Decoding the salvage paradox in Liverpool

A mock arbitration illustrated how this works. Emerald City, a 59,938 dwt container vessel, grounded on a coral reef in the South China Sea after a failed avoidance manoeuvre. With flooding, a port list, and Indonesian authorities requiring bunker removal before work could begin, salvors patched, lightened, refloated and delivered the vessel to Singapore within 20 days. The salved fund was approximately US$80.8M; expenses were US$3.3M, including US$1.5M for bunker removal on terms later described by Mr Howard as extortionate.

James Severn of Penningtons Manches Cooper, arguing for the salvors, emphasised severe peril, skilful execution in a difficult jurisdiction, and the Convention’s encouragement principle. This is the long-established notion that arbitrators should set awards at a level sufficient to sustain and incentivise the salvage industry as a whole. Joseph Riley, also of Penningtons Manches Cooper, representing the property interests, countered that conditions were relatively benign, risks overstated, some work unnecessary, and the bunker removal costs unrecoverable since the fuel was retained by the contractor. Mr Howard awarded US$12M.

Delegates were invited to estimate the outcome after hearing submissions but in advance of the arbitrator’s award. The spread of guesses was wide (in some cases very wide) which illustrated how opaque the process can appear to people unfamiliar with salvage operations, though the award itself fell within a range that experienced practitioners would recognise as defensible.

For the towage sector, the implications are direct. The industry is moving into more complex casualties, including floating offshore wind and alternative-fuel vessels, under a legal framework that has remained largely unchanged since 1989. The assets are evolving; the principles are not.

That continuity is a feature, not a flaw concluded Mr Severn. Lloyd’s Open Form and the Salvage Convention offer a well-established, commercially viable framework for handling precisely the kind of complex, time-critical situations the sector increasingly faces, he added. "The perception that LOF is too expensive or too unwieldy does not survive scrutiny: the arbitration process provides checks, balances and the opportunity to test every element of a claim before experienced decision-makers."

The room was left in no doubt: when tested, awards will still hinge on those Article 13 principles.