On the 23rd of March 2021, the Ever Given, one of the largest container ships in the world, ran aground in the Suez Canal. The 400-metre-long ship blocked one of the main channels for shipping. As a result of this blockade, there was a huge traffic jam of sea-going vessels, accounting for some $400 million (in goods) per hour which was stopped.
The economic pressure to free the Ever Given was considerable. It was up to SMIT Salvage ("SMIT"), a subsidiary of Boskalis, to undertake the difficult task of salvaging the Ever Given. In cooperation with the Egyptian authorities, SMIT drew up several plans to free the Ever Given. In the end, SMIT managed to free the Ever Given on the 29th of March 2021 (6 days after the ship ran aground).
Logically, SMIT subsequently wanted to be paid for its (successful) salvage work, but this was not without controversy. Indeed, the Japanese owner of the Ever Given, Higaki Sangyo Kaisha ("Kaisha"), disputed SMIT's invoice. As a result, SMIT filed proceedings in the UK. This blog briefly discusses the ruling issued by the UK High Court on 30 March 2023 on the matter.
Entitlement to a salvage fee ("reward") arises when a person rescues or contributes to a vessel, cargo, freight or other recognised object as a volunteer (i.e. without any prior contractual or other legal obligation to do so). In that respect, the salvage fee is therefore an (incentive) reward for a volunteer coming to the aid of someone in a dangerous situation.
A salvage situation arises when a shipowner (in this case, Kaisha) accepts an offer of assistance from a salvor (in this case, SMIT). To that extent, the arrangement is contractual, but it is not a contract for services with a pre-agreed fee. Instead, Article 13 of the International Convention on Salvage, London 1989 ("Convention") provides that the reward depends on several factors:
It should be noted that the above does not mean that it is not permissible for parties to enter into a (binding) agreement in respect of salvage operations. A well-known and commonly used contract is the Lloyd's Standard Form of Salvage Agreement, better known as Lloyd's Open Form (LOF). This standard agreement is widely used internationally when concluding salvage agreements. This contract is based on a 'no cure, no pay' principle. In other words, if the salvage fails, there is no need to pay. 
At issue in these proceedings was whether or not the parties had entered into a binding agreement with each other. Kaisha argued that the parties had indeed entered into a binding agreement, referring to the e-mail exchange between the parties. According to Kaisha, the parties had allegedly agreed to a "global agreement", which agreement the parties would provide with the necessary details at a later date. On this basis, Kaisha was of the view that SMIT was not entitled to a reward as it had acted under an agreement and not as a volunteer. SMIT, on the other hand, argued that no agreement applied.
The court stressed that the parties explicitly stated that they would only agree to a complete (and thus detailed) agreement. The fact that the parties agreed on some global arrangements is therefore not sufficient, the court said. The court continued that later additions and drafts prepared by the parties do not change this situation as the parties never agreed to a final agreement.
The UK High Court thus held that there was no applicable agreement between the parties in respect of the salvage work. This means that the way is open for SMIT to claim a reward in accordance with the Convention. In the present case, SMIT claims (allegedly) $35 million. As the salvaged value has been assessed at $1 billion, SMIT's claim is likely to be awarded without much difficulty.
The specialists in our International Trade, Customs and Food and Commodities Practice team will be happy to assist you if you have any questions on this topic, or any other issues surrounding International Trade, Customs or Food Safety and Legislation. Thanks to our many years of experience in International Trade and Logistics, among others, we can provide you with quick and effective service. If you have any questions on this topic, please contact one of our team members or contact Marijn van Tuijl (firstname.lastname@example.org) or Jikke Biermasz (email@example.com) directly.
 A Special Compensation P&I Club (SCOPIC) clause contains an exception to this.
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