Andreas Tsavliris, President, International Salvage Union
Paper for International Tug Salvage and OSV Convention 2012
The salvage industry faces challenging times. Commercial pressures, the unpredictable nature of the business and a decline in the number of salvage cases make investment in equipment and vessels difficult. Shore-based authorities’ requirements and direction of salvage operations can mean longer and more complex jobs with the background threat of being criminalised for good intentions. Protecting the environment has been, rightly, an increasingly key priority and yet the salvor – often the only agency with the equipment and skill to make a difference to the outcome – does not always get a fair reward for their efforts. The role of Lloyd’s Open Form and the administration of the contract has been though recent change but its principles have stood the test of time, what does it offer shipping industry? There are also concerns about the practicalities of salving the new generation of massive container ships and cruise liners with thousands of passengers aboard. But the industry is vigorous, salvors are problem solvers and stand ready to continue to serve the marine community with innovation and dedication.
The salvage industry faces unprecedented challenges. The world looks very different today to how it did at the end of the last century just 12 years ago. The 1970s and 80s seem recent enough to many of us but so distant when seen through the lens of changes in the shipping industry. Those decades saw the emergence of the VLCC and subsequent ULCCs, so size was already a factor in the tanker fleets. It is in bulkers, container ships and cruise ships where the most dramatic changes have taken place.
Members of the ISU between them typically carry out over 200 salvage operations each year and a large number of wreck removals. There is no doubting the experience of salvors in general, but when it comes to large scale vessels of the kind which have emerged in the last decades, there is limited practical experience. The case of the COSTA CONCORDIA – by no means one of the largest cruise ships – has highlighted many things, not least that, despite technological advances, casualties will continue to happen and they can happen to huge craft. The case of the RENA highlighted yet again the difficulty of handling a containership casualty in difficult conditions.
The economics of the industry have changed as well. Improvements in safety regimes have reduced the number of casualties. There are fewer cases for salvors and yet society’s expectations about protection of the environment have increased, shore-based authorities tend to be are more heavily involved and it means that modern cases may well be more complicated. This paper provides an assessment of the challenges facing the salvage industry.
Salvage is a highly capital intensive business. It cannot be done without large, powerful tugs and an array of expensive equipment. And collectively that equipment needs to be spread globally in order to be at the ready for casualties that, naturally, do not happen close by to salvors’ wharves and depots. In most heavy industry investment decisions are based on analysis of the return on capital employed. In classical market economics if the capital in which a firm invests does not generate more cash than other opportunities there is no entrepreneurial incentive to invest in that sector.
And yet the salvage industry does not lend itself readily to this kind of analysis for the simple reason that its rewards are so variable. And that means that increasingly we see, across the whole sector, a lack of investment in new kit, new technology and development activity. There are, of course, commendable exceptions. It means that equipment kept purely on standby by for salvage is seen as wasteful. The capital needs to be more intensively employed and so we see multi-purpose vessels pressed into service, perhaps inappropriately. We see the line between towage and salvage blurred. We see an erosion of skills and experience and more “generalists” in the industry. We see the stockpiling of equipment at fewer, but larger facilities.
This is commercially understandable, and I do not seek to criticise my own industry merely to point out the realities compared with the recent past. And my chief concern is that this gradual erosion of “core” salvage provision will mean that the industry might not be prepared when confronted by the challenges presented by a serious casualty of a mega ship in difficult circumstances.
Relations with authorities ashore
The provision of Emergency Towing Vessels (ETVs) by coastal states is topical, not least following the UK’s decision last year to withdraw its four ETVs. It has been a controversial decision with some critics fearing that lack of provision exposes the UK coast to heightened risk. The International Salvage Union has considered this matter and its Executive Committee agreed that such decisions are for governments to make and it has not formally taken a position on the provision, or otherwise, of ETVs. That said, my personal opinion is that the commercial salvage sector is indeed able to fill the gap either with its own craft or with suitable vessels of opportunity should the need arise even at very short notice.
Society has adopted a virtual “zero tolerance” attitude to marine spills. And while major spills are a rare occurrence they do still occur. It is one of the salvor’s main roles to keep pollutants in the ship or safely remove them and thereby prevent an emergency turning into a pollution catastrophe. In this way the major focus of salvage activity over the last 25 years has shifted with pollution defence now frequently taking priority over property salvage. And that helps to reduce the liability of insurers. The cost of salvage seems modest when compared to the eye watering costs that a major spill will incur.
The ISU conducts an annual survey of the amount of pollutants salved by its members. And over the 16 years to the end of 2010 ISU salvors prevented pollution of more than 16 million tonnes of oils, chemicals and other pollutants from over 3000 ship casualties. This figure includes over 12 million tonnes of crude oil. We do not say that all of that material was imminently going leak into the sea but it is legitimate to ask what would have happened in those cases if there were no global salvage industry?
Of course salvors do not achieve their successes in isolation. The outcome of many operations will depend on effective and efficient cooperation with many parties, including the authorities ashore. The threat or reality of pollution will almost certainly generate acute political problems and sensitivities – at regional, national and, sometimes, international level.
Response effectiveness is increased by detailed contingency planning and joint training. Prior planning should include the taking of response inventories and include listings of salvage assets held at local, regional, national and international level. Best practice would provide for joint training and familiarisation and exercises involving response agencies and commercial salvors. I do not believe we see enough of that joint preparation.
For facilitating quick and effective response, the ISU regards the UK’s model as best practice. In the UK a senior civil servant is appointed as the Secretary of State for Transport’s Representative – shortened to SoSREP – who combines an understanding of salvage with a high degree of delegated political authority. All the key decision-making is focused on two individuals: SoSREP and the salvage master. This model is enhanced even further when the ship’s interests are aligned and supportive. Salvors need freedom of action if they are to use their best endeavours. They need to be confident that their plan, personnel and equipment will be supported by the ship’s interests. Can we really say that is often the case?
