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Salvage to Wreck Removal

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A look at how the SCOPIC Clause has changed casualty response,   By John Noble, Managing Director DONJON UK

Following the House of Lords decision in the Nagasaki Spirit case the salvage and marine insurance industries decided to try and deal with the resulting discouragement to the salvage industry that resulted from the decision.

One idea, the Global Response Network, where the P & I Clubs would set up and fund equipment depots at strategic locations, did not then get off the ground.

In 1998 the maritime industry, through the International Salvage Union, the P & I Clubs’ International Group and property underwriters met to find a mutually acceptable solution that would offer encouragement to salvors in circumstances where the success of an LOF “no-cure, no-pay” was in doubt, but a salvor’s continued presence was desirable.  The result was the Special Compensation P and I Club clause (SCOPIC).  This clause was voluntary in that if a Lloyds Open Form contract incorporated the SCOPIC clause, it was open to the salvage company to invoke the provisions of the clause.

The Club involved had the option to appoint a Special Casualty Representative (SCR).  The role of the SCR is well set down in the various guidelines that are regularly updated in light of experience.  The SCR reports to Lloyds Agency salvage department, who then circulate it to all parties with an interest in the voyage.  The SCR serves the casualty interests in general and must not become involved in the more partisan elements of an incident.

The SCOPIC clause came into being in August1999 and has had a considerable effect on how casualty response has developed in the intervening period.  Historically, and very simply put, if there was a casualty where the ship became an Actual or Constructive total loss the hull and machinery underwriters would pay up, abandon the now “wreck” back to the owners and no longer become involved.  Usually some time later, once the hull claim had been paid, and if there was a legal liability on the ship owner to remove the wreck the P & I Club involved would start the process of putting the wreck removal job out to tender.  This was sometimes a long and drawn out process.  Meanwhile at the casualty the local authorities became increasingly frustrated at the seeming lack of urgency or activity at the wreck site.  In turn this meant that by the time the wreck removal contractors had mobilised and arrived at the site, considerably hostility was shown to those involved.  This often made things very difficult for the salvage master, consultants and others attending!

Now, with SCOPIC in place, there is a mechanism to allow the contractors to remain on site and continue some sort of operation, even though the casualty can be considered a loss or wreck.  Equipment mobilised and used under the SCOPIC provisions is paid for by the owner usually through his P & I Club.  Salvors in turn become entitled to a substantial guarantee that they will be paid, normally arranged by the P & I Club involved.

In practice at the casualty, work continues and this has the effect of reassuring local authorities that they will not be abandoned.  There have been instances where the authorities have not allowed salvors to stand down, but these are rare.

When does the LOF with SCOPIC salvage become a wreck removal?  Whereas under the “old” system there was usually a clear break; now the boundary is less defined, at least to the onlooker.  Some might say that SCOPIC has muddied the waters; but if common sense can prevail and the parties communicate it should be possible to define when LOF and SCOPIC terminate and pure wreck removal commences.

In my view the introduction of the SCOPIC provisions in an LOF contract has the benefit of introducing the P & I club at an earlier stage in casualty response and allowing a seamless transition from salvage to wreck removal.

In conclusion, I am aware that I have presented a rather simplified view of the issue, given the restraints of time and space.  There are many publications and court or arbitration decisions that offer the opportunity for further study.

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