This document summarizes key elements of salvage contracts and awards. It discusses the essential elements of salvage, including maritime property in danger and voluntary services resulting in success. It outlines the objectives of rewarding salvors generously to encourage their services. Compensation increases based on a salvor's level of involvement, from occasional assistance to full-time professional salvage. The document reviews several case examples and covers the Lloyd's Open Form, criteria for fixing salvage awards, and the Salvage Convention of 1989. It also discusses the SCOPIC solution for calculating salvage remuneration.

1. Salvage Contracts, LOF & Awards
Aditya Krishnamurthy, Partner
BOSE & MITRA & CO.

2. Essential Elements of Salvage
Maritime Property
Danger
Voluntary Services
Success – “No Cure – No Pay”

3. Paramount Objectives of Salvage
•salvors paid for benefits conferred to property;
•public policy requires such payment to be
generous ‘reward’ with a view to encouragement
of salvors

4. Compensation increases along the scale
1. those who would normally not expect to render salvage services;
2. those, like harbour authorities, whose normal work is not salvage but
who might on occasions render salvage services as an incident of their
normal work;
3. those for whom salvage is a part of their normal activities, albeit not
their exclusive concern (and who may hire in salvage equipment or
sub-contractors to work with their salvage superintendent);
4. A full professional salvor who maintains specially equipped salvage
vessels, pumps and other equipment in a state of readiness allowing for
quick reaction to disasters.

5. The Thor Commander [2019] 1 Lloyd's
Rep. 168
• The Thor Commander engine broke down and was drifting to a reef
in Australia. The cargo vessel The Xinfa Hai provided towage
service to tow The Thor Commander away from the reef pursuant to
directions of the Australian Authorities;
• The towage operation took approximately 5 hours;
• Salvage Fund – USD 70.5 Million;
• Salvage Reward – USD 1 Million to the owners of The Xinfa Hai

6. The Ocean Crown [2010] 1 Lloyd's Rep.
468
• The Ocean Crown whilst steaming from Chile to India ran aground at
the at the Darwin Channel (near the coast of Chile). Professional
salvage firm had provided assistance.
• value of vessel + cargo + bunkers = USD 166 Million;
• Professional salvor engaged who incurred expenses of USD 18 Million;
• Salvage ‘reward’ excess of USD 34 Million;
• Future market downturn cannot be taken;

7. The Voutakos [2008] 2 Lloyd's Rep.
516
• The Voutakos a bulk carrier vessel whilst steaming from Columbia to Rotterdam
suffered a main engine breakdown as she approached the English Channel.
• Tsavliris salvors towed the vessel to Rotterdam by chartering two tugs and
incurring out-of-pocket expenses USD 874,000 and claimed a salvage reward of
USD 6 Million for the same.
• Salved Fund -USD 42 Million.
• Salvage Reward – USD 2.7 Million
“It must be the case that where a major part of the service has been subcontracted
the award will be less than the award payable to the salvor who has actually made
use of his own investment in craft and equipment to confer the benefit.”

8. The La Pampa [2007] FCAFC 115
• The La Pampa grounded after its steering gear failed as it unberthed in Queensland,
Australia. Three tugs owned commenced a coordinated salvage operation.
• After several hours of pushing and nudging The La Pampa was refloated. The failure of her
main steering gear, coupledwith changes in swell and tide, made the job of the salvors
more difficult.
• Salved fund AUD 37.91 Million;
• Actual expenses AUD 35,000.
• Salvage Reward of AUD 850,000
• The Australian Court held that a considerable latitude of discretion vested with the
arbitrator/ judge in assessing salvage rewards.

9. Rights of salvors are essentially
independent of contract
“A salvage agreement is an agreement which fixes, indeed, the amount to be
paid for salvage, but leaves untouched all the other conditions necessary to
support a salvage award”
Article 7 of the Salvage Convention provides:
A contract or any terms thereof may be annulled or modified if (a) the contract
has been entered into under undue influence or the influence of danger and its
terms are inequitable; or (b) the payment under the contract is in an excessive
degree too large or too small for the services actually rendered.

