LLOYDS OPEN FORM 2011 LOF 2011 The most

LLOYD’S OPEN FORM 2011

LOF 2011 • The most widely used form of salvage contract in the world • A long history – LOF has been in existence for over 100 years • Based on the concept of “no cure, no pay” • Awards are based on various factors including the value of the salved property and so awards can be very high compared to a commercial towage or other form of contract • LOF is based on a policy of encouraging salvors and rewarding them for their efforts

LOF 2011 • LOF 2011 introduces two main series of changes • The first is to do with transparency and consistency. For the first time LOF awards are to be made publically available • Secondly, there is a substantial change in relation to salvage security. There are two changes in this respect: 1) the right of salvage arbitrators to obtain security, and, 2) substantial changes in respect of security in relation to container vessels 3

LOF 2011 Publication of LOF Awards and Transparency • A fundamental principle of English arbitrations is that the arbitration proceedings, materials and awards are private and confidential to the parties – see Ali Shipping Corp v. Shipyard Trogir [1998] 2 All ER 136 • The confidentiality of English arbitration proceedings clashes with another fundamental aspect of English jurisprudence which is that it is a common law, precedent based system • The effects of this are uniformity, certainty and predictability which should mean that legal disputes are more easily resolved and legal costs are kept to a minimum • If arbitration awards are kept private and confidential, there are no precedents. It is therefore difficult for the parties to know where they stand. So there will be lack of uniformity, uncertainty and unpredictability. 4

LOF 2011 Changes to the LOF 2011 – Publication of Awards • The specific changes are set out in clause 3 of the Important Notices on the LOF 2011 form and clause 12 of the Lloyd’s Standard Salvage and Arbitration Clauses • Under previous LOF contracts there was an unofficial system of limited disclosure and circulation of awards. This was recognised in The Hamtun [1999] All ER 249 • It is possible to apply to the arbitrator to withhold publication of an award if there is “a good reason” for doing so. At moment there is very little guidance on this. 5

LOF 2011 Changes to the LOF 2011 – Security Provisions • Clause 6. 6 of the Lloyd’s SSAC gives the arbitrator power to demand security for his own fees and expenses, that have been incurred or are reasonably anticipated, from one or more of the parties. There is an identical provision in relation to appeal arbitrators under Clause 10. 8 • Previous difficulties in relation to obtaining security for salvage of container ships, where cargo may be owned by hundreds or even thousands of different owners. The costs of the usual salvage process may be disproportionate. There are new special provisions in clauses 13 – 15 of the Lloyd’s SSAC 6

LOF 2011 Special Provisions in Relation to Laden Containers • Clause 13 of the Lloyd’s SSAC specifies that notices in relation to salved cargo which is not represented can be sent to the party or parties who have provided salvage security and that is deemed to constitute proper notification to the owners of the property • Clause 14 of the Lloyd’s SSAC provides that, subject to the approval of the arbitrator, where an agreement has been reached between the salvors and the owners of 75% of the value of the salved cargo of represented interests, that agreement shall be binding on the owners of all salved cargo who were not represented at the time of the agreement. 7

LOF 2011 Special Provisions in Relation to Laden Containers • Clause 15 of the Lloyd’s SSAC, subject to the approval of the arbitrator, the salved cargo with a value below an agreed figure can be omitted from the salved fund and excused from liability for salvage, if the costs of including such cargo is likely to be disproportionate • At the same time as the introduction of LOF 2011, a new system was introduced for appointment to the LOF panel of arbitrators and new panel of arbitrators was appointed which was said to be designed to be make the LOF process “more transparent and inclusive” 8

david. mcinnes@incelaw. com Beijing Dubai Hamburg Hong Kong Le Havre London Monaco Paris Piraeus Shanghai Singapore