, every vessel can be seen as a potential casualty, capable of threatening life, property and the environment should things go wrong.

And new risks emerge over time. In the 1970s, the advent of VLCCs and ULCCs resulted in a dramatic shift in the character and scale of risk (although such risk analysis is by no means straightforward, as larger vessels reduce the number of loading and discharge operations). Likewise, now days there are the very large container ships of 13,000 TEU and perhaps more, as well as Cruise Liners carrying over 5,000 people.

Shifts in the pattern of oil transportation also have an impact on risk exposure. One obvious example is the increase in oil exports from Russia and former states of the Soviet Union. Governments are sensitive to these issues. For example a report to the UK’s Maritime and Coastguard Agency (MCA) noted that very heavy fuel oil movements through the Dover Strait now total around 30 million tonnes annually – “with a significant proportion originating in Russia and former Soviet Union countries”.

In December 2003 the International Maritime Organization (IMO) adopted Resolution A.949(23), “Guidelines on places of refuge for ships in need of assistance”. This followed the loss of the oil tanker ‘Prestige’ off the Spanish coast in the preceding year – an event ending in a pollution disaster. A major reason for this was the Spanish refusal to grant a place of refuge for this badly damaged tanker. The vessel was ordered out into the winter Atlantic and broke up just a few days later.

The IMO’s Place of Refuge Guidelines make an attempt to reconcile two conflicting issues. On the one hand, the best way to reduce a pollution threat may be to transfer cargo and bunkers and this requires a place of refuge, to minimise the spill risk, and the hazards of the salvage operation. However, allowing a casualty to approach the shore may endanger the environment, the coastline, fisheries and other economic interests. Not surprisingly, local communities and shore authorities are likely to oppose such a course of action.

Decisions on whether or not to grant a place of refuge are essentially political in nature. They must be taken on a case-by-case basis. Following the ‘Prestige’, however, there is more awareness that the instinctive response – to order a ship out – might well aggravate the problem and may even produce a “worst-case” event: the loss of the tanker and catastrophic pollution.

The IMO has urged Coastal States to implement the place of refuge Guidelines. States are expected to identify safe havens and be prepared to use them in emergency situations. The European Union, for its part, requires member states to list places of refuge. Most have fought shy of doing so, at least in a public sense, due to the obvious sensitivities. Some have responded by declaring their entire coastline as a refuge: no coastal community is singled out.

There have been a number of other developments prior to and since the IMO’s place of refuge guidelines were adopted in 2003. For example in 1999 the UK established the SOSREP (Secretary of State’s Representative) and the ISU regards this far-reaching decision as the most successful ‘command and control’ system devised to date. It has been effective in promoting streamlined, timely decision-making in challenging marine casualty situations – as demonstrated in the handling of the ‘MSC Napoli’ case. A further example, in October 2007, has been the approval by the IMO’s Maritime Safety Committee of “Guidelines on the Control of Ships in an Emergency”. These Guidelines were promoted by the Bahamas, with support from ISU, following the ‘Prestige’ incident.

The ISU has welcomed these IMO initiatives but has noted that the guidance is too general in character. In view of this the ISU decided to draft broader-based guidelines on Marine Casualty Management (the MCM Guidelines). They will set out a comprehensive statement of best practice when responding to ship casualties and are presently being considered by wider stakeholders.

Key role of ports

Port emergency plans should be coordinated with national response systems, as required under Article 3 of the International Convention on Oil Pollution Preparedness, Response and Cooperation, 1990. Port authorities are the “maritime interface” between the response offshore and the shoreside efforts of many agencies, including local government, emergency services, civil defence, wildlife protection teams and water, environmental protection and fisheries agencies. Ports, in particular, play a central role in shore reception and the provision of emergency cargo discharge facilities.

Port authorities take a central role in many casualty response situations. The spirit of “best endeavours” should act as a strong motivator for port authorities and all involved in the response effort. These parties share the common desire to avoid massive economic dislocation, environmental damage and disruption to the life and well-being of coastal communities.

Conclusions

The salvage industry, like many parts of the wider shipping business, has been adversely affected by the downturn in shipping markets over the past year. And it recognizes that it has many issues to deal with – such as maintaining a cadre of experienced, professional salvors and continuing to invest in the necessary equipment when times are hard. But, as has been amply demonstrated over the past century, salvors remain committed to their role and ISU members around the world stand ready to respond to vessels in difficulty, to save life, property and to prevent pollution.