Discussions hosted this October by the Comité Maritime International (CMI) regarding the review of the 1989 Salvage Convention, have revealed deep industry divisions, with the International Salvage Union (ISU) and shipping property insurers pushing strongly for the Convention to be overhauled, while the International Chamber of Shipping and the International Group of Protection and Indemnity (P&I) Clubs campaigned staunchly to preserve the status quo.
At the heart of the controversy is whether the Salvage Convention should be revised to enable salvors, who undertake rescue and remediation work following maritime casualties, to be compensated by shipowners and their insurers for their efforts in preventing environmental damage that would have resulted from the accident.
Stuart Hetherington, partner of Colin Biggers and Paisley lawyers and Chair of the international working group and international sub-committee on the review of the 1989 Salvage Convention, says that the CMI will now examine whether there is sufficient cause to recommend to the International Maritime Organisation (IMO), the United Nations body in charge of international shipping laws, that the Convention warrants revision.
"The IMO typically requires proof of a compelling need before throwing its weight behind treaty reform, so the lack of broad industry support for change, will be a relevant factor," said Mr Hetherington.
"In any event, a treaty solution is not the only option. The CMI may take the view that facilitating a commercial outcome such as assisting with the amendment of industry agreements such as the Lloyds Open Form, the Special Compensation 'SCOPIC' clause, or the terms of hull and cargo insurance policies, may be a more appropriate way forward. The maritime industry has a long history of cooperative self-regulation and the salvage issue should be no different".
The limitations of Convention Articles 13 and 14 – which currently serve to compensate salvors for environmental salvage work – have come to light as environmental concerns grow in significance.
"The ISU argues that the problem with Article 13, is that the award is capped at the value of the salvaged property which in most cases amounts to the ship and/or cargo. Property recovered following a maritime accident often has a relatively low value, with the result that the salvage award will also be correspondingly low and therefore fail to reflect the danger, time and effort put in by the salvors", said Mr Hetherington.
"While Article 14 provides an alternative basis for compensating salvors, awards in this category are limited to the salvor's expenses with no scope for profit. The ISU argues that there is therefore little financial incentive for salvors to intervene in difficult operations involving an extensive environmental threat".
The fact that salvage awards are presently property-based has also meant that only ship and cargo owners and their property insurers are liable to pay for environmental salvage awards. The ship's third party liability insurers – namely the P&I Clubs – currently make no contribution to salvage awards even though the salvors' environmental protection efforts may have spared them from having to foot the bill for significant environmental and third party liabilities.
Accordingly, at the CMI's recent October talks, the ISU strongly restated its push for the creation of a separate and distinct environmental salvage award calculated by reference to the environmental liabilities avoided by the shipowner. The ISU argued this would more adequately reward salvors for the benefit they confer as well as split the responsibility for the award more fairly between property and liability insurers.
Not surprisingly, the London property insurance market backed the ISU position at the October meeting. Its representative proposed that the environmental award be determined by tallying the environmental protection costs incurred and applying an uplift between 25 percent to 100 percent, depending on the likelihood the liability would actually have crystallised. An overall limit on the environmental award was also suggested.
On the flipside, Mr Hetherington noted that the International Chamber of Shipping and International Group of P&I Clubs steadfastly maintained that there was no justification for revisiting the Convention.
Key concerns identified by the dissenting groups related to the speculative nature of any environmental award as it would be based on a hypothetical assessment of what damage would have occurred had the salvors not acted.
"The International Chamber of Shipping and P&I Clubs are naturally concerned that a speculative inquiry will spiral into protracted and expensive litigation which is in no one's interest", said Mr Hetherington.
"They also question whether salvors should receive a higher reward when many governments have boosted the state's salvage capacity in recent years by acquiring or financing emergency towage vessels. For instance, the European Maritime Safety Agency has improved resources in the region as has the Australian government which uses levies raised from ships carrying oil into the country to finance tug operations around the Australian coast."
"Industry views may currently differ but I'm optimistic that the stakeholders in the salvage debate have the goodwill and resolve to work toward a collaborative outcome with the assistance of the CMI," said Mr Hetherington.