Importantly, the ISU jointly with the Nautical Institute has recently published the first comprehensive set of Casualty Management Guidelines which it hopes will be highly beneficial in educating and assisting all those who might be party to a casualty and improving cooperation in response.
ISU believes strongly that salvors should be indemnified from criminal prosecution unless they are grossly negligent in their response effort. At present in too many territories salvors are at risk from unfair criminalisation if some pollution occurs despite their best efforts to contain the risk. It is against natural justice that someone should be pursued for trying to help and it undermines the incentive to intervene when it is often only the professional salvor who stands between a casualty and a catastrophe.
Lloyd’s Open Form and environmental salvage awards
Last year saw the publication of the new edition of the Lloyd’s Open Form (LoF) contact, LOF 2011, and the accompanying standard arbitration clauses. The changes make the contract fit for use in the modern shipping environment.
The ISU’s own data show that LOF remains the most widely used salvage contract. Its key feature is its simplicity which means that it facilitates rapid intervention in an evolving casualty situation. One of the ISU’s objectives is the promotion of LOF and I commend it to salvors and shipowners – for more than 100 years it has served all of our interests and I am sure it will continue to do so.
Nevertheless the ISU considers that the present system under the 1989 Salvage Convention, and the commercial arrangements under Lloyd’s Form 2011, and where applicable, the Special Compensation P&I Club Clause (SCOPIC 2011), do not provide proper recognition of the salvor’s efforts in carrying out his obligations under the 1989 Salvage Convention.
The ISU believes the system should be updated to provide for the assessment of an award which recognises the salvors efforts in avoiding or minimising damage to the environment. The ISU is therefore working to bring about the necessary change, and we believe it can be done simply. ISU will pursue the matter throughout his year and at the major CMI conference in China in the autumn.
The challenge of salvaging mega ships
At the most simple level it should seem obvious that the larger the vessel the greater the salvage challenge: greater weight of cargo; more boxes to deal with; more potential pollutants and bunkers to safely remove and, in the case of massive cruise liners, a bewildering number of passengers and crew to handle.
The COSTA CONCORDIA demonstrated to the watching world that disaster can befall large cruise liners. And the case of the RENA showed again the great difficulty of handling a container ship casualty. Like the MSC NAPOLI she was nothing like as large as they come. And we have also seen difficulties associated with the latest generation of ultra large bulkers when the VALE BEIJING experienced structural issues late last year.
With cruise ships the challenge is the sheer amount of humanity involved. Even in benign sea conditions the safe evacuation and transport of many, many thousands of passengers – a good number of them elderly – and crew will be extremely difficult. Throw in bad weather and a listing vessel and the picture gets alarming. Add a fire and it is a horrific prospect. Accommodating the rescued passengers on assisting vessels will be difficult and once ashore, perhaps in a remote location, re-patriating the passengers will be a great logistical challenge.
While plans for such operations exist, I am not convinced that in practice they will be able to be executed smoothly. Keeping passengers on board may generally be desirable but that will undoubtedly influence and constrain the nature of a salvage operation. Even in the wake of the CONCORDIA, is the industry prepared? I fear not.
Container ships have posed special problems for salvors for many years. There are particular challenges in confronting serious fires on board container ships. There are also specific difficulties when faced with the task of refloating a heavily grounded container vessel at an exposed location. And challenges in moving and handling the boxes.
In many cases the plan to refloat the casualty will require the discharge of possibly thousands of containers. This raises a great many practical problems. Suitable floating cranes must be located, as well as barges or vessels capable of receiving the off-loaded containers. Good weather is essential and a suitable location must be identified for receiving the containers. The MSC NAPOLI and RENA were small compared with the next generation of box ships. In the Maersk E-class we now see container ships of 14,000 teu in service. These vessels are 400 metres long and have a deck to keel depth of 30 metres. And there are now ships capable of carrying 18,000 teu are under construction.
In the case of fire, several considerations specific to the ship type are relevant. The cargo will almost certainly include hazardous chemicals, perhaps explosives. Furthermore, it may take some time to obtain vital cargo-related information, including information on dangerous cargo and its location within the vessel. Freight containers are also highly efficient heat transmitters. Thermal radiation from a large container fire is extremely intense. The only effective counter is to provide vast quantities of cooling water.
These problems and hazards would be magnified in the case of an Ultra Large Containership casualty – both in the acute stage of the emergency and in later operational phases. In the longer term, the time required for container discharge (assuming that suitable discharge equipment is found) might be so extended as to place in jeopardy, in its own right, the possibility of saving a grounded Ultra Large Containership.
International business these days operates on the “just-in-time” supply principle and container ships perform the function of floating warehouses. Interruption to the supply chain can have huge economic consequences and financial cost. Indeed the cargo values are bewildering – consider thousands and thousands of containers full of electronic goods coming from the Far East to Europe. Hundreds of millions of dollars – even billions – worth of goods may be on board. I do not believe that the shipping industry as a whole is ready to deal with a mega box ship casualty.
The salvage industry faces numerous challenges in a world of shipping that has changed significantly in the past decades. Commercial pressures increase and society rightly requires good environmental outcomes and yet the regime does not fairly reward salvors. There is increased involvement and demands from multiple shore-based authorities and incidents are played out in the full glare of the media with the risk of the salvor being made a criminal if some pollution happens during the operation. Add the enormity of modern cruise ships, container ships and bulkers and it is clear that the salvage industry has much to contemplate. However salvors are problem solvers and will not hide from a challenge. They will continue to stand ready to assist casualties all around the world.