COLUMN | Just once, can we please let the facts get in the way [Tug Times]

Your scribe grew up in a time when professionals were supposed to know what they were doing. Most professionals and tradesmen had done an apprenticeship or some other form of practical training, and the BBC was a trustworthy and reliable source of news.

I suppose I was there when the rot set in, and the old mid-apprenticeship release scheme for deck cadets was being replaced by the fancy new OND in Nautical Science. We were taught useful things like nuclear physics because the Americans had launched a nuclear-powered cargo ship, so obviously there would soon be thousands of them and we had to be prepared for this wave of the future. They might as well have taught us to play the double bass, for all the good it did us. But the BBC was still a trustworthy and reliable source of news.

Now we have the Covid-19 outbreak, and fake news rules the world’s media. It seems people will believe any fool with a fake story to peddle, so believe me when I tell you, you will not stave off the virus by drinking cow urine or washing your hands with vodka. In fact, with pubs closing around the world, you might soon think of a better use for vodka. And the BBC is no longer a trustworthy and reliable source of news.

I could quote numerous examples, but will confine myself to a piece of nonsense by one Helier Cheung of BBC News, who recently claimed when writing about the virus that, “Singapore, Hong Kong and Taiwan all kept numbers relatively low – despite their proximity to China.”

I hate to disappoint the BBC, but saying Singapore is close to China is as ridiculous as saying I can play the double bass. The distance from Guangzhou, a major city in southern China, to Singapore is about the same as the distance from London to Tripoli in Libya, or for those of you with opposite feet, about the same as the distance from Darwin to Brunei.

If you are bored as you self-isolate, try writing imaginary headlines in the style of the BBC for your country. “Australia will not make Islam the only state religion, despite its proximity to Brunei,” is offered as a way to get you started. Or what about, “Felixstowe will not ramp up security despite attacks on ports in nearby Libya.”

These thoughts raised my blood pressure because I had been pondering the recent revisions to Lloyd’s Open Form (LOF). And since my wife tells me my brain is a faulty organ that seldom reaches logical conclusions, perhaps I should explain.

In my youth, LOF was like the BBC. It was clear, sensible, popular and greatly admired. It was comforting to know there was a contract that could be signed by the people on the spot and thus guaranteed a swift response to any dangerous situation.

Salvors had to succeed to get paid, and if they did, the size of the reward would be decided by a wise and experienced arbitrator after the event. In return for saving 100 per cent of a ship, her bunkers and cargo, a salvor might expect to be paid around five per cent of the value of the salved property, so everyone lived happily ever after.

Fifty years later LOF, like the BBC, has fallen into disrepute, although for less obvious reasons.

Shipowners and the people advising them seem to be reluctant to sign, and the contracts are now as rare as hens’ teeth. The fact that rewards have risen to just above 10 per cent of salved values does not seem to explain this aversion to an otherwise sensible contract, so its supporters have resorted to regular revisions of the standard wording in an effort to make it more appealing to the modern shipping industry.

Some of the revisions have been purely cosmetic, such as the move to make it look like a standard BIMCO contract by revising the format and having boxes on the first page which are completed by the parties.

“An LOF is like an elephant – hard to describe, but you’ll know one when you see one.”

The attempt to trick owners into signing because LOF now looks just like any other contract failed abysmally, and the number of LOFs continued to decrease. The latest attempt to make it sexy again has just been published as LOF2020 and I am grateful to Jim Allsworth of C-Solutions for a clear and readable explanation of the changes that he recently wrote for a company newsletter.

Jim points out that there are some sensible changes to wording, and a new rule that makes it mandatory to advise Lloyd’s if any side agreements have been entered into.

There are changes in relation to low-value cargo and termination, and an attempt to clarify the concept of delay as a risk. But, as he rightly points out, there is nothing that will make a “material difference” to the industry. I guess this is another way of saying there is nothing that will make the contract more acceptable.

He then goes on to ask whether there was an opportunity to really shake things up and make LOF more popular – something that would prevent industry players wasting time trying to negotiate alternative terms.

This is an important question, because one of the great strengths of LOF is that it can be completed quickly and allows the salvor to get to work straight away. Delays in the early stages of a casualty, as anyone who has ever been involved will know, can only lead to greater difficulties, a more complicated salvage and consequently a more expensive job.

Jim argues that almost everyone agrees LOF is the right contract when there is substantial risk and a ship is in imminent danger, but many players believe it is abused by salvors in more straightforward cases where the danger is not imminent and there is time for underwriters to negotiate better terms for themselves in the belief that a salvage contract is not warranted.

A wise old salvor was once asked what constituted a job worthy of an LOF contract. He thought for a moment and said “An LOF is like an elephant – hard to describe, but you’ll know one when you see one.”

This is still true today, although it seems there are some salvors who see a butterfly and claim it is an elephant. Perhaps I was fortunate to work in the Far East, where there were so many ratbags offering day rates that we could only insist upon LOF when we could clearly see the elephant. We had to distinguish between things like “emergency towage” and “salvage” to have any hope of winning a fair share of the business.

Jim Allsworth sees nothing wrong with this in a commercial world, but he points out three major problems. First, there will come a time when the delay incurred while commercial terms are negotiated will lead to a serious pollution incident or an avoidable wreck removal – something I know from personal experience has already happened.

Next, he says problems can arise in funding the operation when costs start to escalate rapidly. And finally, “love them or hate them, professional salvors are a necessity,” so if we limit their income there will be no spare cash to fund their R&D or keep them solvent.

In this I am sure he is correct because salvage and, more particularly, wreck removal are rapidly becoming more complex and more expensive. If salvors are not rewarded properly then there is a danger they will no longer be there when we really need them.

“The only question is whether we still have such professional men and women who can set aside their own self-interest for the good of the industry?”

So how do we solve the problem? Jim offers a solution that is simple and elegant, and might just work. He points out that when there were problems with Article 14 compensation for salvors who prevented pollution, all the interested parties got together and devised the SCOPIC system, which, although not perfect, has generally worked well and is still in use today.

He suggests it is time for the parties to sit down again and look at the less urgent cases where the elephant is not in the room, then devise a mechanism for rewarding salvors at a level closer to what they would earn under commercial contracts, and saving the “stonking great rewards” for genuine salvage cases.

Such an arrangement would, he says, encourage swift response and prevent potentially disastrous delays, solve funding issues for the shipowner, properly fund an effective salvage industry and protect the long-term future of both the salvage and shipping industries.

Brilliant. All it needs is the good will and willingness to talk, which was a striking feature of the SCOPIC negotiations. The only question is whether we still have such professional men and women who can set aside their own self-interest for the good of the industry?

The facts are clear, but can we let them stand in the way of the prejudices which seem to be an ever more dominant feature of modern life? Or does everybody think Singapore is close to China? We need more people who know their Madras from their Elba.

Stay safe.