The Lloyd's Open Form, formally "Lloyd's Standard Form of Salvage Agreement", and commonly referred to as the LOF, is a
standard form contract
A standard form contract (sometimes referred to as a ''contract of adhesion,'' a ''leonine contract'', a ''take-it-or-leave-it contract'', or a '' boilerplate contract'') is a contract between two parties, where the terms and conditions of the co ...
for a proposed
marine salvage
Marine salvage is the process of recovering a ship and its cargo after a shipwreck or other maritime casualty. Salvage may encompass towing, re-floating a vessel, or effecting repairs to a ship. Today, protecting the coastal environment from ...
operation. Originating in the late 19th century, the form is published by
Lloyd's of London
Lloyd's of London, generally known simply as Lloyd's, is an insurance and reinsurance market located in London, England. Unlike most of its competitors in the industry, it is not an insurance company; rather, Lloyd's is a corporate body gov ...
and is the most commonly used form for international salvage. Innovations in the LOF 1980 have engendered a major change in environmental salvage.
The salvage reward
After a stricken ship accepts an offer of salvage from a salvor, a binding contract is created. It is then normal to agree upon the LOF in the interests of certainty of terms. The LOF is called "open" because it specifies no particular sum for the salvage job. Indeed it may not specify a sum, as salvage is not a "contract for services", but an agreement to provide a service in the hope of a "reward" to be determined later by an
arbitration hearing in London, where several
KCs practising at the
Admiralty Bar specialise as maritime arbitrators.
When determining the salvage award, an arbitrator follows the
English law
English law is the common law legal system of England and Wales, comprising mainly criminal law and civil law, each branch having its own courts and procedures.
Principal elements of English law
Although the common law has, historically, be ...
of civil salvage, which is itself subject to the
Salvage Convention 1989, a successor to the original 1910 Convention. The value of the ship, its cargo and freight at risk are taken into account when the arbitrator decides what the award should be, together with the extent of the dangers and the difficulty in effecting the salvage.
"No cure – no pay"
Traditionally, the salvage reward has been subject to the salvor successfully saving the ship or cargo, and if neither is saved, the salvor gets nothing, however much time and money has been spent on the project. This harsh principle is called "No cure – no pay"; and at the top of page one of the LOF, beneath the title "Salvage Agreement" is a statement of this fundamental premise.
In the 1960s and 1970s, there were a number of ageing single-skinned tankers coming to grief and letting huge slicks of crude oil escape. While passing ships were obliged to offer reasonable assistance to save life, they were reluctant to offer salvage services on a seeming reckless adventure to save a low value hulk where third party liability risks might be enormous. Instead, salvors preferred to work where there were richer pickings and fewer dangers. This situation alarmed coastal states (whose beaches were liable to pollution from oil slicks) and
P&I Clubs Protection and indemnity insurance, more commonly known as P&I insurance, is a form of mutual maritime insurance provided by a P&I club. Whereas a marine insurance company provides "hull and machinery" cover for shipowners, and cargo cover for cargo ...
(who might be responsible to "pick up the tab" and indemnify those third-party risks).
Modern environmental salvage
To remedy the position, the Lloyd's Open Form (LOF) 1980 made provision for a stricken tanker to engage salvage services and ''guarantee'' a reward provided that the salvor had exercised due diligence in attempting to save the marine environment from pollution. This innovation proved very successful, and the international community was so delighted and impressed that only a few years later the 1989 Salvage Convention came into force, adopting this new LOF idea. Specifically, articles 13 and 14 of the Convention lay down the modern basis for making the award.
Although the 1989 Convention has been a success, the
House of Lords
The House of Lords, also known as the House of Peers, is the Bicameralism, upper house of the Parliament of the United Kingdom. Membership is by Life peer, appointment, Hereditary peer, heredity or Lords Spiritual, official function. Like the ...
decision in ''
The Nagasaki Spirit
''The Nagasaki Spirit'' 997 is an English admiralty law case on marine salvage and on the provisions of Article 13 and 14 of the 1989 Salvage Convention.
The case identified problems with the drafting of the Convention, a response to which was ...
'' showed that it had been poorly drafted in places, and did not always provide adequate reimbursement to salvors. The international maritime industry joined with P&I Clubs in 2000 to develop the new
SCOPIC Protection and indemnity insurance, more commonly known as P&I insurance, is a form of mutual maritime insurance provided by a P&I club. Whereas a marine insurance company provides "hull and machinery" cover for shipowners, and cargo cover for cargo ...
form, a
codicil
Codicil may refer to:
* Codicil (will), subsequent change or modification of terms made and appended to an existing trust or will and testament
* A modification of terms made and appended to an existing constitution, treaty, or standard form c ...
which could be annexed to the LOF to redress the shortcomings of the 1989 Convention.
References
{{reflist
External links
Lloyd's of London LOF page
Admiralty law
Admiralty law in the United Kingdom
Marine salvage