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Obtaining Security for Your Salvage Claim

Now that you have successfully saved a vessel from almost certain destruction by a marine peril, what do you do next? More importantly, how will you ensure that funds will be available to pay your salvage claim? These age-old questions still pose significant challenges to salvors and their attorneys today.

A successful salvor possesses a preferred maritime lien upon the salvaged property. The lien comes into existence as soon as the salvage service has been rendered. A maritime lien is sometimes referred to as a “secret lien” since there is no requirement that the lien be recorded in the vessel’s Coast Guard documentation (or anywhere else for that matter). Once the salvor has successfully salvaged a vessel, he has the right to keep the vessel in his possession until such time as his salvage claim has been paid in full, or until the vessel’s owner or insurer have posted acceptable security to stand in lieu of the vessel while awaiting the decision of the salvage claim.

Prior to 1996 when the United States ratified the Salvage Convention of 1989 (“SALCON 89”), the salvor’s right to maintain possession of a salvaged vessel (or security in its place) was established by court decisions. Since the 1996 adoption of SALCON ’89, the salvor’s right to maintain possession of a salvaged vessel has been codified in Article 21(3) of SALCON ’89 which states: “The salved vessel and other property shall not, without the consent of the salvor, be removed from the port or place at which they first arrive after the completion of the salvage operations until satisfactory security has been put up for the salvor’s claim against the relevant vessel or property.” Article 21(3) actually expands the salvor’s rights. Now, the salvor may insist upon payment of his claim or the posting of adequate security not only while the vessel is within his own possession, but before it can be removed from the place it first arrives following a successful salvage (usually a marina). Unfortunately, the courts have not yet rendered any decisions which have addressed the strength of the salvor’s rights and remedies under Article 21(3). Therefore, it remains to be seen whether a boat owner who disregards the salvor’s lien claim and removes his vessel from the salvor’s possession or from the place of first arrival without the salvor’s consent, may do so with impunity, or will incur additional damages, penalties or enhancement of the salvage claim. Since a salvage lien confers a property right upon the successful salvor, it can be argued that removal of the vessel from the place of first removal without consent of the salvor would provide the salvor with a claim of trespass or tortious conversion against the party who removed the vessel. Enterprising attorneys and salvors will no doubt experiment with the scope of the salvor’s rights and remedies under Article 21(3) in the future.

Possession or control of a salvaged vessel is important, since the salvor’s only security for payment his claim is either the vessel itself or a fund standing in place of the vessel. If suit is filed in federal court and the vessel is arrested, then the owner may not regain possession of the vessel without posting adequate security (usually in the form of a Bond or Letter of Undertaking issued by the vessel’s insurer). In the event the salvor cannot obtain security for the vessel or cannot arrest the vessel, then the salvor is left with filing a lawsuit in personam against the vessel’s owner. In such cases, there is no security available at the outset to enforce the judgment. The salvor must go forward to obtain a judgment against the owner and then hope that the vessel owner has sufficient assets or insurance to pay the judgment. In many situations (such as when there is no insurance, or when the vessel is owned by the husband but not by the wife and their assets are all held in tenancy by the entirety), there will be insufficient assets available to pay the salvor’s judgment. Therefore, obtaining security for the salvage claim by maintaining possession of the vessel, or by obtaining a bond or a letter of undertaking in place of the vessel is essential to ensuring collectability of a salvage award or judgment.

In order for a salvor to enforce his rights under Article 21(3) of SALCON 89, it is important for the salvor to notify the vessel owner and the marina or other place where the vessel is first taken, that the salvor has asserted a salvage claim, holds a maritime lien upon the vessel, and does not consent to the vessel’s removal from the place of first arrival without the salvor’s express written consent. Once the vessel owner has received notice, he cannot lawfully remove the vessel without violating the salvor’s rights. In addition, a cooperative boatyard, marina or other place of first arrival may lawfully ignore the owner’s directions to launch the vessel or to remove it from their facility without first obtaining the consent of the salvor. This leverage can place the salvor in a strong position to obtain payment of an early salvage reward, or to receive satisfactory security toward payment of an eventual judgment. Hopefully, future court decisions construing the scope and effect of Article 21(3) will give further support to the salvor’s rights of possession and/or control over the return of salvaged vessels to their owners.

© Stephen F. White 2000

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