Monday, July 26, 2021

Maritime Salvage Document Survives Vote of Confidence

Century Old Claim Form Stands the Test of Time
Shipping News Feature
UK – WORLDWIDE – One of the most iconic of shipping documents, the 'Lloyd's Standard Form of Salvage Agreement', more commonly referred to as the Lloyd's Open Form, has been under threat of late due to under use but confirmation comes that the Form is to be saved, and indeed promoted more widely.

After an industry-wide consultation the Lloyd’s Salvage Arbitration Branch (LSAB) that oversees the Lloyd’s Open Form (LOF) salvage contract and procedures is to be continued by Lloyd’s. There had been a proposal to put LSAB into ‘run off’ in the face of declining use of the LOF, a decline perhaps through improved safety of the maritime industry or a growing resistance by insurers to the Form’s risk-based structure.

For more than a century the LOF has provided a framework for determining the amount of remuneration to be awarded to salvors for their services in saving property at sea and minimising or preventing damage to the environment. Today it is still the most widely used international salvage contract.

The LOF is called ‘open’ because it doesn’t specify any particular sum for the salvage job but is merely an agreement to provide a service in the expectation of a ‘reward’ to be determined later by an arbitration hearing in London. Based on the principle of ‘no cure, no pay’, salvors are adjudged a share of the value of the assets they recover.

Salvors argue that such incentivisation, rather than fixed-price contracts normally awarded on a competitive ‘lowest bid’ basis, is necessary if they are to maintain their fleets of expensive salvage vessels and experienced accident response teams on standby in case of marine accidents.

In making is decision the Lloyd’s Council says it has ‘recognised and listened to’ the high volume of representations in support of LSAB and LOF made by market representatives, committees and other interested parties and the Council issued the following statement:

“Lloyd’s is now determined to increase the use of the form and highlight the benefits that its use can bring. With support from the Lloyd’s Market Association, and representatives of the Lloyd’s market (marine) committees, we would like to establish a ‘LOF Market Working Group’ to support and help drive this review [with] support from the already established ‘Lloyd’s Salvage Group’, represented by all parties across the maritime sector with an interest in LOF.

“Once this work has been completed, we will then present the findings, actions and any recommendations to Lloyd’s Council. In the meantime, we will amend our charging structure to better reflect the importance of the work undertaken by the LSAB and we will shortly be sending a further communication to the market, and wider maritime community, confirming the new charging structure for the LSAB (and use of LOF).”

The Council’s move has been strongly endorsed by UK maritime professional services body Maritime London with Chief Executive, Jos Standerwick, commenting:

"I am exceptionally pleased that Lloyd’s have made the right decision on the future of the LSAB and is committed to working with the market to increase the use of the Form and highlight the benefits that its use can bring. It goes without saying that Maritime London and our members will do all we can to support Lloyd’s in this endeavour.

“I would like to thank all of our members and those from the wider, international shipping community who were so vocal in explaining the fundamental importance of the LSAB and the LOF to the London market and the most importantly to the safe and efficient response to marine casualties.”

Mr Standerwick’s views were echoed by Mark Lloyd, his Chairman, who is also a member the Admiralty Solicitors Group (ASG), who added:

"The ASG and other users of the LSAB and LOF system are strongly supportive of the response of Lloyd's to the consultation process. The unanimous and consistent response from the insurance, salvage, services and other industry parties was that the LOF system and LSAB's role is a core element of the global shipping industry. This response confirms that.”