Salvage a claims handler s guide

Transcription

1 FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE AND COMMODITIES TRANSPORT TECHNOLOGY Salvage a claims handler s guide Ian Teare Partner Norton Rose LLP Tel: ian.teare@nortonrose.com

2 A Warm Up Quiz

3 I immediately knew we had gone aground

4 Agenda 1. Some of the key elements of salvage in English Law 2. Some of the key elements of the LOF 2000 form 3. The assessment of Awards under Article Article 14 and the Scopic Clause

5 The Key Elements of a Salvage Claim Four essential elements: The services must be voluntarily provided The property must be in danger (real or apprehended) The services must be in the nature of salvage They must be successful and confer a benefit

6 Who can be a volunteer? Master, Officers and crew of salved vessel Crews of tugs rendering salvage services The ship owners in sister ship salvage Pilots Tug & Tow

7 What constitutes danger in the context of salvage? Is there a risk of physical danger? Is there a risk of financial consequences? It is sufficient that there is a state of difficulty, and a reasonable apprehension. The Charlotte (1848) Reasonable apprehension is an objective test: the state of mind / opinion of those on board is not decisive

8 Dangers : some illustrations The Mount Cythnos (1937) The St John (1999) The Tramp (2007)

9 The LOF Form The identity of the salvage contractors Consideration of professional status The policy of encouragement The effect of sub contracting on status considerations Agreed place of safety / deemed performance Can salvors be compelled to take the casualty to a specific port? Can the safe place be agreed during the operation? What does best endeavours really mean? LOF 2000 Clause H vs The Troilus

10 The LOF Form Is the Scopic Clause incorporated? Affects on the Article 13 Award Rights as to monitoring and reporting The date and place of the Agreement Was a binding agreement made? Does the signatory have authority to bind all salved interests? The Contractors basic obligation Best endeavours Article 18 of the Salvage Convention 1989

11 The LSSA Clauses The Overriding Objective The promotion of saving life, property and the environment LOF to be read and understood in a reasonably businesslike manner To encourage cooperation between the parties To ensure that the reasonable expectations of the salvors and owners of the salved property are met To ensure that it leads to a fair and efficient disposal of disputes between the parties whether amicably or by mediation within a reasonable time and a reasonable cost

12 Mediation % settle on the day. The first thing we do; let s kill all the lawyers. Shakespeare King Henry VI A man was found next to a murdered body, he had the knife in his hand, thirteen witnesses that seen him stab the victim, when the police arrived he said, "I'm glad I killed the.." Mattingburg not only got him off, but he got him knighted in the New Year's Honors list, and the relatives of the victim had to pay to have the blood washed out of his jacket. Edmund Blackadder Discourage litigation. Persuade your neighbour to compromise whenever you can As a peacemaker the lawyer has a superior opportunity of being a good man. There will still be business enough. Abraham Lincoln

13 Lloyds Standard Salvage Arbitration Clauses (The LSSA Clauses) Provisions as to security The arbitrator has the power to reduce or increase the security at any time Interest Beware potentially penal rates Be prepared to challenge the claimed rates Appeals 21 day time limit to submit written notice of appeal No new evidence on appeal No tinkering by the appeal arbitrator.or is there? Disclosure Be aware that documents deployed in the claim on the policy may be discloseable in the salvage arbitration

14 Assessment of Awards - Property Salvage Salvage Convention 1989 Article 13 Article The reward shall be fixed with a view to encouraging salvage operations, taking into account the following criteria without regard to the order in which they are presented below: (a) the salved value of the vessel and other property; (b) the skill and efforts of the salvors in preventing or minimizing damage to the environment; (c) the measure of success obtained by the salvor; (d) the nature and degree of the danger; (e) the skill and efforts of the salvors in salving the vessel, other property and life; (f) the time used and expenses and losses incurred by the salvors; (g) the risk of liability and other risks run by the salvors or their equipment; (h) the promptness of the services rendered; (i) the availability and use of vessels or other equipment intended for salvage operations; (j) the state of readiness and efficiency of the salvor's equipment and the value thereof.

15 Salved Value Assessed at the time and place of termination which can be different for ship and cargo Ship usually taken as market value less deductions Deductions are the reasonable cost of repairs and related expenses may include an element of loss of use in exceptionally long repairs Cargo value usually taken as the CIF value Q: but what about high salved values?

16 The Effect of High Salved Values The Queen Elizabeth (1949) 82 Ll.L.Rep. 803, 821 In those circumstances, where one has, as we do have in this case, a practical certainty of continuing damage and continuing expense, coupled with a possibility, even if it is not more than a bare possibility, of a much more serious loss, one has to give some real effect to the very high value of the salved property. By that I mean that one must give some effect to it, beyond saying to oneself merely that this is a case in which the value of the salved property at least provides a sufficient and abundant fund out of which to reward the salvors. I am not saying that you can measure salvage awards as sums in arithmetical proportion in relation to the salved property when you have values of the magnitude that you have in this case, but equally it would not, I think, be right to say that, where you have a value of this size, the addition of a few millions or the subtraction of a few millions would make no difference whatsoever. So long as even an outside chance of anything in the nature of total loss remains, then I think that the increase of value must involve some, although possibly not great, increase in the salved award over and above what might have been awarded had the value been much smaller.

17 The Effect of High Salved Values The Amerique (1874) L.R. 6 PC 468, 475 The rule seems to be that though the value of the property salved is to be considered in the estimate of the remuneration, it must not be allowed to raise the quantum to an amount altogether out of proportion to the services actually rendered.

18 The Effect of High Salved Values Balance between: the Queen Elizabeth (1949) and the Amerique (1874) Policy of encouragement Article The reward shall be fixed with a view to encouraging salvage operations, taking into account the following criteria without regard to the order in which they are presented below: (a) the salved value of the vessel and other property; (b)

19 Nature and Degree of Danger The Charlotte (1848) 3 Wm Rob 68, 71 It will be sufficient if, at the time at which assistance is rendered, the subject-matter has encountered any misfortune or likelihood of misfortune which might possibly expose it to loss or damage if the services were not rendered. Examples of the nature of danger: risk of further damage by grounding or flooding risk of becoming an ATL or CTL loss of use of the vessel The degree of danger: real and sensible danger of physical loss actual or immediate, imminent and absolute? how much damage? The salved property: may be subject to different types of risk; but still contribute to the award pro rata (Art 13.2)

20 Dangers The danger of being immobilised until assisted The Disparity Principle and The Voutakos [2008] EWHC 1581 Disparity principle That in salvage cases where there was only immobilisation, no great urgency and only straightforward towage was required to effect a cure, the sum awarded should not be wholly out of line with commercial towage rates. Appeal arbitrator held: that the disparity principle was seriously flawed and should be discarded commercial rates are irrelevant to the assessment of salvage remuneration what commercial rate to use & arbitrator s knowledge of rates in error? article 13 does not require commercial rates to be taken into account The Voutakos [2008] commercial rates are admissible and relevant in the simplest of towage cases they may be particularly influential provide a floor to any award cannot be that the actual cost and rates of hire are to be treated as wholly irrelevant (see s 13(1)(f))

21 The Development of Article 14: Special Compensation Salvage remuneration for pollution avoidance developed following the Amoco Cadiz LOF 1980, Clause 1(a), Safety Net provisions: exception to the No Cure No Pay principle reasonably incurred expenses plus up to 15% increment included a fair rate for tugs, equipment etc. applied only to laden tankers Today: special compensation for out of pocket expenses plus fair rate for equipment and personnel actually and reasonably used may be increased up to 30% of expenses & tribunal to 100% of expenses if salvor negligent and fails to prevent or minimise damage to the environment: deprived of whole of any special compensation deprived of part of any special compensation

22 Article 14: Special Compensation 1. If the salvor has carried out salvage operations in respect of a vessel which by itself or its cargo threatened damage to the environment and has failed to earn a reward under article 13 at least equivalent to the special compensation assessable in accordance with this article, he shall be entitled to special compensation from the owner of that vessel equivalent to his expenses as herein defined. 2. If, Salvor's expenses for the purpose of paragraphs 1 and 2 means the out-ofpocket expenses reasonably incurred by the salvor in the salvage operation and a fair rate for equipment and personnel actually and reasonably used in the salvage operation, taking into consideration the criteria set out in article 13, paragraph 1 (h), (i) and (j). Potential conflict between P&I / H&M on values i.e. trigger for Art. 14

23 Article 14 LOF 1990 expressly incorporated Article 14 into the contract Two problems with Article 14 lead to Scopic: what is damage to the environment? [Art. 14(2)] If, in the circumstances set out in paragraph 1, the salvor by his salvage operations has prevented or minimized damage to the environment, the special compensation payable by the owner to the salvor what is a fair rate? [Art. 14(3)] Salvor's expenses for the purpose of paragraphs 1 and 2 means the out-of-pocket expenses reasonably incurred by the salvor in the salvage operation and a fair rate for equipment and personnel actually and reasonably used in the salvage operation,... Difficulties lead to the development of the SCOPIC clause

24 The Scopic Clause SCOPIC has not changed the law it comes into effect by contractual agreement Came into use in LOF 2000 It is a two stage process: is SCOPIC incorporated into the agreement? if incorporated, has it been invoked by salvor?

25 The Scopic Clause The effects of incorporating / invoking SCOPIC: Incorporation: If SCOPIC incorporated, the salvor cannot claim under Article 14 Invoked: SCOPIC can be invoked by the salvor at any time irrespective of threat of damage to the environment assessment of SCOPIC remuneration starts from date invoked

26 The Scopic Clause SCOPIC security must be provided within 2 days of invoking in the sum of US$3M Security amount can be increased or decreased later on Tariff rates to apply Special Casualty Rep. ( SCR ) appointed at the sole discretion of vessel s Owner Costs of SCR borne 50/50 between Hull and P&I Hull and cargo underwriters can, at their own expense: appoint their own Special Representatives entitled to access and information to report on the operation Article 18 of the 1989 Intn l Convention on Salvage expressly incorporated

27 The Scopic Clause The salvage services will be assessed on Article 13 principles SCOPIC remuneration will be paid only by the owners of the vessel and only to the extent that it exceeds the total Article 13 Award If the Article 13 Award exceeds the SCOPIC remuneration then the Article 13 Award will be discounted by 25% of the difference between Art. 13 and SCOPIC costs which would have accrued if SCOPIC had been invoked at the start of the services

28 Questions?

29 Our international practice

30 Presentation 1 No individual who is a member, partner, shareholder, employee or consultant of, in or to any constituent part of Norton Rose Group (whether or not such individual is described as a partner ) accepts or assumes responsibility, or has any liability, to any person in respect of this presentation. 2 Any reference to a partner means a member of Norton Rose LLP or Norton Rose Australia or a consultant or employee of Norton Rose LLP or one of its respective affiliates with equivalent standing and qualifications. 3 This presentation contains information confidential to Norton Rose Group. Copyright in the materials is owned by Norton Rose Group and the materials should not be copied or disclosed to any other person without the express authorisation of Norton Rose Group 4 This presentation is not intended to give legal advice and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. Readers must take specific legal advice on any particular matter which concerns them. If you require any advice or information, please speak to your usual contact at Norton Rose Group.

31 FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE AND COMMODITIES TRANSPORT TECHNOLOGY