Salvors seek fair reward for protecting the environment
By the President of the International Salvage Union 2009-2011, Todd Busch
In 2008, the salvage income world wide of all members of the International Salvage Union (ISU) was just over $250 million. This is not a huge industry but it is a vital one because of its capability for international emergency response and the protection of the marine environment. However, ISU believes its members are not always fairly rewarded for the benefit they confer in protecting the marine environment.
Now it is true that, in many cases, the salvage Award or negotiated settlement takes into account the salvor’s efforts and success in avoiding or minimizing damage to the environment, whilst rendering the salvage services to the salved property by virtue of the Salvage Convention’s Article 13.1 (b).
However – and this is key – all too often the tribunal is unable to give full effect to this provision because of the low value of the salved property from which the award is made. Cases that give rise to a material threat to the environment are often of low value compared to the cost and effort involved. It is in these cases that we feel inadequately rewarded. In such cases Article 14 (subsequently replaced by the Special Compensation P&I Clause “SCOPIC” ) eased the problem by providing compensation so salvors were not “out of pocket”. But Article 14 is a “safety net” rather than a method of remuneration. SCOPIC, (which only applies to salvage services rendered under the widely-used Lloyd’s Open Form – LOF- cases), works on the same principle. It is a tariff based safety net.
The three principle reasons why salvors feel there should be change
1. There has been an enormous change in salvage operations since 1979 when consideration was first given to ways of encouraging the salvage industry to go to the assistance of ships which threatened damage to the environment. The remedies provided in the Salvage Convention may have been sufficient when they were first proposed nearly 30 years ago but environmental concerns have increased in importance year by year making further change necessary. The environment is now relevant in almost every salvage operation and enormous regulatory control has been imposed on salvage operations where a coastal state is involved, often giving local officials the power to determine precisely what work is done.
Thirty years ago the main concern was oil cargoes. But it is now recognised that other pollutants can be equally, if not more, damaging. Regulation and legislation have expanded to deal with other pollutants. There are no ships which do not carry pollutants in one form or another, bunkers or cargoes, and there is therefore hardly a casualty in which environmental considerations are not relevant. Further, potential liabilities do not stop at pollutants. For example it is now quite common for claims to be brought in respect of grounding damage to coral reefs. Changing public environmental concerns now, effectively, dictate how a salvage operation is to be carried out and have to be the very first consideration of any salvor.
The ever increasing concern of the wider public and government agencies about the environment and the fear of it being damaged has also made a material difference to the risks and liabilities of the salvor. In their anxiety to curb pollution of the sea, governments are legislating to not only increase potential civil liabilities but impose potential criminal liabilities on a salvor.
Salvors have always accepted that they have liability for their negligence during any salvage operations, but they have also had the protection of ‘responder immunity’. However the Bunker Convention of 2001 deliberately removed that protection opening up the salvor to potential third party claims. Although there may be a good defence it is highly likely that the salvor and his personnel will be drawn into expensive, time consuming litigation subject to the vagaries of a variety of jurisdictions. Fortunately the International Maritime Organisation, (IMO), has recommended to Member States that they should make provision for ‘responder immunity’ for salvors and other responders. It remains to be seen as to how many States accept this recommendation.
A further example of exposure to potential criminal liability is the recent EU Ship Source Pollution Directive. It requires all EU States to impose criminal sanctions for all pollution caused by ‘serious negligence’.
The Canadian C-15 Bill has a similar effect. Salvors will be open to prosecution whenever they salve a ship within 200 miles of the coastline if there is a leakage of a pollutant and it is suspected they were responsible. No doubt other nations will follow suit.
The potential civil and criminal liabilities of a salvor are certainly very different from what they were in the 1980s when the Salvage Convention was being developed and are a definite disincentive to the salvor to become involved in other people’s problems. If salvors are to put their heads in a potential noose the rewards should take into account these risks.
2. Salvors are required under the 1989 Convention and under LOF to avoid or minimise damage to the environment whilst carrying out salvage operations, but they are not always fully rewarded for the benefit they confer.
For example in many shipping casualties where a coastal state is involved it is frequently a requirement that the bunker fuel is removed from the casualty by the salvor before they are allowed to commence property salvage operations. This requirement can arise even when salvors feel it is an unnecessary precaution.
That environmental concerns are uppermost is well illustrated by the case of the “Prestige”. The refusal to offer a place of refuge to the “Prestige” may have been understandable to the authorities at that time, but within the industry it is commonly accepted that had it been given, this ship and much of her cargo could have been salved, thereby reducing the environmental disaster that occurred.
It is also accepted that the resultant salvage award under the existing regime would probably have been in the region of $10 to $12 million; that such an award would probably have been paid out of the salved property fund without the need to dig into the safety net of the SCOPIC clause; that such cargo oil remaining onboard would have been contained; and that the cost of the cleaning up of the spill arising from the initial casualty would probably have been in the region of $40 to $50 million.
In the event, the salvors were unable to salve the ship and cargo because a place of refuge was denied with the result that the ship finally sank giving rise to environmental damage and claims estimated to be in the region of $1 billion.
Had the ship and cargo been salved, claims of up to $1 billion would have been avoided but how much would the salvor have received for protecting the environment under the present regime? An enhanced award, definitely, but one capped by the salved value of the ship and cargo. Very little in comparison to the benefit conferred.
Despite the lack of a proper reward for the benefits conferred by protecting the environment, the salvage industry currently does much to benefit it. The Prestige lost some 70,000 tons of oil, the Erika a similar amount, and the Exxon Valdez lost some 37,000 tons. A total of 180,000 tons which resulted in claims of about $5 billion. I understand that the US Government estimates that 700,000 tons of oil were lost in the Gulf of Mexico earlier last year as a result of the Deepwater Horizon incident. In contrast, during the same year, 2009, ISU members salvaged 1,022,730 tons of pollutants and in the last 15 years have salvaged nearly 16 million tons of pollutants, some of which might otherwise have polluted the sea and coastlines. Of course not all that tonnage of pollutants would have been at the same degree of risk but what would have happened had only a small proportion not been salvaged?
If the ship and cargo are of little financial value, or even valueless, the salvor (if a LOF is signed), will hopefully have the benefit of the SCOPIC Clause. This operates very well, but it is tariff based, and does not have a reward mechanism for the salvor’s work to prevent damage to the environment. As salvors are usually the first on the scene of any casualty, this state of affairs does not seem sensible. A change in the law to provide the possibility of a reward for protecting the environment would provide additional encouragement for the salvor.
3. As mentioned earlier, it is fair to note that, when discussing the incentives given by the Salvage Convention, salvors’ efforts in protecting the environment are currently taken into consideration, to a degree, as those efforts are one of the criteria taken into account when assessing an award under Article 13. However, the reward under Article 13 is paid by ship and cargo owners and their respective underwriters pro rata to value and there is no contribution from the Shipowner’s liability underwriters who will normally bear the cost of pollution claims and therefore are a direct beneficiary from the work done by a salvor. This is plainly unjust.
ISU believes its “case for change” as set out here is persuasive and fair given the way concern for the environment has rightly increased. We also believe there is a sensible and quite straightforward way to amend the existing legal framework to enable the change through amendments to LOF and certain Articles of the Salvage Convention.
Salvors are not seeking any environmental award unless a benefit has been conferred and we entirely accept that it should be in proportion to that benefit. Further, we are content for the assessment as to a fair award, to be made by the appropriate tribunal, guided by principles that have worked well for many years. .