By Mark Hoddinott, General Manager, International Salvage Union
The business of marine salvage is as old as commercial shipping and has continually evolved but dramatically so in the past 150 years as global trade expanded; the shipping and insurance industries became more sophisticated and the amount of money tied up in maritime adventures grew. Every decade witnesses major events and developments and the last twenty years are no different. We have seen significant casualties; technological developments; contractual and commercial change. What does not change is the nature of the business: dangerous, difficult and requiring brave, capable individuals willing to put themselves in jeopardy to get the job done. And it still needs entrepreneurs and investors willing to take on uncertain challenges at their own financial risk.
IT&OSV’s birth came in the same year as a revised edition of the Lloyd’s Open Form salvage contract, known as LOF 95. It was a significant edition of the most commonly-used salvage contract because it incorporated the 1989 Salvage Convention but that could only happen after the UK passed the Merchant Shipping (Salvage and Pollution) Act in 1994. LOF and the Convention work harmoniously together and have at their heart the fundamental principle of “no cure, no pay”. In short, salvors are encouraged to provide services to casualties by the prospect of an award based on the value of the ship and cargo but they will only be paid if they succeed.
The next key development was the introduction of the Special Compensation P&I Club Clause in 1999 and always known as “SCOPIC”. It was, and remains, a scheme under which salvors are compensated for their efforts in cases where the low value of the casualty and cargo or difficult circumstances might otherwise mean no commercial salvor would attend the casualty leading to increased risk of pollution. It has proven to be a popular alternative to the Convention’s Article 14 ‘safety net’ which is still available but rarely used.
Despite the many benefits of LOF, the ISU, and others, are concerned about a decline in the use of the contract. ISU firmly believes that in many emergency response situations LOF is the most appropriate contract as it facilitates rapid intervention and is fair to all parties. There is a trend (under pressure from shipowners and their insurers) to agree commercial contracts and a more “tariff-based” system. This may cause contraction of the industry with less provision of salvage and less choice of contractor. It may well lead to less investment in equipment. In the longer term this is likely to lead to greater losses.
This period also saw, in 1999, the introduction of BIMCO’s well-regarded suite of wreck contracts. These simple instruments were amended in 2010 and remain popular as templates with contractors and insurers alike.
In the structure of the industry we have also seen great change with the traditional European heartland consolidating and the rise, particularly, of American firms taking on a global role. Perhaps 1995 represented the tail-end of the dominance of the traditional family-owned salvage business. In 2015 large corporates dominate though there remains a place for others.
Shipping is undoubtedly getting safer but is still noted for its major casualties rather than its thousands of safe passages. Each decade seems to have one (or more) iconic marine disaster. 1960s: Torrey Canyon; 1970s: Amoco Cadiz; 1980s: Exxon Valdez (leading to the OPA-90 legislation). The 1990s were no different and in Europe the Sea Empress was a significant casualty in 1996 along with the Erika in 1999, both of which led to significant oil pollution. From the Sea Empress came the UK’s Donaldson Report and the much-admired SoSREP system (Secretary of State’s Representative for Maritime Salvage and Intervention). It gives control of the incident to a single point authority beyond political influence. ISU supports the system and would like to see it more widely used in other coastal states.
Containership cases have also caught the public imagination. The APL Panama off Mexico in 2005 and the MSC Napoli of the UK in 2007 demonstrated the high cost of dealing with containership casualties. The latter was also one of a string of expensive wreck removals in which we saw coastal states’ desire to see wrecks removed in elaborate ways at any cost. Other cases included the New Flame; Rena and of course the biggest of them all Costa Concordia. The high cost of such operations continues to exercise the insurance industry: the loss of the Costa Concordia and its removal have cost in excess of US$2 billion.
A running sore during the period has been lack of progress on Places of Refuge. The need for coastal states to recognise their duty in this regard continues to be a difficulty demonstrated dramatically in the that last three years by the MSC Flaminia, Stolt Valour and the Maritime Maisie which all suffered fires but had to be held at sea because they were denied access to ports in Europe, the Middle East and the Far East respectively. Equally, a lack of responder immunity and the threat of unfair criminalisation hangs over salvors all around the world.
Increasing vessel size has been a well-documented trend. But it is still worth noting that the containerships referred to above were comparatively small with a capacity of less than 5000 teu (and were not fully laden). Boxships with a capacity of more than 18,000 teu are now common. Other classes of vessel: bulkers, LNG carriers, cruise liners have all grown in size in that last twenty years. The ability of the industry to handle such vessels as casualties continues to be questioned. ISU is clear that its members will always stand by to attend casualties whatever the size and will use their “best endeavours” to save life, protect the environment and save property but ISU accepts that large vessels will be more challenging and will perhaps require significant investment in specialised equipment, another challenge.
Ships have changed greatly since the mid-1990s, fundamental salvage methods have not. However, there has been innovation in matters like bunker and other pollutant removal using hot-tapping, for example, and extracting hazardous cargo from great depths.
There has clearly been a shift in societal attitudes towards the environment in the past decades and which has perhaps accelerated in the last twenty years. We are in an era of “zero tolerance” to any spill whatsoever. The order of priority for salvors has likewise shifted. It used to be: saving life, then property then protecting the environment it is now firmly: saving life; protecting the environment then saving property. That will not change but does the commercial framework recognise the shift? Does LOF, for example, properly recognise the environmental aspect of salvage operations?
Commercially, it is recognised that there is over-capacity of supply of salvage services, particularly in areas like Singapore. Some consolidation or structural change in the industry is to be expected. The requirements of coastal states are unlikely to become less onerous and the cost of wreck removals will continue to be worryingly high.
What is certain is that marine salvors will continue to be a vital part of the shipping industry, using their best endeavours to save life, prevent pollution and save property for the benefit of all. As long as there is marine trade there will be salvage.