410.659.1300
News & Insights

Salvage Lien Characteristics

The scope and characteristics of the salvage lien are often misunderstood. Hopefully this article will shed some light on this complex legal concept, which underlies virtually all claims for a salvage reward.

The successful salvor will acquire a salvage lien for the value of his reward upon the vessel and cargo salvaged. A salvage lien is just one type of maritime lien. A maritime lien is a privileged lien or property right in a vessel, much like a security interest, which follows the vessel wherever it goes and remains intact, even if the vessel is sold to a buyer without notice of the lien. It arises the moment the services are provided to the vessel. Maritime liens are often called “secret liens” since they do not need to be recorded anywhere before they take full force and effect. There is no title or registry anywhere, which can be examined in order to determine whether any particular vessel is encumbered by maritime liens.

Reasonable diligence must be exercised in order to preserve a maritime lien. If the lien holder sits too long on his lien without taking action to collect it, then his lien will become stale and can be forfeited under the doctrine of laches. The holder of a maritime lien may foreclose his interest in the vessel by filing suit against the vessel in federal court (the vessel is treated as if it were a living person). The court will order the vessel to be arrested (seized by the Marshal). Then, if adequate security is not timely posted by the vessel owner, the court will order it to be sold at auction by the Marshal, so that maritime lien holders may be paid from the proceeds of the vessel’s sale. The public is notified of an arrest and upcoming auction (by newspaper ad) so that all lien holders may learn of the arrest, and may intervene in the case to protect their claims to a share of the sale proceeds.

When a vessel is sold to foreclose maritime liens, it is at a U.S. Marshal’s auction. Only a Bill of Sale issued by the U.S. Marshal will clear the vessel of all maritime liens. The winning bidder who receives a Marshal’s Bill of Sale can be confident of receiving a clean title. Maritime lien holders are then paid from the proceeds of sale in accordance with their respective priorities. Among the various types of maritime liens, the salvage lien holds very high priority. The only maritime lien with a higher priority is a lien for crew wages earned after the salvage service was performed.

The most often encountered maritime liens are ranked as follows:

  1. Court costs and expenses of keeping the vessel pending sale
  2. Salvage
  3. Seamen’s wages
  4. Claims arising from collision, cargo damage, and personal injury/death
  5. Preferred ship mortgages
  6. Liens for “necessaries” such as repairs, stores, fuel, towage and pilots

When competing liens hold equal rank, they will be paid in reverse order of creation, with the youngest liens paid first and the oldest paid last.

Salvage liens are property rights which may be assigned to others. This is particularly useful in co-salvage situations. Co-salvors may agree among themselves as to how a reward should be split, or even buy each other’s liens. Assignments can then be made by co-salvors to the principal salvor, which can then pursue a reward for the benefit of all who participated in the salvage.

While this article has concentrated on enforcement of the salvage lien, it should be remembered that a salvor might also collect his reward by filing suit against the owners of the vessel personally. This often occurs when the vessel has left the court’s jurisdiction and does not return, or when costs of arrest and safekeeping of the vessel do not justify an arrest.

© Stephen F. White 2000

Tags: , , ,