ENVIRONMENTAL SALVAGE A CURRENT STATUS

1. ENVIRONMENTAL SALVAGEA CURRENT STATUS Robert B. Parrish President, The Maritime Law Association of the United States September 17, 2012

2. ENVIRONMENTAL SALVAGE—A CURRENT STATUS INTRODUCTION & BACKGROUND At its conference in Beijing, in October 2012, the CMI is due to consider various proposals for possible reform of the law and practice of salvage. Among these is a proposal, sponsored by the International Salvage Union (ISU), for the provision of further remuneration to salvorsthrough the creation of a new “environmental salvage” award. • Previously (Salvage Convention 1910), no remuneration for steps taken to prevent pollution independently of actions to save property—hence lack of incentive to salvors • Salvage Convention 1989 • The main features of the Convention which deal with remuneration of the salvor for environmental damage avoidance are contained in Articles 13 and 14. • Under Article 13 the award to a successful salvor is to take into account any success in preventing or minimizing damage to the environment.

3. ENVIRONMENTAL SALVAGE—A CURRENT STATUS INTRODUCTION & BACKGROUND • Under Article 14 a safety-net of “special compensation” can be awarded in cases involving a threat of such damage. This consists of a “fair rate” for equipment and personnel, plus an increment to reflect the degree of success achieved in avoiding or minimizing pollution. • Theoptional SCOPIC clause (Special Compensation P & IClub) under LOF provides compensation to salvors who provide services to vessels posing a threat to the environment even if no cure. It introduced a tariff to calculate the Contractor's Special Compensation together with an uplift fixed at 25%. Traditional Article 13 Awards will be discounted by 25% of the amount by which any Article 13 Award exceeds the SCOPIC remuneration.

4. ENVIRONMENTAL SALVAGE—A CURRENT STATUS INTRODUCTION & BACKGROUND • A SCOPIC amended version came into effect on September 1, 2000.  Increases in compensation have been made on a number of occasions, most recently in 2011. • The SCOPIC Clause is a sort of “safety net” (that provides compensation when no cure), and is meant to be an alternative option for the contracting parties to agree to replace the Salvage Convention Article 14 when signing a Lloyd’s Open Form salvage contract. Under this form of salvage agreement the contractor agrees to use its best endeavours not only to salve the property at risk but also to prevent the escape of oil from the vessel whilst performing the salvage services.

5. ENVIRONMENTAL SALVAGE—A CURRENT STATUS INTRODUCTION & BACKGROUND • This effectively gives salvors a guarantee from the vessel’s P&I Club that even if no property was saved, they would recover as a minimum the full amount of their expenses, at tariff rates agreed in SCOPIC, plus a 25% uplift • Recently on the RENA grounding in New Zealand (where the vessel ultimately broke up) the salvor’s SCOPIC expenses will be approximately US $100M • It is contended by the ISU that its members are inadequately remunerated for their role in preventing pollution, and that international law on the subject needs to be changed.

6. ENVIRONMENTAL SALVAGE—A CURRENT STATUS HISTORY OF PROPOSALS, COMITE’ MARITIME INTERNATIONAL INVOLVEMENT/QUESTIONNAIRES • CMI Montreal 1981 • International Salvage Union (ISU) writes CMI in December 2008 inviting review of 20 year old Salvage Convention • CMI establishes IWG • Questionnaire to NMLAs July 2009 • 2nd questionnaire in 2010 seeking empirical evidence supporting ISU complaints • CMI Buenos Aires October 2010

7. ENVIRONMENTAL SALVAGE—A CURRENT STATUS POSITION OF ISU • The ISU’s current proposal is that Article 14 of the 1989 Convention be entirely replaced by a new provision entitling the salvor to a discretionary environmental award, whenever there has been a threat of damage to the environment. • The proposed award would be determined by the same criteria as those prescribed by Article 13 for the assessment of a conventional award for salvage of property, save that in place of “the salved value of the vessel and other property” account would be taken of “the extent to which the salvor has prevented or minimized damage to the environment and the resultant benefit conferred.”

8. ENVIRONMENTAL SALVAGE—A CURRENT STATUS POSITION OF ISU • ISU Arguments: • Firstly, much has changed since the Salvage Convention was first drafted in 1981. Environmental issues are now dominating every salvage case. • Secondly, whilst salvors are rewarded for saving the ship and the cargo, they are not fully rewarded for the benefit they confer in protecting the environment. • Thirdly, it is not fair that the traditional salvage reward which currently, but inadequately, reflects the salvor's efforts in protecting the environment is wholly paid by the ship and cargo owners and their insurance without any contribution from the liability insurers who cover the shipowner's exposure to claims for pollution and environmental damage.

9. ENVIRONMENTAL SALVAGE—A CURRENT STATUS POSITION OF ISU • At the same time, Article 13 would be amended to provide that conventional salvage awards, payable by property underwriters, are no longer to be enhanced by the skill and efforts of the salvor in preventing or minimizing damage to the environment. • Unclear whether salvors want a safety net award (payment even if no cure)

10. ENVIRONMENTAL SALVAGE—A CURRENT STATUS POSITION OF SHIPPING INDUSTRY (ICS) AND INTERNATIONAL GROUP OF P & I CLUBS • Why no change needed • To the extent that the Salvage Convention is flawed by the unworkable provisions of Article 14, industry has found a solution in SCOPIC which is clear, simple and workable, is accepted by all parties, is generous to salvors and has developed a successful 13 year track record. • To the extent that the Salvage Convention is flawed by the provisions of Article 14, it does not impact states. It is not their concern who pays. From their perspective the Convention operates very effectively and there is a satisfactory mechanism in place to prevent or minimize damage to the environment. It seems very unlikely that anyone will be able to demonstrate "a clear and well-documented compelling need" to amend the Convention. • Article 13 1 (b) requires that "the reward shall be fixed with a view to encouraging salvage operations“ and for arbitrators to take into account "the skill and efforts of the salvors in preventing or minimising damage to the environment." There is relatively little evidence in most cases of specific work done to prevent damage to the environment. The mechanism exists, so salvors should use it.

11. ENVIRONMENTAL SALVAGE—A CURRENT STATUS REPORT OF THE CMI INTERNATIONAL WORKING GROUP ON REVIEW OF THE SALVAGE CONVENTION FOR CONSIDERATION AT BEIJING CONFERENCE OCTOBER 2012 • If the Conference believes that there is merit in recommending that some matters should be put forward to the IMO as amendments worthy of consideration to the Salvage Convention the options available include: • Forwarding a draft Protocol to the Salvage Convention to the IMO. • Forwarding a report to the IMO identifying the issues which have been debated and the conclusions reached.

12. ENVIRONMENTAL SALVAGE—A CURRENT STATUS REPORT OF THE CMI INTERNATIONAL WORKING GROUP ON REVIEW OF THE SALVAGE CONVENTION FOR CONSIDERATION AT BEIJING CONFERENCE OCTOBER 2012 • Alternatively, the Conference may wish the CMI to suggest that in the light of the debate at the Conference, consideration needs to be given to amending the LOF to take account of these discussions. • The Beijing Conference may on the other hand consider that no further action should be taken by CMI on the issue of salvage at the present time.

13. ENVIRONMENTAL SALVAGE—A CURRENT STATUS MLA POSITION • Committee Process • BOD voted to take no position