410.659.1300
News & Insights

Salvage Convention of 1989: Rewarding Efforts to Protect the Environment

To the professional salvor, the principle of “No cure – No pay” is one of the most inequitable rules to be adopted by the admiralty courts. Under this principle, the skilled and professional salvor will receive no salvage reward in the event that his salvage efforts fail, or in the event that the salved property has little or no value. This principle is closely linked to a second rule which provides that the amount of the salvage reward may not exceed the value of the salvaged property.

These traditional principles ignore the benefits conferred upon vessel owners by salvors whose efforts may result in the owner’s avoidance of tremendous liabilities (especially to the environment and to third parties), even though the salvors do not succeed in saving anything of value.

In recent years, with the adoption of pollution protection legislation and with increased public interest in environmental protection, these traditional salvage principles have become even more unfair. Under traditional salvage law, the salvor who prevents an environmental disaster by successfully salvaging a vessel with full fuel tanks, only to find out later that it is a constructive total loss, will receive no reward for his efforts. Although a few courts have attempted to correct this inequity by judicially recognizing the concept of “liability salvage” (i.e., a salvage reward for averting the owner’s liability for pollution and other claims), these efforts have not received wide acceptance.

Upon this background arrived the “International Salvage Convention of 1989,” which entered into force in the United States on July 14, 1996. The Convention recognizes that salvors need incentive to exert their best efforts to prevent or minimize damage to the environment and that salvors should be rewarded for their skill in doing so. Article 13 of the Convention provides that whenever salvors have successfully saved property having value, in addition to examining traditional criteria such as skill, peril and promptitude, the courts must now consider “The skill and efforts of the salvors in preventing or minimizing damage to the environment” when fixing the amount of the salvage reward. In addition, Article 14 of the Salvage Convention provides that in cases where a salvor is not eligible for a traditional “No cure – No pay” salvage reward, either because his efforts failed or because the property salved was worthless, he may still be awarded “Special Compensation” in the event that he was able to minimize or prevent environmental damage in the course of his salvage efforts. Under such circumstances the salvor is eligible to receive “Special Compensation” equal to the fair value of its out-of-pocket expenses, plus a fair rate for the equipment and personnel actually utilized in the salvage operation. In addition, Article 14 provides that whenever the court deems it “fair and just to do so,” the salvor’s “Special Compensation” may be increased by up to 100%. This allows a salvor whose efforts succeed only in preventing environmental damage, the potential to recover up to 200% of the salvor’s expenses.

The Salvage Convention has therefore introduced greater fairness into the calculation of the salvage reward, and has created a new remedy by which a salvor who is unsuccessful, or who salvages property with little or no value, may still be able to “salvage” at least the expenses of his own efforts. By recognizing that salvors must often make quick decisions to act, at times when the salved value of property may be in question, the Salvage Convention provides salvors with new incentive to act, and to avert environmental damage, especially when salvors may recover the expense of their efforts and up to double those expenses if warranted by the circumstances.

Tags: