December 2016
INTERNATIONAL SALVAGE UNION
Salvage and Wreck Conference focuses on Lloyd’s Open Form A panel session was devoted to considering the use of LOF. Jim Allsworth of CSolutions reminded the conference that the shipping industry “needs a professional salvage capability” and said there was a risk that, if the trend to undertake jobs on commercial terms continued, the required salvage capability might not be available.
Left to right: Andrew Chamberlain, George Tsavliris, Jim Allsworth, Sam Kendall-Marsden.
The state of the Lloyd’s Open Form salvage contract was a significant focus of the recent Salvage and Wreck Conference. ISU members, associates and executive committee members were well represented at the annual event in London. The conference featured three themes: law and insurance; tugs and spill response. ISU President, John Witte, along with Dieter Berg, President of the International Union of Marine Insurance opened the main proceedings with an outline of the state of their industries. Mr Berg highlight challenges for marine insurers including the commercial environment, market conditions and technological challenges. Looking to the future, he pointed to cyber risk and deep sea mining for minerals as areas of concern. The rise in cargo values on fully laden box ships was also an issue forcing cargo insurers to take a closer interest in salvage matters. John Witte addressed the commercial environment for marine salvors. He said that a decreasing supply of work and plenty of would-be contractors meant there was the possibility of further consolidation in the industry following the creation last year of Ardent from ISU members Titan and Svitzer. The reputation of the salvage industry continues to be a focus for the ISU, according to Mr Witte who said: “Salvors
can feel a bit unloved. There may be examples of bad practice but surely that is the case in all industries. Salvors should be regarded as ‘loss mitigation partners’ to the insurers and owners.” He said that ISU had publicly committed to ensuring that its members behave properly. However, he added: “I do not believe we have a fundamental or systemic problem in our industry and ISU expects other parties to be fair to our members and to behave properly. It goes both ways.” Speaking about LOF, Mr Witte said: “We know the days of more than one hundred LOFs each year are gone but nevertheless ISU believes it remains the best contract in many emergency response situations. It ensures a rapid intervention in an evolving casualty situation. “The benefits are clear: speed; simplicity and clarity of standard clauses; “no cure, no pay” and the risk is with the salvor.” It is widely agreed that education is needed among owners and underwriters to ensure the benefits of LOF are properly understood. Mr Witte also said that ISU encourages its members to use the “right contract in the right circumstances” and noted that there are others ways to contract. But, he added, “an evolving casualty situation is not the time to engage in commercial brinksmanship." 1
George Tsavliris, principal, Tsavliris Salvage said that salvors still need the element of “encouragement” allowed for in LOF awards to ensure they can maintain the necessary level of equipment. Sam Kendall-Marsden of the Standard Club said that LOF was the ideal contract for an emergency when there was not time to negotiate but it had been undermined by improved communications. He said he was supportive of the LOF regime but there are issues to address. Conference chair, HFW partner, Andrew Chamberlain, summed up the panel debate saying that LOF had received a “cautious thumbsup.” ISU’s stated position is to support the use of un-amended LOFs and does not believe the contract needs to be modified.
Dieter Berg (left) and John Witte.