Two ways of calculating the salvor’s remuneration are provided under the Salvage Convention. Where there is a useful result the “No Cure–No Pay” principle is applied on the basis of various performance- related criteria (Article 13) and a salvage reward will be due. The criteria employed include:
- The value of the salved property; the skills of the salvors in minimising environmental damage;
- The nature and extent of danger, the measure of success and the general skills of the salvors as evidenced in the response time; the risks undertaken;
- The availability of vessels; the promptness and length of the salvage service.
The various criteria listed under Article 13 are not in a hierarchical order and can only be considered as indicators for the adjudicators of the salvage reward. Thus, it cannot be said a priori which of these criteria is the most determinative of the amount of the reward. As a result, judges and arbitrators have significant discretion in determining the amount awarded. What is certain is that if there is no valuable property salved there will be no reward.
It is arguable that the point in time at which the reward is earned is the redelivery of the property to the owners, or, if the owners are avoiding redelivery, the time at which the redelivery should have been accepted.
The salvage reward is payable by the owners of the property salved and in proportion to the value of the salved property.
The amount awarded can be controversial. Thus, it has been held that the salvage award must take into account the value of the salved property but cannot be out of pro portion to the services rendered. This would probably imply that for the same services a higher reward will be awarded to the salvor of a more expensive ship and cargo. The second part restricts to an extent the possibility of providing very high salvage awards without taking into account the type of the actual services rendered. It is submitted that such guidelines cannot alter the principles of Article 13 but they are permissible if they assist with the interpretation of the 1989 Salvage Convention.
Towage Assistance
In such cases towage assistance if available would probably have been sufficient so the argument has been made that the money payable under towage should be taken into account when the salvage award is decided. English courts have confirmed that while it is permissible to take into account commercial rates for the services obtained the significance varies with the facts of each situation.
Special Remuneration
A special remuneration is also available and is called “special compensation”. This is provided for under Article 14. The special compensation is the most significant modification introduced by the 1989 Salvage Convention in the law of salvage and aims at providing incentives for the salvors to get involved in incidents where pollution is threatened, even if there is a risk that very little or no property will eventually be salved.
Before describing the method of calculation of the special compensation it is worth explaining when it becomes payable. The Salvage Convention defines “damage to the environment” as “substantial physical damage to human health or to marine life or resources in coastal or inland waters or areas adjacent thereto, caused by pollution, contamination, fire, explosion or similar major incidents”. This definition is restrictive in many ways.
- First, damage to the environment is only covered in coastal or inland waters and adjacent areas.
- The second restrictive characteristic of the definition is that it requires “substantial” physical damage, a term which is not clear.
- damage but also on the importance and rarity of the marine life and resources affected. The third way in which the definition is restrictive is the required link with major incidents, indicating that where physical damage to the environment is substantial but the incident is not a major one the environmental damage will probably not be covered by the definition.
Where the salvor has participated in a salvage operation in which there was a threat of environmental damage then there is an entitlement to special compensation. Two situations are provided for.
- The first occurs where the salvor has been unsuccessful in its attempts to prevent or minimise damage to the environment. In such a case the special compensation will be equivalent to the salvor’s expenses.
- The second situation is where the salvor has been successful in preventing or minimising damage to the environment. In such a case the salvor can recover its expenses plus an increase by anything up to 100 per cent.
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