Voutakos, Re the Owners of the vessel v Tsavliris Salvage (International) Ltd, Court of Appeal - Admiralty Division, July 10, 2008, [2008] EWHC 1581 (Admlty),[2008] 2 CLC 33,[2008] 2 Lloyd's Rep 516

Resolution Date:July 10, 2008
Issuing Organization:Admiralty Division
Actores:Voutakos, Re the Owners of the vessel v Tsavliris Salvage (International) Ltd
 
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Neutral Citation Number: [2008] EWHC 1581 (Comm)

Case No: 2008 FOLIO 122

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMIRALTY COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 10/07/2008

Before :

MR JUSTICE DAVID STEEL

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Between :

| |THE OWNERS OF THE VESSEL “VOUTAKOS”, HER BUNKERS, STORES AND CARGO |Claimant |

| |- and - | |

| |TSAVLIRIS SALVAGE (INTERNATIONAL) LTD |Defendant |

| |IN THE MATTER OF AN ARBITRATION BETWEEN: | |

| | | |

| |TSAVLIRIS SALVAGE (INTERNATIONAL) LTD |Claimant |

| |- and - | |

| |THE OWNERS OF THE VESSEL “VOUTAKOS”, HER BUNKERS, STORES AND CARGO |Respondent |

| | | |

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T Brenton Q.C. & Stewart Buckingham (instructed by Ince & Co) for the Claimant

Steven Gee Q.C. & T Hill (instructed by Hill Dickinson) for the Defendant

Hearing dates: 18 June 2008

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Judgment

Mr Justice David Steel :

  1. This is an appeal brought by shipowners with the leave of Aikens J on questions of law arising out of a Final Interim Award dated 7 January 2008 made by Mr. John Reeder Q.C. in his capacity as the Lloyd’s Salvage Appeal Arbitrator (“the Appeal Arbitrator”). By his award (“the Appeal Award”) the Appeal Arbitrator substantially increased the salvage renumeration payable for salvage services rendered to VOUTAKIS and her cargo in late October 2006 from US$1,750,000 to US$2,700,000. The award from which the appeal was brought (“the Original Award”) had been made by Mr. Simon Kverndal Q.C. on 20 July 2007 (“the Original Arbitrator”).

  2. The services were rendered in October 2006. It is only necessary to summarise the circumstances briefly:-

    1. On 19 October 2006 the motor bulk carrier VOUTAKOS (“the vessel”) suffered a main engine breakdown in the South Western approaches to the English Channel. She was in position Latitude 48° 17΄ North, Longitude 07° 58΄ West. She was in the course of a voyage from Puerto Prodoco, Columbia to Rotterdam with about 174,496 tons of coal.

    2. Very quickly a salvage agreement was entered into between the owners and the salvors on the terms of a Lloyd’s Standard Form of Salvage Agreement 2000 (“the LOF”) and steps were taken by the respondents to identify a suitable tug to take the vessel in tow.

    3. In due course the salvors chartered in the ocean going tug FAIRMOUNT GLACIER from Fairmount Marine. The tug proceeded to the vessel’s position and established a towage connection during the morning of 30 October. The tug then commenced towing the vessel to Rotterdam in good weather conditions.

    4. On 31 October the wind increased in force causing the vessel to shear. On 1 November with the wind having increased to force 6 – 7 and the flotilla approaching the Dover straits, the salvors decided to hire in another tug to act as a steering vessel for the casualty.

    5. Accordingly the ALPHONSE LETZER was hired from URS. She made fast to the vessel at 1510 on 1 November and the tow continued.

    6. On 2 November the flotilla was close to the entrance channel to Europort where she was due to pick up a pilot. However difficulties in controlling the tow led to the pilot slot being missed.

    7. The wind reduced in force and at 08.20 on 3 November the flotilla picked up a pilot and the vessel was duly berthed in Rotterdam at 19.00.

    8. The tow had covered some 560 miles.

    LOF

  3. The 2000 edition of LOF contains the following provisions:-

    “Contractor’s basic obligation: The contractors identified in Box 1 hereby agree to use their best endeavours to salve the property specified in Box 2 and to take the property to the place stated in Box 3 or to such other place as may hereafter be agreed…

    Effect of other remedies: Subject to the provisions of the International Convention on Salvage 1989 as incorporated into English law (“the Convention”) relating to special compensation and to the Scopic clause if incorporated the contractors services shall be rendered and accepted as salvage services upon the principle of “no cure - no pay”…

    Arbitration and LSSA clauses: The contractor’s renumeration and all special compensation shall be determined by arbitration in London in manner prescribed by Lloyd’s Standard Salvage and Arbitration clauses (“the LSSA clauses) and Lloyd’s procedural rules. The provisions of the LSSA and Lloyd’s procedural rules are deemed to be incorporated into this Agreement and form an integral part hereof…

  4. The relevant LSSA clauses included the following provisions:

    “2. Overriding objective

    In construing the agreement or on the making of any arbitral order or award regard shall be had to the overriding purposes of the agreement namely:

    …(d) to ensure that the reasonable expectation of salvors and owners of salved property are met and …

  5. Arbitration Procedure and Arbitrators Powers

    6.1 The arbitration shall be conducted in accordance with the Procedural Rules approved by the Council (“Lloyd’s Procedural Rules”) in force at the time the Arbitrator is appointed…

    6.7 The Arbitrator’s award shall (subject to appeal as provided in clause 10) be final and binding on all the parties concerned whether they were represented at the arbitration or not and shall be published by the Council in London…

  6. Appeals and Cross Appeals

    10.1 Any party may appeal from an award by giving written Notice of Appeal to the Council provided such notice is received by the Council no later than 21 days after the date on which the award was published by the Council…

    10.7 In addition to the powers conferred on the Arbitrator by English law and the Agreement, the Appeal Arbitrator shall have power to:…

    ii. confirm, increase or reduce the sum(s) awarded by the Arbitrator and to make such order as to the payment of interest on such sum(s) as he may think fit;…

    Merchant Shipping Act 1995

  7. Schedule 11 to the Merchant Shipping Act 1995 sets out the text of the International Convention on Salvage 1989 which by virtue of section 224 (1) of the Act has the force of law in the United Kingdom and which by virtue of Article 2 applies to LOF arbitration proceedings:

    “Article 1

    Definitions

    For the purpose of this Convention—

    (a) Salvage operation means any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever.

    Article 6

    Salvage contracts

    1 This Convention shall apply to any salvage operations save to the extent that a contract otherwise provides expressly or by implication.

    2 The master shall have the authority to conclude contracts for salvage operations on behalf of the owner of the vessel. The master or the owner of the vessel shall have the authority to conclude such contracts on behalf of the owner of the property on board the vessel.

    Article 12

    Conditions for reward

    1 Salvage operations which have had a useful result give right to a reward.

    2 Except as otherwise provided, no payment is due under this Convention if the salvage operations have had no useful result.

    Article 13

    Criteria for fixing the reward

    1 The reward shall be fixed with a view to encouraging salvage operations, taking into account the following criteria without regard to the order in which they are presented below—

    (a) the salved value of the vessel and other property;

    (b) the skill and efforts of the salvors in preventing or minimising damage to the environment;

    (c) the measure of success obtained by the salvor;

    (d) the nature and degree of the danger;

    (e) the skill and efforts of the salvors in salving the vessel, other property and life;

    (f) the time used and expenses and losses incurred by the salvors;

    (g) the risk of liability and other risks run by the salvors or their equipment;

    (h) the promptness of the services rendered;

    (i) the availability and use of vessels or other equipment intended for salvage operations;

    (j) the state of readiness and efficiency of the salvor's equipment and the value thereof….

    3 The rewards, exclusive of any interest and recoverable legal costs that may be payable thereon, shall not exceed the salved value of the vessel and other property.”

    The questions of law

  8. The questions of law on which leave to appeal was granted are as follows:-

    “(i) Whether, when assessing salvage remuneration for a service consisting of towage for a vessel in no physical danger, the commercial rate for service is a wholly irrelevant consideration.

    (ii) Whether, based on the findings of fact in the appeal Award, as distinct from the appeal arbitrator’s characterisation of the case, the “disparity principle” -...

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