The International Salvage Union (ISU) has criticised a proposal from Lloyd’s of London to close its Salvage Arbitration Branch, claiming it could leave the Lloyd’s Open Form (LOF) salvage contract “fatally damaged”.

The ISU was informed in late April of Lloyd’s move to review the future of the Salvage Arbitration Branch, which manages the LOF system.

The ISU executive committee said in a statement that the LOF had been the traditional “go-to” salvage contract for more than 100 years, and could fold without the support of the Salvage Arbitration Branch.

It added that the end of the LOF “would have a serious impact on safety at sea and a potentially significant impact on the environment, as well as the possibility of catastrophic losses to communities reliant on the sea for their livelihoods".

“There would be increased danger to seafarers and an inevitable increase in loss of property such as hull, cargo and in businesses affected ashore,” it said.

Under the LOF system, a salvage contractor can be appointed immediately and the award settled later, either through direct negotiation with underwriters, or arbitration.

Alternative forms of emergency response salvage contracts could require negotiation before the salvor is appointed which would delay the salvage operation.

Alternatives

However, over the past decade, underwriters have increasingly favoured alternative contract forms to the LOF, putting its future in question.

The move to end the Salvage Arbitration Branch is also a part of business reforms now being undertaken at Lloyd’s.

The ISU pointed out that there is still a role for the LOF in shipping to effectively respond to casualties and to protect the environment and human life.

It said incidents such as the pollution caused by the grounding of the 203,000-dwt Wakashio (built 2007) off Mauritius in July last year would become more common without the LOF.

“In the absence of LOF there will be a direct impact on insurers and their clients; financial exposure to losses will increase and shipowners and property underwriters will be wide open to common law salvage claims,” the ISU said.