The salvage generally is defined as the rescue of a wrecked or disabled ship or its cargo from loss at sea. It is also defined as a process of saving goods from damage or destruction, especially from a ship that has sunk or been damaged. The legal meaning of salvage however, does not become clear from above definitions. Before we understand the salvage clearly, let us try and see what is contract salvage and understand how it is different from pure salvage.
In the legal perspective, the contract salvage is just a contract to do salvage rather than salvage. In contract salvage the owner of the property and salvor enter into a salvage contract prior to the commencement of salvage operations and the amount that the salvor is paid is determined by the contract. The features may vary depending on the mutual agreement between the parties and not on the existing laws.
1. This can be a fixed consideration (amount), based on a ‘time and materials’ basis.
2. The contract may also become a ‘No Cure, No Pay’ type.
3. Payment may be due on employing the services even if the operation is not successful.
4. It depends on terms that both parties agree to.
Well, salvage being done for a ship, which is in danger or has a property that is in danger, implies that the other party has to take risk. The amount of risk or the existing danger cannot always be pre assessed and therefore cannot be known precisely till the task is accomplished. This means the salvage remuneration cannot be determined prior accomplishment of the task. It is for this reason that the 1910 Convention had the provision that provided court with the power of voiding the contract of salvage that was made on false estimation of danger, had too high or low remuneration, had fraud as element, etc. Thus, though the Art. 6 & 7 of 1910 Convention had a provision of contract salvage, the Convention vide Art. 8 had the court empowered to fix the reward based on the circumstances of each case, on the basis of the considerations: such as;
- the measure of success obtained;
- the efforts and deserts of the salvors;
- the danger run by the salved vessel, by her passengers, crew, by her cargo;
- the danger run, by each vessel;
- the time expended and the expenses incurred and the losses suffered, and the risks of liability and other risks run by the salvors;
- the value of the property exposed to such risks, due regard being had to the special appropriation (if any) of the salvors’ vessel for salvage purposes; and
- mainly, the value of the property salved.
The provision of 1989 Convention on Salvage is basically outside the limits of a contract. It applies to any salvage operation, save to the extent that a contract otherwise provides expressly or by implication.
In pure salvage (also called ‘merit salvage’), there is no contract in respect of remuneration between the owner of the goods and the salvor. The relationship is implied by law. The salvor of property under pure salvage must bring his claim for salvage in a court which has jurisdiction and this will award salvage based upon the ‘merit’ of the service and the value of the salvaged property.
In order for a claim to be awarded, three requirements must be met;
- the property must be in peril;
- the services must be rendered voluntarily (no duty to act); and
- the salvage must be successful in whole or in part.
At this stage an attempt can be made to define salvage as act or service that is not out of pre established contract, duty or compulsion, changing the status of a ship or the property from ‘in peril’ to ‘in safety’ as defined and agreed.
This means the person claiming salvage should not be bound by a duty to provide salvage or a contract regarding the consideration or amount that should be paid. The vessel simply needs to be in a maritime peril (danger) from which the Master wants to get the ship in the status or area of safety as is agreed upon. Thus, a ship may be simply stopped in the middle of ocean, with irreparable main engine. The Master feels that the ship should be brought to a certain location ‘A’. The salvage would be considered successful, only if the ship is brought to the location ‘A’. The consideration is decided upon the successful accomplishment of the task and in certain other cases (where there is no success) on the basis of existing rules in this respect.
A salvage service in the view of the Court of Admiralty may be described sufficiently for practical purposes as a service which saves or helps to save a recognised subject of salvage when in danger, if the rendering of such service is voluntary in the sense of being solely attributable neither to pre-existing contractual or official duty owed to the owner of the salved property.
As a general rule, salvors who render services of this description can ensure the security being deposited prior release of cargo or avail an order by tribunal with jurisdiction as per the interim decision. He, anyway acquires a maritime lien on the property saved and they are entitled to remuneration, except in certain cases where they may be precluded by negligence or misconduct on their part. They may, as a rule, enforce their rights by proceedings in rem (against all) or by proceedings in personam (against individual) under the Admiralty Jurisdiction. The court will assess the amount due, if not already the subject of a binding agreement and decree payment to the salvors by the owners or persons interested in the salved property, or payment out of proceeds of judicial sale of the property. There are, however, some exceptions to these general rules.
