Laws of Salvage at Sea

Samaritans at Sea

A Time-Honoured Right

The international Law of the Sea imposes a duty on all vessels to render assistance to any person found at sea in danger of being lost. While there is no comparable obligation to try to salve a vessel in distress, it has been a fundamental principle of maritime law for over 3000 years to reward a volunteer who successfully rescues another person’s ship or cargo. The traditional concept of salvage involved the rescue of property from wrecked ships, including flotsam, jetsam and lagan. Alongside the development of a commercial salvage industry during the 20th century, the modern law of salvage has undergone significant refinement and is now enshrined in the International Convention on Salvage (1989).

The Salvage Convention came into force on 14 July 1996, and has been ratified by 69 states, including Australia, where most of its articles are given effect through the (Cth) Navigation Act, 2012 and Navigation Regulations, 2013. 

In Australia, the Convention applies to a ‘salvage operation’, which is any act or activity undertaken to assist a vessel or any other property not permanently and intentionally attached to the shoreline (including freight at risk) in danger in any waters. In this context, a ‘vessel’ is any kind of vessel used in navigation by water, however propelled or moved, and includes a barge, lighter or other floating craft, an air-cushion vehicle or other similar craft. A ‘recreational vessel’ is one that is not used in connection with a commercial, governmental or research activity.

The Convention does not apply to fixed or floating platforms or to mobile offshore drilling units when they are used on location in the exploration, exploitation or production of sea-bed mineral resources. Nor does it apply to warships or other non-commercial vessels owned or operated by a State and entitled to sovereign immunity under international law. Saving lives is not part of salvage under the Convention. 

Three Conditions for a Salvage Reward

The general law of salvage stipulates three conditions to support a claim for reward: the vessel must be in peril; the salvor must be acting voluntarily; and the salvage must be successful to some degree.

1. The Peril

Marine peril can arise in many ways, such as in severe weather or when a vessel catches fire or loses power. Whatever the cause, the law of salvage requires that the distressed vessel or its cargo is at risk of significant damage or complete loss. The danger does not have to be actual or immediate, or imminent and absolute, but it must be real and not fanciful or remote. In essence, the party seeking an award must demonstrate that a reasonable apprehension of peril existed when the rescue operation commenced. Put objectively, the inquiry is whether a reasonable master in charge of the distressed vessel would have refused an offer of assistance in all the circumstances.

2. The Volunteer

Assuming the necessary peril exists, the second requirement for a successful award is that the salvor must be acting voluntarily, and not pursuant to any pre-existing contract or other legal duty to do so, apart from the general duty to give assistance to those in peril at sea, or to stand by after a collision. Should the question arise, the owner of the vessel has the burden of proving that the services were not voluntary.

Services rendered under a salvage contract that existed before the peril arose are not voluntary in the requisite sense and will be compensated according to the terms of the contract and not under maritime law. 

A ship’s master and crew who have employment agreements with the shipowner have a duty in most circumstances to act reasonably in preserving the vessel and its cargo, and do not generally become salvors if their ship becomes endangered. But if their employment is terminated before the salvage commenced — such as by abandonment of the ship by order of the master — they may still qualify as salvors if they later render voluntarily salvage assistance.

Of course, any offer of assistance can be refused, so long as the owner or his agent remains on board to do so. If the offer is accepted, a contract automatically arises to give the successful salvor the right to a reward under the 1989 Convention. In the absence of improper coercion by the salvor (such as fraud, misrepresentation or suppression of material facts), a court will be slow to set aside such a contract just because it was entered into in circumstances of danger and urgency.

3. Success

The third pre-condition for a right to salvage is that the salvor’s efforts must have contributed to the success of the operation, and no salvage will be awarded if the property is lost or placed in greater peril. This requirement is summed up in maritime law by the expression ‘no cure, no pay’, a principle adopted by the Salvage Convention, which provides that no reward is payable for a salvage operation that has had no ‘useful result’. However, success need not be total; partial success is sufficient, provided that the owner’s property is preserved to some extent.

