MODERN SALVAGE OPERATION AND THE LOF

MODERN SALVAGE LAW:-
Salvage is the services rendered by a person who saves or helps to save a maritime property in danger. A salvage operation will be a salvage operation if and only if
1) The salvage service must be voluntary
2) The salvage service must be rendered to recognized subject of salvage
3) The subject of salvage must be in danger
4) The salvage service must be successful.
     Modern salvage law is based on INTERNATIONAL CONVENTION ON SALVAGE 1989, which replaced the 1910 convention which incorporated the ‘no cure – no pay’ principle. This means the salver was only awarded for his services when the operation was successful. Although this basic philosophy worked in most cases, it did not take pollution into account. A salver who prevented a major pollution incident ( by towing a damaged tanker away from a environmentally sensitive area) but did not managed to save the ship or cargo got nothing. The 1989 convention seeks to remedy this deficiency by making provision for an enhanced salvage award taking into account the skills and efforts of salvers’ in preventing or minimizing damage to environment.
   Article 14 of convention introduced a special compensation to be paid to salvers who have failed to earn a reward in the normal way which is listed in article 13. If the salver by his salvage operation has prevented or minimized damage to the environment, the special compensation payable by the owner to the salver may be increased up to maximum of 30% of the expenses incurred by the salver. It can be increased in special cases but cannot exceed 100% of the expenses incurred by the salver.

LLOYD’S OPEN FORM:- A Lloyd’s open form, formally Lloyd’s standard form of salvage agreement, but more commonly referred to as LOF, is a standard legal document for a proposed salvage operation. The two page contract is published by Lloyd’s of London. It is called open because it is literally open, without any money being stipulated for the salvage job. The sum to be paid is determined later in London by a professional arbitrator. At the top of page, beneath the title ‘salvage operation’ is a statement of contract’s fundamental promise “NO CURE – NO PAY”. This means that the reward depends upon success and the recovery of property.
       First Lloyd’s form of salvage agreement was adopted in 1892. In its early edition ( up to 1970). LOF was straight “NO CURE -- NO PAY” contract. The 1980 edition moved away from the traditional “NO CURE—NO PAY” principle by providing a safety net for salvers who agreed to the salvage of loaded oil tanker. The safety net guaranteed that the salver’s expenses would be paid in case where the value of the salved property was less than normal salvage award. In addition salver could receive an increment of up to a maximum of 15% of his expenses.
         An improved incentive scheme ‘special compensation’ was introduced in article 14 of the International salvage convention 1989. This is paid by the ship owner when salver has prevented or minimized damage to the environment. LOF 1980 ‘safety net’ only applied to loaded oil tanker, but article 14 applies to all ships. The 1990 edition of LOF contract gave immediate effect to article 14.
       Although seen by the salver as welcome incentive, difficulties were experienced in several salvage cases in assessing the amount of special compensation due under article 14. An alternative means of assessing special compensation remuneration, known as SPECIAL COMPENSATION P&I CLAUSE or SCOPIC clause, was therefore developed by salver’s P&I club underwriters and other parties. To incorporate the SCOPIC clause improved version of LOF came in force in 2000.