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“Special Compensation” Saves the Day: Salvage of the F/V Lindsey Jeanette

In my Article in the June/July 1999 issue of this Newsletter I discussed the “Special Compensation” that is now available under the Salvage Convention of 1989 (adopted in the U.S. in 1996). “Special Compensation” is available to salvors under circumstances in which there exists a threat of damage to the environment. A salvor may receive “Special Compensation” even though its salvage efforts are unsuccessful or when the value of the salvaged property is insufficient to fully fund a salvage reward.

Next, in my November/December article, I reviewed how “more liberal” awards to professional salvors are still available under Article 13 of SALCON 89.

These concepts have been validated in a recent decision by the U.S. District Court for the Middle District of Florida, which reinforces the idea that a salvor should be fully compensated for both his salvage efforts and his efforts to protect the environment.

In Intl. Towing & Salvage v. F/V LINDSEY JEANETTE, a 45-foot commercial fishing vessel capsized after colliding with a freighter 30 miles offshore. Intl. Towing responded and found that fuel was leaking from the vessel. Intl. Towing stabilized the vessel using airbags, which converted the hull into a rigid containment boom, trapping fuel from a ruptured tank, lube oil, hydraulic fluid, spare oil products, and lead from batteries, within the inverted hull. After towing the vessel to shore, and rigging containment booms, the salvor was able to right the vessel, lift it from the water intact, and remove all pollutants from its hull – all with the approval of the U.S. Coast Guard which issued no fines. Although the vessel was tendered back to its owner (provided it paid the bill for services rendered), the owner failed to post security or pay the bill. The vessel was then arrested by Intl. Towing to satisfy its salvage claim and bill for services totaling $49,287.50 (plus prejudgment interest and attorneys fees).

Although the vessel was sold to Intl. Towing at auction for only $1,000, the court determined that its fair market value was actually $30,000. While the owner argued that SALCON 89 did not apply to smaller vessels, the court confirmed that SALCON 89 now provides the applicable law for all salvage claims, both large and small. To determine the amount of the salvage reward, the 10 criteria listed in Article 13 of SALCON 89 (salved value, danger, skill, time, expense, etc.) must be analyzed. However, Article 13 also states that a salvage reward (exclusive of interest and legal costs) cannot exceed the salved value of the vessel. Therefore, any salvage reward would be limited to $30,000.

This is where “Special Compensation” under Article 14 of SALCON 89 made its entrance to save the day. Under Article 14, if the operation involved a threat of damage to the environment, then the salvor is entitled to recoup its out-of-pocket expenses and a fair rate for the equipment and personnel it used in the salvage operation. An additional 30% may be added to this figure if the salvor’s efforts succeeded in preventing or minimizing environmental damage. If the court finds it “fair and just” to do so, it may further increase the special compensation by 100% (i.e., double the bill).

When Intl. Towing calculated its bill, it totaled all of its out-of-pocket expenses plus a fair rate for its equipment and personnel, and arrived at $33,000. After adding the 30% enhancement referred to above, plus an additional $6,387.50 for post-salvage storage charges, its total bill came to $49,287.50. The court found that this calculation was correct, and that it was proper to include the 30% enhancement, since the salvor’s efforts had minimized damage to the environment. Because the amount available to pay any salvage reward ($30,000) under Article 13 was insufficient to cover the salvor’s expenses, the court determined that Article 14 of SALCON 89 would control the amount of the reward. Therefore, the court held that the reward would amount to the “Special Compensation” available under Article 14 in the amount of $49,287.50. Since the salvor had already taken title to the salvaged vessel worth $30,000 the court entered judgment against the owner for the $19,287.50 deficiency, plus pre-judgment interest of $4,890.72 (after finding that an award of pre-judgment interest was almost “automatic”). The matter of attorneys’ fees was referred to a Magistrate Judge for decision.

As can be seen from the outcome of this case, the availability of “Special Compensation” through Article 14 of SALCON 89, can be very beneficial to a salvor who has succeeded in protecting the environment, but who has salvaged a vessel having insufficient value to satisfy a salvage reward.

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