Lloyds Reviews Key Maritime Salvage Contract

• Lloyd’s and the Lloyd’s Market Association has started a second phase of its review into the format, content and use of a key maritime salvage contract.
• A workshop was held on 8 December 2021 to review the Lloyd’s Open Form (LOF) contract for ship salvage to understand how it can be amended to encourage its greater use in maritime.
• This workshop seeks to prevent a further decline in LOF use in maritime salvage and strengthen the form so it becomes the main contract for these shipping emergencies.

A Riviera news source talks about Lloyd’s review of the format, content and use of a key maritime salvage contract.

First phase of the review

Lloyd’s manager for market engagement, oversight and delivery Kevin Clarke outlined what this involves at the Salvage and Wreck Removal conference in early December. He said the first phase of the review into LOF was completed in Q3 2021.

“Initial and exploratory conversations were held with a range of stakeholder groups” said Mr Clarke.

Phase two of this process involved the workshop including many of these stakeholders. Representatives from the International Chamber of Shipping, International Salvage Union and International Group of P&I Clubs met with those from the International Union of Marine Insurance (IUMI) and LOF appeal arbitrators to discuss LOF.

Findings will be discussed with others

Findings from this workshop group will then be discussed with others in the industry.

“Phase three will involve broader stakeholder engagement, once we have the conclusions from the workshop,” said Mr Clarke.

There was strong support from many of these stakeholders in Q2 2021, in reaction to Lloyd’s announcement of its intention to close the salvage arbitration branch (LSAB).

IUMI Salvage Forum chair Philip Norwood said this announcement came as a surprise and would have led to the demise of LOF for maritime salvage.

A strong market reaction

“There was strong market reaction because LSAB is vital,” said Mr Norwood. “LSAB is pivotal for LOF contracts and facilitating LOF processes from start to finish.”

He said IUMI fully supported LSAB and LOF as “these are important to the salvage industry and insurance market”.

A working party and wider industry consultation would help steer LSAB and LOF for the industry.

“LOF and LSAB enable quick responses to lower grounding risks. They are important for saving lives, assets and reducing pollution risk,” said Mr Norwood.

“Salvage is essential and important to ship insurance. Insurers need salvors to protect the shipping industry and we need to do more to protect LOF, and ensure it is used as a default.”

ISU’s new president Captain Nicholas Sloane

ISU’s new president Captain Nicholas Sloane said LSAB and LOF were vital for a swift response to ships in distress.

“LOF is essential for sustainable salvage services, mitigating loss and protecting the environment,” he said. “Quick salvage can have a major impact. It is important that salvors are available to respond to cases to mitigate risk, minimise asset loss and save lives.”

26 maritime casualties in 2021

According to Lloyd’s, there have been 26 maritime casualties in 2021 where LOF was or is being used as the salvage agreement.

The latest of these is the LOF for the salvage of Marshall Islands-flagged, 2007-built bulk carrier Aviator in the Indian Ocean. This 11,743-gt bulk carrier was in a collision with product tanker Atlantic Grace, 12 nautical miles off Okha coast, Gujarat, India on 26 November. LOF was signed on 28 November enabling Smit Salvage to provide assistance to Aviator. Mr Clarke is the case manager for this LOF.

Under another LOF contract, Five Oceans Salvage Consultants towed 2006-built container ship Archimidis out of trouble off Acapulco, Mexico. This Liberia-flagged, 89,776-gt ship had 3,930 containers on board when it was disabled and drifting for 12 days before assistance was provided.

Incident in November

At the end of November, French salvors Les Abeilles towed 2012-built bulk carrier TBC Progress to Le Havre under an LOF contract. This Panama-flagged, 19,999-gt vessel was carrying a cargo of grain when it suffered propulsion damage in heavy weather 50 nautical miles off Cap de la Hague.

In October, Multraship Salvage and Smit Salvage worked together on an LOF project. They assisted general cargo and container ship Beaumaiden when it grounded off Ronne, Denmark. This 2008-built, Dutch vessel was carrying fertiliser when it ran aground. Tugs were able to refloat and then tow the 2,545-gt vessel to Ronne.