Lloyd’s Open Form (LOF) is a necessary contract for salvage when there is considerable risk to life, assets and the environment
Technological advances and improved safety regimes have resulted in ships being safer at sea and, therefore, the number of casualties has fallen considerably since the 1990s.
Fewer salvage contracts have been signed and this is one of the main factors which has led to a reduction in LOF contract cases.
Despite the significant diminution in the figures over recent decades, serious casualties will never be completely eradicated and the LOF is very likely to remain an important and necessary contract in circumstances in which the crew, ship and environment are in imminent and serious peril.
That said, advances in communications and sophisticated technology now make consideration of other contracts attractive to shipowners in relation to minor casualties which do not immediately put the crew, ship or environment at risk.
With today´s technology, the shore side can receive updated notifications from the vessel within a very short period, and sometimes even in real time.
Accordingly, ship masters no longer need to make unilateral decisions when confronted by challenging circumstances.
The most appropriate type of salvage contract can be carefully selected and entered into by the shipowners and the salvor, often following legal advice, and the LOF contract may not be selected for minor casualties.
In this context, the salvage industry has, of necessity, changed significantly and competition between the global salvage operators now dominating the sector has become considerable. Moreover, the salvage equipment on offer has become more sophisticated and expensive.
When a casualty is announced from the ship´s side, these global salvage operators receive tender notices at almost the same time and now find it harder to insist on using an LOF contract. They often offer flexible contract terms where minor casualties are concerned to secure the work.
Understandably, a shipowner facing a casualty wants the salvor to arrive on the scene as quickly as possible, efficiently and successfully complete the salvage (while minimising any damage to the environment) and keep the salvage award as low as possible.
However, such an outcome is not always possible and generally the LOF awards, being based on salved values, can be very expensive in comparison with BIMCO´s TowCon or other fixed-price salvage contracts.
This is an inevitable result of services on a ’no cure - no pay’ basis where the reward amount is open until the event of success; although the LOF is a contract, salvage services performed pursuant to the LOF are deemed pure salvage, rather than contract salvage.
Nowadays, both shipowners and salvors expect to use a suitable salvage contract when a casualty occurs. However, what is appropriate will depend on the circumstances, including the crew´s health and wellbeing, the vessel´s condition, the type of casualty, the weather, sea state and the distances involved.
Most minor casualties requiring straightforward hook up and tow do not need the LOF contract. TowCon 2008, involving a fixed-price lump-sum payment, and TowHire 2008, involving a daily rate of hire, or other commercial contracts will suffice.
And it is widely recognised that no shipowner wants to engage salvors on the LOF terms unless it is absolutely necessary; they would rather use salvage contracts calculated on a daily rate or lump sum basis.
However, when a vessel is in a genuinely dangerous situation and requires urgent assistance (for example, because it is in imminent danger drifting without power in bad weather near a coastline or reef and/or close to busy marine traffic and/or on fire), the LOF contract remains, for both shipowners and salvors, the favoured salvage contract as it is generally deemed the surest agreement by which to protect the master, crew, property and environment.
In addition to the LOF, there are various alternative, national forms of salvage contract. However, these are generally only used by vessels and salvors who are in the waters of, or who are nationals of, the countries concerned.
When a vessel rests lightly aground in calm conditions and sheltered waters, no urgent measures are called for and BIMCO´s WreckFixed 2010 involving a fixed price, and WreckHire 2010 may be the best option.
When it comes to subcontracting, SalvCon 2005, a fixed-price salvage contract published by the International Salvage Union (ISU) can be used. It is designed to be used by a salvor, working under the LOF or a similar contract, who wishes to engage additional assistance from another salvor on a lump-sum and non-award sharing basis. Other commonly used alternatives are the ISU award-sharing subcontractors agreement and SalvHire 2005, a daily hire agreement.
As has been stated, no cure - no pay is a basis specifically designed for salvage operations on which prospects for success are not always specific and, therefore, the total cost of salvage including remuneration is usually higher than will be incurred in cases of rescue on any other basis, such as daily hire.
Therefore, when there is no doubt that ship and cargo are salvable, the LOF is profitable only to the salvors. Thus, a ship master must be prudent in signing the LOF.
Often however, where signing the LOF is most appropriate is also where the strongest, most powerful and most manoeuvrable tugs are needed. These could be tugs with bollard pulls of more than 100 tonnes.
As ships have got larger, so has the need for ever more powerful, sophisticated and expensive tugs and other salvage equipment. These must of course be not only purchased but also maintained, manned and handled by experienced and highly skilled crews capable of using them properly.
* Rupert Talbot-Garman is a London-based maritime and commercial arbitrator and mediator. He is a solicitor of the Supreme Court of England and CEDR-accredited mediator
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