UK P

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UK PI CLUB
SALVAGE The introduction of SCOPIC ( The Special
Compensation PI Clause)
Graham Daines Thomas Miller P I Ltd.
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SCOPIC

• Circulated paper LOF and SCOPIC
• The development of LOF
• The introduction of SCOPIC
• The role of the SCR
• SCOPIC in practice

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SCOPIC

• LOF Contract - used for over 100 years
• Why the need for radical change?
• The Development of SCOPIC
• Advantages and Disadvantages
• The role of the SCR
• SCOPIC a review

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SCOPIC

• International Convention on Salvage 1989
• Extension of Safety Net provisions
• Application beyond laden tankers

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SCOPIC

• ARTICLE 14 PROVISIONS
• Special compensation payable to salvor
• If threat of environmental damage
• Article 13 award less than special compensation
• Special compensation based upon fair rate for
  expenses
• Uplift by up to 30 per cent (or up to 100 per
  cent if tribunal considers it to be fair and
  just)
• If
• Salvor has prevented or minimised environmental
  damage

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SCOPIC

• Difficulties experienced with interpretation of
  Article 14
• Dissatisfaction not confined to one party
• Geographical restriction to environmental threat
  (compared to LOF80)
• Coastal or inland waters or areas adjacent
  thereto
• Uncertain assessment of special compensation
  the uplift (Art.14.2)
• Uncertain assessment of fair rate (Art.14.3)

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SCOPIC

• Lack of incentive for salvor due to
  uncertainty of reward
• Security for Art.14 awards not always
  available
• No P and I club involvement
• Inadequate information available from scene
  no dialogue
• Lengthy Art.14 disputes affecting cashflow
• Costly arbitrations

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SCOPIC

• SPECIAL COMPENSATION PI CLAUSE (SCOPIC)
• Developed by all parties to the salvage contract
• An attempt to resolve problems inherent in
  Article 14 and to achieve certainty
• Not designed to replace 1989 Salvage Convention
• No geographical restriction
• Replaces Article 14 provisions
• Initial two-year trial period
• Not perfect? but an improvement

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SCOPIC

• SCOPIC
• Voluntary agreement Parties may contract on LOF
  terms, lumpsum basis or daily rate
• SCOPIC must be invoked by salvor No cure No
  pay without safety net until then
• May be invoked at any time
• No geographical restriction
• No need to establish environment threat

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SCOPIC

• SCOPIC
• SCOPIC remuneration based upon agreed tariff plus
  25 per cent uplift
• Salvage services still assessed under Art.13
• SCOPIC remuneration payable by P and I club
  only to extent it exceeds Art.13 award
• Discount applies if SCOPIC invoked unnecessarily
  i.e. Art.13 award exceeds SCOPIC remuneration

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SCOPIC

• SCOPIC
• Security for SCOPIC remuneration of US3 million
  to be provided within 2 working days (adjustable
  later)
• Withdrawal from SCOPIC provisions
• - if no security is provided salvor may
  request tribunal to apply Art.14
• Payment SCOPIC remuneration payable within 30
  days
• Shipowner may terminate under SCOPIC upon giving
  5 days notice

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SCOPIC

• SCOPIC
• Tariff schedule to be reviewed and agreed
  regularly
• Worldwide, commercial rates
• Banded tug rates based upon BHP
• Equipment rates capped at 150 per cent of
  replacement cost

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SCOPIC

• SCOPIC
• Appointment of Special Casualty representative
  (SCR) achieves
• Much improved access to current information
• Available to ALL parties
• Salvage masters daily reports and SCR final
  report circulated
• SCR may record disagreement with salvor and
  report
• Disputes capable of being resolved earlier

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SCOPIC

• SCOPIC
• Advantages and disadvantages for salvors
• Advantages
• No need to prove environmental threat
• No geographical uncertainty
• Profitable tug rates apply
• Improved cashflow
• Amount payable under SCOPIC usually guaranteed

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SCOPIC

• SCOPIC
• Disadvantages for salvors
• Shipowner acquires right to terminate
• Uplift limited to 25 per cent

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SCOPIC

• SCOPIC
• Advantages and disadvantages for shipowners and
  their P I clubs
• Advantages
• Much improved flow of information
• important when pollution threatened or ship in
  danger of becoming a wreck
• Reduced legal costs
• Certainty of cost of operation
• Clear right to terminate

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SCOPIC

• Disadvantages for shipowners
• Environmental threat/location of casualty
• - No longer factors
• Commercial rates plus, always apply

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SCOPIC

• SCOPIC 2000 AMENDMENTS
• SCOPIC may be used with any LOF e.g. LOF 2000
• SCOPIC replaces Art.14 ART.14 does not apply
  even if SCOPIC not invoked
• Right of withdrawal by contractor under SCOPIC
  only exercisable up to provision of initial
  security
• SCOPIC remuneration only payable in excess of
  potential Art.13 even if no Art.13 award is
  sought or paid
• Termination provision re-worded to achieve
  clarity
• Amendments / clarification of tariff rates and
  application

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SCOPIC

• In the years for which figures are available
  there were
• 123 LOF cases in 1999 SCOPIC was invoked in 14
  cases,
• 133 cases in 2000 SCOPIC
  16 cases
• 108 cases in 2001 SCOPIC
  23 cases
• 104 cases in 2002 SCOPIC
  18 cases
• 89 cases in 2003 SCOPIC
  27 cases
• 91 cases in 2004 SCOPIC
  13 cases
• To June there have been 52 LOF cases in 2005 and
  SCOPIC has been invoked in 7 cases

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SCOPIC

• The role of the SCR from SCOPIC and the SCR
  Guidelines
• The primary duty of the SCR shall be the same
  as the contractor, namely to use his best
  endeavours to assist in the salvage of the vessel
  and the property thereon and in so doing to
  prevent and minimise damage to the environment.

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SCOPIC

• Role of the SCR
• Provider of up to date information to all parties
  not just shipowner
• Salvage master in charge and responsible
• SCR has the right to consult with and be
  consulted by the salvage master and to express
  his views
• SCR may issue dissenting report
• SCR should receive salvage plan and notice of
  changes

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SCOPIC

• Role of the SCR
• Record daily expenditure based upon SCOPIC tariff
• Aim to discuss and agree calculations with
  salvage master
• Produce final salvage report
• Within one month
• Facts and circumstances
• Allowable tugs, personnel, equipment
• Total remuneration under SCOPIC

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SCOPIC

• Role of the SCR
• Advantages
• For shipowners - knowledge and progress
• For salvors - line of communication
  to all parties
• For insurers - knowledge ability to react
  immediately to changing events e.g. pollution
  threat

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SCOPIC

• SCOPIC A review
• Encouraging results from the first three years
• Increasing use of LOF with SCOPIC
• SCOPIC invoked in 15 per cent of cases
• More cases capable of being settled swiftly
• Improved flow of information
• Adaptable format

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SCOPIC

• SCOPIC A review (2)
• Structured chain of communication
• Greater certainty over expenditure
• Improved cashflow
• Earlier resolution?
• Knowledge/influence over events