10. Lloyd’s “Open” Form
• NOT to provide a self contained regime governing the parties
relationship
• it provides for salvage remuneration to be fixed by an independent
arbitrator in accordance with the principles of English law of salvage.
• In practice, the blank space Lloyd’s Form was very seldom filled in. In
modern times, very few agreements fix salvage remuneration.

11. Lloyd's Open Form - Salvage Arbitration
• Institutional Arbitration of the Salvage arbitration branch of Lloyd’s – English
law and Jurisdiction;
• Collects security from the owners of the Vessel - Security is released after the
award is honoured;
• Has a two tire system wherein an awarded passed by the arbitration of first
instance can be appealed against;
• Publishes awards available online for members of Lloyd’s;

12. Merchant Shipping Bill, 2016 & the
Salvage Convention, 1989
• Salvage Convention, 1989 ratified by India;
• The provisions of the said Salvage Convention 1989 were
incorporated from in the Merchant Shipping Bill, 2016 (Chapter II of
Part XI) which was
• Introduced in the Lok Sabha on December 16, 2016.
• Referred to the standing committee on the 12th January 2017.
• Standing Committee tendered its Report on the 18th July 2017.

13. Criteria for fixing the reward –
Article 13 of the Salvage Convention
• the salved value of the vessel and other property;
• the skill and efforts of the salvors in preventing or minimizing damage to
the environment;
• the measure of success obtained by the salvor;
• the nature and degree of the danger;
• the skill and efforts of the salvors in salving the vessel, other property
and life;

14. Criteria for fixing the reward – Article
13 of the Salvage Convention (Contd.)
• the time used and expenses and losses incurred by the salvors;
• the risk of liability and other risks run by the salvors or their
equipment;
• the promptness of the services rendered;
• the availability and use of vessels or other equipment intended for
salvage operations;
• the state of readiness and efficiency of the salvor's equipment and the
value thereof.

15. Article 14 – Special Compensation for
Environment Protection
• ‘No Cure – No Pay’ not applicable for environment salvage
• Salvor gets compensation for his out-of-pocket expenses, plus a
‘fair rate’ for equipment and personnel actually and reasonably
used;

16. The Nagasaki Spirit [1997] 1 Lloyd’s Reports
323
• Collision between The Nagasaki Spirit, laden with crude oil, and the container ship,
The Ocean Blessing, in the northern part of the Malacca Straits. Unfortunately, apart
from 2 seafarers on The Nagasaki Spirit all other seafarers on board The Ocean
Blessing and The Nagasaki Spirit lost their life;
• The savors successfully curtailed oil pollution by transferring 22,466 tons of oil from
the Nagasaki Spirit;
• The Court had taken the view that the salvors are only entitled to recover out of
pocket expense and made it clear that it did not involve an element of profit;
• Salvors were initially awarded USD 12. 26 Million and the same had been reduced to
USD 8.6 Million.

17. The SCOPIC Solution
• A standard form contract incorporated into the LOF at the
option of the parties;
• Workable framework for calculating remuneration pre-agreed
rate of vessels, personnel and equipment;
• Greater financial security to salvors;
• Invoked by the salvor at any state in the salvage operations,

18. Madgavkar Salvage vs. Norsea Global
Offshore Pte. Ltd, Commercial Arbitration
Petition No. 13 of 2015
• The Bombay High Court refuse to disturb a salvage arbitration award
seated in Mumbai which inter alia refused to enforce the idle time
charges of the contract of salvage.
• The Salvor claimed idle time charges until security was furnished by the
shipowner under the salvage contract.
• The Shipowner successfully argued that such a clause was a penalty
clause and the salvor did not sustain any loss in relation to keeping his
equipment idle.

19. THANK YOU
Bose & Mitra & Co.
72, Sakhar Bhavan
230 Nariman Point
Mumbai, India