THE SALVOR’S PERSPECTIVE
ALAN LOYND – GENERAL MANAGER MARINE
Introduction to HKST and ISU
The Hongkong Salvage and Towage Company came back into salvage in 1986, and within two years had been invited to join the International Salvage Union. The ISU has 46 members from 30 countries, and ISU members handle around 90 per cent of all salvage operations worldwide. Membership is only open to companies which have a track record of successful salvage and pollution prevention, and members are required to conduct themselves in a reasonably ethical and decent way. The world’s largest salvage company was actually invited to leave the ISU some years ago, and only recently readmitted.
A look at the ISU website will give you an idea of who we are, and how we achieve worldwide coverage for our customers.
The need for speed
One of the aims of the ISU is to raise awareness of salvage issues, and the main message is the need for speed. The sooner we arrive, the easier it is to solve the problem, and the less the user will pay. Too often, we are not summoned until the casualty has been abandoned by her crew and the situation is out of control. Success, and economy, demand that shipowners conquer their fear of salvage and act more quickly.
Dry and wet salvage
Dry salvage is anything which does not involve a sunken vessel i.e. fire, collision, grounding, breakdown or other form of marine accident. It could be a simple rescue tow, or a tanker on fire, or a luxury yacht aground in Sai Kung. So remember us if you are the owner of a luxury yacht…..
Wet salvage is basically wreck removal, and tends to happen when a wreck is blocking a navigable channel, or where a valuable cargo needs to be recovered. In both cases, protection of the environment is of major importance and salvors have pioneered some interesting techniques to prevent pollution, including sub-sea recovery of oil.
Why we do it, and who we do it to
You may be surprised to learn that the one subject never discussed on a savage is money! I suppose we all know at the back of our minds that a successful outcome will earn the company a few shekels, but the average salvage team is driven not by greed, but by a stubborn resolve to succeed where others could not, and by a determination to look good to other salvors. There is an expression that, in salvage, you are only as good as your last job, so we all want our last job to have been a success. Shipowners, masters and crews normally treat salvors with suspicion verging on outright hostility. Even the master who hugged my knees and begged me to save his ship turned nasty once he realised we had stabilised the situation. Please remember it is the underwriters and P&I Clubs who pay us. It is unlikely there will have to be a whip-round in the office!
A look at the numbers
In 1997, the most recent year for which numbers are available, ISU members recovered property (ships, bunkers and cargo) valued at US$1.79 billion, and performed 255 salvage services. In return, they were paid US$94.7 million, or 5.29 per cent of the property value. Total 1997 revenue, from salvage and wreck removal, was US$134 million. Salvors are cheap to run!
The emphasis on pollution
For some years, an ISU motto (found in all ISU Christmas crackers) has been "keep the pollutant in the ship". This is increasingly important given the modern attitude of zero tolerance of pollution. A few hundred tonnes of crude oil, hazardous cargo or bunkers spilled in a sensitive area can give rise to liabilities calculated in million of dollars.
Most salvage operations now start with an environmental threat assessment, followed by swift action to minimise the threat. On a recent salvage job, firefighting water in the hold of a container ship was sampled and analysed before the water was pumped overboard, to ensure we did not pollute the surrounding waters.
Every year, ISU members recover over 1 million tonnes of potential pollutants, including over 50,000 tonnes of bunkers.
Salvors have invested heavily in the equipment needed to respond to the threat of pollution, and ISU members regularly call in their fellow-members to assist on a major case. Governments have also started to provide standby tugs and equipment to protect vulnerable coastlines, and it is worth noting that they normally do this in conjunction with the local salvor. One notable exception is Hong Kong!
Not only does Marine Department leave salvage entirely in the hands of the private sector, it is careful not to give local tug companies any commercial advantage by tipping us off if there is a casualty on our patch. As the only local salvor, it is galling for us that, in an effort to avoid claims of favouritism, Marine Department do not tell us anything. Instead, they pass information to Lloyds Casualty Service in London, who sell the news back to us. We then receive it at the same time as all other subscribers around the world, and Lloyds Casualty make a fortune!
Another aspect of salvage in this area is that we compete for every job with tugs from Taiwan, the Philippines and the P.R.C. Their equipment is older and infinitely more horrible, but they are very cheap. Thus we end up quoting day rates for jobs which, anywhere else, would only be done on Lloyds Open Form.
Finally, the threat from chemicals is increasing rapidly. In 1997, ISU members recovered almost 140,000 tonnes of hazardous chemicals – double the figure for 1996.
Changes to LOF and arbitration
One of the finer aspects of the LOF system is its ability to move with the times. Salvors, insurers and lawyers are all aware of the need to respond quickly to meet the needs of the industry. LOF has gone through nine revisions since it was introduced and in 1997 new measures were introduced to simplify and speed up LOF arbitrations. We believe that LOF has advantages for all parties to a casualty. It is recongised worldwide, promotes rapid response without detailed commercial discussions, operates within a balanced and fair system, and allows for amicable settlement or arbitration by an experienced and impartial expert.
Special compensation and SCOPIC
Special compensation guarantees a salvor’s expenses when responding to a laden tanker casualty. This provides the incentive to go to high risk cases where success is far from certain. This so-called Safety Net was introduced following, some major tanker casualties in the 1970s. ‘Amoco Cadiz’ is a good example.
Unfortunately, the complex mechanism for calculating special compensation has not been without its problems. The "fair rate" of remuneration was held to be the actual cost of running equipment, rather than the commercial rate such equipment might command, and special compensation can only be claimed in coastal waters. Salvors also have a problem with casualties where their costs are likely to exceed the value of the casualty and security has not been forthcoming.
Thus the various sectors of the industry got together to devise SCOPIC – the Special Compensation P&I Clause.
Remuneration is calculated on a tariff basis so, for example, the average 4000 BHP HSKT tug would earn a maximum of US$10,000 per day, and a Salvage Master goes for US$1,000 per day.
The salvor can invoke SCOPIC at any time, provided he has good reason, and from then on everyone will know what the job is costing. Work done under SCOPIC will be monitored by a Shipowners Casualty Representative who must endorse the Salvage Master’s daily reports. The Salvage Master retains control of the operation, but must brief the SCR and listen to his views. The ISU was the first body to endorse SCOPIC, because we believe it will improve liaison and cooperation between the parties.
Can salvors be prevented?
In many cases, salvors are no more than normal seafarers with better equipment than their victims.
The safety equipment required on a vessel by law is adequate only for dealing with minor emergencies. Many salvages would never happen if ships carried adequate numbers of fireman’s outfits, sufficient quantities of foam, and a 4" submersible pump.
There again, many salvages would never happen if owners spent a reasonable amount on maintaining main engines and generators, and I can think of three salvages which would never have happened if one particular company in Hong Kong was banned from owning ships. Luckily for me, none of the above scenarios are likely so, love us or hate us, salvors are going to be around for a long time yet.
Thank you.