‘The right to claim salvage is a fundamental right of the International Maritime Law, depending neither upon any contractual engagement between the salvor and the owner of the salved property, nor upon a cause of action in tort’. Salvage is governed to a significant degree by equity, involves both private rights and public policy.
Note: Contract is written or spoken agreement, that is intended to be enforceable by law.
Tort on the other hand is a wrongful act or an infringement of a right (other than under contract) leading to legal liability.
The reward is given;
- ‘not merely to remunerate the effort made to save the ship, cargo and lives of the persons onboard (private rights)’; but also
- ‘to encourage others to make similar attempts (public policy)’.
Salvage activities existed even before the legislation was in place. This is the reason that the convention contains rules, which are close to the basic principles of law and equity. Admiralty Court in giving their decisions have taken guidance from the basic directives and modified their views from time to time, setting precedents. The main principle which was followed in these judgments being ‘one must not benefit from other’s loss. Since, the legislation has undergone drastic changes from 1910 to the 1989’s Convention, the court rulings therefore would be different if they were given today. The main difference in the two Conventions being the consideration of environment and concept of special compensation. The 1989 Convention applies to pure salvage, independent of contract.
The case laws, however are classic examples to understand if the party giving assistance in absence of contract, deserves the remuneration. These case laws, in their own sense demonstrate the application of written laws with a touch of justice.
Various situations, where a salvage situation has been identified by Admiralty Courts are as follows:
- Towing, piloting or navigating a ship in danger into safety.
- Getting a stranded ship afloat; holding a stranded vessel in position; standing by a ship in danger; removal from a ship of a danger.
- Slipping off anchor and thereafter sinking a vessel in deep waters.
- A vessel in danger of sinking beached.
- Salving a ship by transshipment of cargo; salvaging cargo from sunken ship.
- Shifting derelict or wreck.
- Assistance a ship in danger, giving technical help; giving manpower.
- Guiding ship, giving safe courses to enable a vessel to clear the ice-field.
- Protecting from pirates or plunderers.
- Saving a ship from an impending collision, fire, etc
- Enabling a ship to rejoin the convoy.
Both these convention have rules preventing remuneration to a salvor, expressly refused the services. Although, in a decided case, viewing the detailed facts a case was decided otherwise.
Salvage operation means any act or activity to assist a vessel or any other property in danger. In none of the definitions a time bar is imposed. The thrust is on the success of task rather than the time period in which it is accomplished. There is a very interesting case where the salvor was denied the remuneration but the court gave the judgment in favour of salvor.
Voluntariness is an essential element of salvage in the sense that if a service is rendered solely under a pre-existing contractual or official duty owed to the owner of the salved property, or solely in the interest of self preservation, it is not a salvage service.
Preexisting contract to assist sometimes can cause adverse results, as is evident from a very important decided case. Before we go through the case, let us look at, what law says. Article 5 of 1910 Convention states, ‘remuneration is due notwithstanding that the salvage services have been rendered by or to vessels belonging to the same owner. Similar rule is there in 1989 Convention, Art. 12/3. Thus, ‘this shall apply, notwithstanding that the salved vessel and the vessel undertaking the salvage operations belong to the same owner’. A very minor condition in any contract can however, overturn the case. Let us see, how.
There is a fine difference between the basic work related duty and statutory duties provided by law. Statuary duties do not preclude claims for salvage. The Merchant Shipping Act, sec. 348 provides, ‘In every case of collision between two vessels, it shall be the duty of the Master or person in charge of each vessel, if and so far as he can do so without danger to his own vessel, crew and passengers (if any), to render to the other vessel her Master crew and passengers (if any) such assistance as may be practicable, and may be necessary to save them from any danger caused by the collision and to stay by the other vessel until he has ascertained that she has no need of further assistance. If the Master or person in charge fails without reasonable cause to comply with this section, he shall be guilty of misdemeanor. The statutory duty imposed by this section does not prevent the vessel rendering assistance from claiming salvage.