The Convention also places a duty on the salvor to carry out the operation with due care, and he may be liable to pay damages, or have his reward reduced, if a vessel or property is further damaged through his negligence. Further, no reward will be payable if the salvage service was rendered necessary by the fault of the salving vessel, for example, by failing to give way and causing a collision.

A salvor also owes a duty to seek assistance from other salvors, when circumstances reasonably require it, and to accept such assistance when reasonably requested to do so by the owner or master of the vessel in danger. If more than one person contributes to saving a vessel or its cargo, they will share the reward according to their respective contributions. For their part, the owner and master of a vessel in danger owe a duty to the salvor to co-operate fully with him during the salvage operation.

Fixing the Reward

The Convention provides that rewards are to be fixed with a view to encouraging salvage operations, taking into account specified criteria, including: the nature and degree of the danger; the skill and efforts of the salvors in salving the vessel or other property; the risks run by the salvors or their equipment; the time used and expenses and losses incurred by the salvors; the promptness of the services rendered; the measure of success obtained by the salvor; success in preventing or minimizing damage to the environment; and the salved value of the vessel and other property. The reward, exclusive of any interest and recoverable legal costs, will not exceed the salved value of the vessel and other property. 

Special Compensation

Although the traditional ‘no cure, no pay’ principle worked well in most cases, it provided little incentive to conduct salvage operations with only a slim chance of salving a vessel, but which might nevertheless prevent major pollution. For example, a salvor who averted a disastrous oil spill by towing a leaking tanker away from an environmentally sensitive reef, but failed to save the vessel, received nothing for his efforts despite rendering a valuable service to the community.

But the evolution of very large vessels carrying huge cargoes of hazardous material or substances greatly increased the potential for harm to marine and coastal environments, as the catastrophic grounding of the Exxon Valdez off the Alaskan coast in 1989 demonstrated. These were no doubt among the “substantial developments” noted in the Convention’s Preamble which underscored the international community’s “increased concern for the protection of the environment”.

As a result, the Convention expanded the scope of salvage by introducing ‘special compensation’ to salvors who have failed to earn a reward in the normal way (by salving the ship and cargo), but have prevented or minimized “damage to the environment” — defined 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”.

The compensation consists of the salvor’s out-of-pocket expenses reasonably incurred in the salvage operation and a fair rate for equipment and personnel actually and reasonably used. The tribunal or arbitrator assessing the reward may increase the amount of compensation to a maximum of one hundred percent of the salvor’s expenses, “if it deems it fair and just to do so”.

What about Derelict Vessels?

A vessel found entirely deserted or abandoned without hope of recovery is often considered ‘derelict’ and is fair game for anyone who comes across it. Whether a vessel is derelict depends on the intentions of the master and crew when leaving the vessel. For example, when the super-maxi yacht Skandia was abandoned after it capsized with hull damage during the 2004 Sydney-Hobart yacht race, it did not become derelict because its owner always intended to retrieve and repair it.

No permission is needed before attempting to salvage a derelict vessel but the salvor does not automatically become its owner. Where concern for human safety has dictated the abandonment of the vessel, the owner has the option to reclaim his property by paying an appropriate salvage reward. For his part, the salvor has a maritime lien on the salved property and need not return the property to the owner until his claim is satisfied or until security to meet an award is given. 

Admiralty Jurisdiction

Under the (Cth) Admiralty Act, 1988, claims relating to salvage (including salvage of cargo or a wreck found on land) may be brought in the Federal Court of Australia and some courts of the States and Territories invested with Admiralty jurisdiction. However, Admiralty actions and related jurisdictional issues have been described as something of a ‘minefield’, into which it is best not to venture without first obtaining sound legal advice.

[Disclaimer: This article contains general information intended to convey a broad understanding of marine salvage. It does not constitute legal advice intended to be acted upon by anyone. Any person requiring legal assistance concerning this subject should engage an appropriately qualified Australian legal practitioner to advise on the specific matters relevant to their individual circumstances. Neither the author of the article nor the publisher accepts any legal responsibility for the correctness, currency or completeness of the contents of the article.]