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P&I Pressure Helps Push Salvage Contract Changes

Leading marine salvors have backed plans to formulate a new, standard salvage contract in response to pressure for an alternative system from Protection & Indemnity (P&I) insurers. It would not be the industry's intention, though, to dispense with the Lloyd's Open Form (LOF).

Members of the International Salvage Union (ISU) have given the body a mandate to develop new arrangements through discussion with the property (ship and cargo) insurers, shipowners and P&I Clubs. The idesa is to provide a further option, rather than a replacement, to existing salvage contracts. The move addresses concerns within the P&I community related to salvage costs and participation. There is a view in P&I circles that Clubs should assume liability for all salvage, involving property as well as pollution.

As a result of the decision at the recent Gothenburg meeting of the ISU, detailed talks will be set in motion, with the International Group of P&I Clubs, property insurers and other parties. Salvors feel that LOF should be retained for most casualty situations, but acknowledge that there is scope for a new basis for casualty response in situations where a spill has occurred and rapid intervention is needed to minimize environmental damage. The ISU is advocating a new approach designed to meld what are seen as the best features of the existing LOF, the world's most commonly used salvage agreement, with the 'Salvage 2000' concept advanced by the P&I sector.

ISU president Arnold Witte said, "The LOF system still offers many advantages to the international shipping community and its underwriters. Nevertheless, the P&I Clubs, who have financial responsibility for pollution claims arising from shipping accidents have a number of legitimate claims which cannot be ignored by the salvage industry." "Equally, the property insurers... are strong supporters of the existing system. Their interests must be taken into account as they meet almost the entire cost of salvage services rendered on a global basis," observed Witte.

In recognition of concerns in the P&I business, the ISU said it was prepared to offer an agreed rate By David Tinsley, technical editor structure for salvage services deployed to deal with direct pollution threats, and to support the P&I desire for separate representation at associated salvage arbitrations. The marine salvage contractors' body also believes that a new LOF Salvage 2000 contract should be drafted in such a way as to "maximize opportunities for amicable settlement and prompt payment, without recourse to arbitration." Total values under the various "no cure, no pay" agreements worldwide declined in 1996 by one-third from the preceding year's all-time high of $1.7 million, to $1.2 million

 
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