Salved fund (Article 13.1(a))
Apart from the danger faced by the casualty, probably the most important criterion for assessing any salvage award is the size of the salved fund out of which the salvors will be remunerated. The fund obviously will either limit the ability of the Court or Tribunal to make an encouraging award or give the opportunity to the Court or Tribunal to give generously to the salvors.
In The ‘CITY OF CHESTER’ (1884) the Court stated: “It is obvious that whilst a small percentage on a very large value might be an ample remuneration in one case, a very large percentage on a small value might be a very inadequate remuneration in another case. The risk of getting little by reason of the comparatively small value of the property saved is one of those risks which salvors always run”.
Consequently, when the opportunity arises where the salved fund is substantial, the Court or Tribunal will consider that the substantial size of the fund enables it, and entitles the salvor, to an enhanced award to satisfy the public policy of encouragement.
In The ‘QUEEN ELIZABETH’ (1949), there was a claim for salvage made in respect of services rendered to the cruise ship ‘QUEEN ELIZABETH’, which ran aground just outside Southampton, UK in April 1947. Her salved value was £5,983,000. This might be considered a bargain nowadays and a fraction of what the new ‘QUEEN ELIZABETH’ cost, but at the time it was considered enormous. Wilmer J said: –
“In those circumstances, where one has, as we do have in this case, a practical certainty of continuing expense, coupled with a possibility even if it is not much more than a bare possibility of a much more serious loss, one has to give some real effect to the very high value of the salved property. By that I mean that one must give some effect to it, beyond saying to oneself merely that this is a case in which the value of the salved property at least provides a sufficient and abundant fund out of which to reward the salvors”
However, this does not give the Court or Tribunal an open license to go overboard with overly generous salvage awards simply because the salved fund may be in the millions, as was the case then, or now in the hundreds of millions of US Dollars.
In The ‘GLENGYLE’ (1898), the Court stated:
“The Court must not be induced by it to award a sum which is out of proportion to the services of the salvors”
This followed a leading decision by the Privy Council in The ‘AMERIQUE’ (1874), in which the Court stated:
“The rule seems to be that though the value of the property salved is to be considered in the estimate of the remuneration, it must not be allowed to raise the quantum to an amount altogether out of proportion to the services actually rendered.”
This, therefore, provides the Court or Tribunal with a limiting factor. At the end of the day how generous a Court or Tribunal can be where there is a significant and substantial fund will depend on the merits of the services, length of services, dangers faced, expenses incurred etc.
The ‘proportionality’ principle as set out in The ‘AMERIQUE’ came up for discussion in the ‘OCEAN CROWN’ LOF award. The “Ocean Crown” grounded in southern Chile in the summer of 2008. The cargo of copper was worth over US$100 million, and the ship value actually increased as the services were being rendered. The ultimate salved fund was in excess of US$160 million. Everything about the case was significant. The out-of-pocket expenses were enormous, around US$18 million, the dangers faced by the casualty were serious and short term, the operation was lengthy and involved refloating and transshipment of cargo and, of course, a very high salved fund.
The then Appeal Arbitrator (the late Mr. John Reeder QC) seemed to suggest in his Appeal Award that in such circumstances there might be a different “proportionality” test. This, of course, would have been absurd as the only test other than “proportionality” is “disproportionality”. The Appeal Arbitrator clarified that what he meant was “degree” of proportionality. Obviously, the principle is applied to a greater or lesser degree based on the circumstances.
In the next article, which will be published on 1 April 2025, I will look at the further provisions of Article 13.1 of the Salvage Convention.
Source: Hill Dickinson