Challenges ahead for the salvage industry, but from a position of strength says annual review

The International Salvage Union’s 2015 Annual Review reports an industry facing future challenges from a position of strength with background progress on issues affecting both the salvage and shipping industries.

The review includes an abbreviated report on its accounts, an aspect beyond the scope of this article; of interest however are observations on the industry in general by: ISU president John Witte, general manager Mark Hoddinott and legal adviser Rob Wallis.

President John Witte speaks of operational and commercial challenges but with opportunities for good operators in what he describes as a ‘vibrant industry providing vital services: saving life; protecting the environment and saving property’. Headline figures include ISU members providing 212 salvage services and conducting 64 wreck removals in 2015 with gross revenue from all activity for ISU members standing at US$717m.

He describes the industry as being there to help shipowners, cargo owners and their insurers to limit potential losses, in effect loss-mitigation partners whose members, under traditional contracting models, are prepared to take most of the financial risk in a salvage operation, adding: “I strongly believe that well-capitalized contractors with their own expert staff and equipment are best-placed to provide salvage and wreck removal services. I would always promote these operators ahead of a consultant with no critical mass who hires-in what might be needed for the job at hand.”

The review states ISU has made good progress with Places of Refuge, a subject of importance to both contractor and client during a salvage operation. Mr Witte comments that for too long coastal states have not met their obligations with ‘shocking cases’ where salvors have been denied access to a Place of Refuge. He congratulates the European Union on work to produce and implement its new Operational Guidelines on Places of Refuge. ISU has been closely involved here but they are not pursuing further regulation in this area, encouraging coastal states to comply suggesting the EU should now provide international leadership encouraging other states to change their attitude to Places of Refuge.

On the operational side, the increasing size of vessels and difficulties of handling them as casualties remains a concern. Container ships, LNG carriers and cruise ships are examples of increasingly large vessels which could present particular challenges when requiring services from salvage contractors.

Better understand the Lloyd’s Open Form (LOF)
Promoting a better understanding of the value of Lloyd’s Open Form (LOF) is seen as important for ISU. Most commentators agree that in many emergency response situations, it is the best contract. Mr Hoddinott sees this as a long-term project as attitudes and positions have been established for decades, Mr Wallis adding that at the heart of LOF is the intent to encourage investment in salvage services to help prevent loss, an important point for all parties to understand. ISU has also been assisting Lloyd’s with its new approach to management of the Special Casualty Representative Panel aimed at making it a more robust system with finalisation of the project expected during 2016. Included in this work is the SCOPIC regime associated with LOF, a feature which has worked well since its introduction in 1999. Mr Wallis states that rates for different pieces of equipment and categories of personnel will be automatically amended in line with the US Consumer Prices Index every three years.

Criminalisation of salvors and other seafarers continues to be of concern and Mr Wallis states that while not seeking to excuse negligence, salvors should not be criminalised for using their best endeavours to save life and property and protecting the marine environment. ISU considers there is a ‘real risk’ that salvors, who are often the only professionals capable of safely intervening in a casualty situation, may choose not to respond in some jurisdictions.

Turning to the ISU’s statistics, data is gathered anonymously and figures for 2015 show ‘a robust industry continuing to provide vital services in the face of a challenging economic climate for world shipping’. While safer ships have generally reduced the amount of emergency response work, individual cases may be more complex with wreck removal activity continuing to be an important source of income.

The total number of services in 2015 was 212, the second highest since 1999 (249 services in 2014). Gross revenues for ISU members in 2015 fell to US£717m from US$775m in 2014. Wreck removal income has increased during the past decade accounting for more than half of gross revenues, up from US$394m in 2014 to US$397m in 2015.

Revenue from LOF cases, at US$83m, is the lowest in more than a decade with 2014 seeing the lowest annual number of LOF cases on record (37) and this may be reflected in the 2015 statistics. Revenue from operations other than LOF was the second highest at US$98m and showing a gently rising trend. SCOPIC revenue in LOF cases increased significantly to US$139m in 2015.

Click and download the annual review in pdf format: ISUAnnualReview2015

Article originally published on the Maritime Journal web site

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