DECEMBER 2014
INTERNATIONAL SALVAGE UNION
ISU President promotes benefits of LOF contract The Lloyd’s Open Form (LOF) is a fair contract with many benefits, ISU President, Leendert Muller, told the annual Salvage and Wreck Conference in London in the keynote speech. LOF is still the most commonly used salvage contract with ISU statistics showing that its members performed 48 LOF services in 2013, up from 37 the previously year. But the overall trend is a decline in the use of LOF and ISU is set to work with Lloyd’s on communicating the benefits of LOF to the marine insurance market as well as other parts of the shipping industry. ISU wants to tackle misunderstandings such as the misplaced fear that LOF may be costly to use. Setting out the benefits, Mr Muller said: “LOF is a clear and simple contract, with standard clauses. It enables rapid intervention in an evolving casualty situation mainly because there is no need to negotiate terms “upfront” and the contract can be quickly agreed with a verbal agreement that is legally binding. It can be signed at a later stage.”
taking account of the circumstances of the job.
The integrity of LOF is assured by Lloyd’s, a world scale insurance market with considerable resources and there is a defined process and well-supported system to administer use of the LOF contract. ISU believes strongly that it is a fair contract which provides for a salvage award based on a number of criteria including the value of the property saved
ISU does not consider LOF to be any more expensive to use than other contracts and there is also a Fixed Cost Arbitration Process (FCAP) for smaller cases. Mr Muller also noted that there are cases where the use of daily hire rates and other commercial terms has, in the end, cost more than if a LOF had been used.
Mr Muller added: “Perhaps the best demonstration of the fairness of LOF is that the majority of cases are settled amicably. If they are not, there is a clear dispute resolution process using Lloyd’s Arbitrators and further possibility to appeal against an arbitrator’s award.”
Mr Muller added: “We would like to see Lloyd’s put more weight behind communicating the benefits of LOF and promoting its use to Lloyd’s underwriters. But we also recognise that there are number of other salvage contracts that are regularly used and which have their place. And there are, of course, cases where other commercial terms are more appropriate”. ISU was well represented at the conference, with many members speaking and participating in panel discussions. ISU General Manager, Mark Hoddinott, moderated a working group and Communications Adviser, James Herbert, led a workshop of the salvage of “mega vessels”.
ISU opposes concept of the “Property Salvage Consultant” ISU has re-stated its opposition to the idea of a so-called Property Salvage Consultant (PSC) attending nonSCOPIC Lloyd’s Open Form cases. The initiative has been promoted by cargo insurance interests. The concept of a Special Casualty Representative (SCR) being deployed during a SCOPIC LOF case is well established and parties agree it generally works well but this idea is for property interests to send a consultant to monitor the progress of the salvage services in non SCOPIC LOF cases and send regular reports. It is the ISU position,
supported by the International Chamber of Shipping; the International Group of P&I Clubs and the Admiralty Solicitors’ Group that a PSC is unnecessary. ISU General Manager, Mark Hoddinott said: “Salvors are engaged to use their “best endeavours” to save life, protect the environment and save property. Their pay depends on their success in those objectives, taking account of the circumstances. We therefore reject the PSC proposal because we do not see that it will add any value; it will increase bureaucracy and could even lead to interference which might hamper the 1
conduct of operations.” ISU recognises the need to ensure all parties are properly briefed on the progress of operations and so it has agreed that, for a trial period, the appointed salvage master will submit to Lloyd’s a Daily Salvage Report (DSR) in a standard format. That report can then be circulated to all interests to keep them updated and sighted on developments. Mr Hoddinott added: “We do not think there is any need to continue debating the matter during the trial period.”