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