The number of Lloyd's Open Form (LOF) salvage deals awarded in 2018 suggests market speculation over the demise of the traditional “no cure no pay” emergency salvage contract could be premature.
Eighteen LOF deals were awarded in the first three months of the year, compared with 54 in the whole of 2017. In 2016, only 42 LOFs were awarded.
Encouragingly for the salvage industry, LOF contracts have been deployed in the biggest casualties so far this year.
They include the collision between the 164,000-dwt tanker Sanchi (built 2008) and 76,000-dwt bulker CF Crystal (built 2011) in January, which led to the loss of the tanker; and the job to refloat the 7,409-ceu car carrier Glovis Spring (built 2016) in February.
Most surprisingly, a LOF was used in March's emergency response to the massive fire on the 15,262-teu Maersk Honam (built 2017), where Maersk Line had a prearranged global salvage response deal with Ardent.
And a LOF deal was also used that month for the wreck removal of the 72,610-dwt bulker Flourishever (built 1995), currently aground in the South China Sea.
LOF contracts have also sparked controversy this year, with protection and indemnity (P&I) insurers warning salvors against attaching side agreements to standard deals.
Clubs cite one such side agreement that allows salvors to retrospectively introduce a special compensation P&I clause (Scopic) to a contract. Under Scopic, salvors are entitled to additional rewards for minimising environmental damage.
The dispute over side agreements comes as underwriters try to put a cap on the cost of claims, and salvors seek to maximise returns. However, some of the P&I clubs are warning the use of side arrangements could compromise insurance cover.