The sec. 355A of MSA provides that, the Master of an Indian ship, on receiving at sea a signal of distress or information from any source that a vessel or aircraft is in distress, shall proceed with all speed to the assistance of the person in distress (informing them if possible that he is doing so), unless he is unable or in the special circumstances of the case considers it unreasonable or unnecessary, to do so, or unless he is released under these provisions (sub section 3 and 4). Similar regulation is also in chapter V of Solas. It will be noted, therefore, that none of the foregoing statutory duties precludes a claim for salvage. Work related duties however, will not help the claim.
In respect of a pilot the situation again becomes interesting. The pilot on board the salved vessel, who had been engaged as such, cannot claim salvage remuneration for ordinary pilotage services, nor are the services of a pilot to be deemed extraordinary, merely because they involve some degree of hazard. Although, a similar degree of hazard may entitle, one who performed them, purely as a volunteer, to rank as a salvor in respect of them.
Where there is a towage contract, service may be treated as salvage in certain situations particularly, at some point after the towage had begun, towage had been superseded by the right to salvage owing to the altered circumstances. Concealment of material fact by ship (being towed) can change the towage contract to salvage.
Receivers can claim as salvors only if they personally render salvage services to life or property in peril which are outside the prescribed duties. The duties and powers of Receivers of wreck regarding assistance to vessels wrecked, stranded or in distress are set out in the Merchant Shipping Act in part XIII.
Other persons holding a public office or appointment are entitled to salvage reward only if and so far as that which exists clearly outside the scope of the duties of the office or the appointment.
No right to salvage reward, in the proper sense of the term, could arise in respect of services rendered either to property or to life unless by some means part at least of the property concerned ship, cargo or freight was ultimately preserved. It was not essential that the res was salved, but some part of it, at least, had to be saved. If for the moment, we disregard the Safety Net, “Success was necessary for a salvage reward.”
Salvage Con 1910 states, ‘Salvors of human life, who have taken part in the services rendered on the occasion of the accident giving rise to salvage or assistance, are entitled to a fair share of the remuneration awarded to the salvors of the vessel, her cargo, and accessories’. Salvage Convention 1989 has a similar provision with additional mention of environment.
Successful result is a very important aspect of salvage. Services, however meritorious, which do not contribute to the ultimate success, do not give a title to salvage reward. There is a very interesting case on record, which goes as follows:
1910 Conv. Article 7 says, ‘Every agreement as to assistance or salvage entered into at the moment and under the influence of danger may, at the request of either party, be annulled or modified by the court, if it considers that the conditions agreed upon are not equitable. Also, in all cases, when it is proved that the consent of one of the parties is vitiated by fraud or concealment, or when the remuneration is, in proportion to the services rendered, in an excessive degree too large or too small, the agreement may be annulled or modified by the court at the request of the party affected.’
Article 8 says, ‘The court may deprive the salvors of all remuneration, or may award a reduced remuneration, if it appears that the salvors have by their fault rendered the salvage or assistance necessary or have been guilty of theft, fraudulent concealment, or other acts of fraud’.
1989 Convention Art 14 / 5 : If the salvor has been negligent and has thereby failed to prevent or minimize damage to the environment, he may be deprived of the whole or part of any special compensation due under this article.
Article 18 states, ‘A salvor may be deprived of the whole or part of the payment due under this Convention to the extent that the salvage operations have become necessary or more difficult because of fault or neglect on his part or if the salvor has been guilty of fraud or other dishonest conduct.’
Article 23 states, ‘Any action relating to payment under this Convention shall be time-barred if judicial or arbitral proceedings have not been instituted within a period of two years. The person against whom a claim is made may at any time during the running of the limitation period extend that period by a declaration to the claimant.
(You may also visit my youtube videos @captsschaudhari.com)