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International Salvage Union Opinion for Fairplay

By Leendert Muller, President ISU

International shipping is vital to world trade. And while there have been great improvements in ship and operational safety, casualties continue to occur and can never be completely eradicated. That is why there is a continuing and vital role for commercial marine salvors who are often the only ones standing between a casualty and an environmental catastrophe.

Salvage is governed by the 1989 Salvage Convention and is conducted under many kinds of contract. Traditionally the Lloyd’s Open Form (LOF) salvage contract – which has been in existence for more than 100 years – has been the most commonly used emergency response contract. A key principle is that the salvor undertakes to use his “best endeavours” to save the ship and cargo and prevent pollution. The job is done at the salvor’s risk and he will only be paid if the job is successful.

However, it is of concern to the ISU that the use of LOF has steadily declined. LOF has great benefits: it is clear and simple, enabling rapid intervention largely because there is no need to negotiate terms “upfront.” The integrity of LOF is assured by Lloyd’s, a world scale insurance market with considerable resources. And there is a clear dispute resolution process using Lloyd’s Arbitrators. ISU firmly believes it is a fair contract allowing a salvage award based on well-established criteria including the value of the property saved, taking account of the circumstances. The great majority of cases are settled amicably. And using other commercial terms can be more costly for owners and insurers than LOF.

There are various ideas in the shipping market as to why use of LOF has reduced. We think it is, in large part, due to a lack of knowledge about the contract and its benefits. It also suffers from a number of myths that have come to be accepted, such as it being a contract which favours the salvor. If that were the case why would so many cases be settled without dispute?

ISU, and Lloyd’s, want to communicate better the benefits of LOF. We want to help shipowners and insurers – particularly property underwriters – understand LOF and recognise its key place in the conduct of marine salvage.  We know there are other commercial ways of doing salvage where speed of response is not an important factor and of course we accept that. But, for emergency response, LOF is still the best way to encourage commercial salvors to save life, protect the environment and save valuable property and ISU commends its continued use and wants to see a resurgence in its use.