Article 13 reward is given only when the salvage was successful. Many salvors would not go for salvage where success chances were slim. To encourage the salvors, Article 14 was introduced by which the salvor if failed to earn a reward under Article 13 or the reward was not sufficient to recover his own expenses, was entitled to special compensation for his efforts in preventing or minimizing damage to the environment. This special compensation given by the Owner to the Salvor would be equivalent to the expenses incurred by the Salvor. It could be additionally increased upto a maximum of 30% of the expense incurred by the salvor. However, if deemed fair and just the tribunal may increase to maximum of 100% of the expenses incurred by the salvor.
Salvor‘s expenses include out-of-pocket expenses, expenses of equipment and personnel, etc. The total special compensation shall be paid only if and to the extent that such compensation is greater than any reward recoverable by the salvor under Article 13. P&I Club on behalf of the Owner paid this special compensation to the salvor.
All 3 parties had concerns regarding Article 14. The P&I Club and shipowner were concerned that salvor would unnecessarily prolong the operation and claim for more compensation. The salvors were concerned that the special compensation was possible only when there was a threat to the environment which needed to be proved. Moreover, article 14 seemed applicable only in inland and coastal waters.
To tackle all these concerns, SCOPIC was introduced as part of LOF. Once invoked, the SCOPIC clause substitutes Article 14 and salvors concerns were solved. Once invoked, the clause applied to all geographic areas. It was applicable even when there was no threat to environment. Upon invoking, within 2 working days security deposit of 3 million USD is provided.
What are the various clauses under SCOPIC?
Following are the various clauses under SCOPIC 2020:
- Invoking the SCOPIC Clause
- Security for SCOPIC RemunerationWithdrawal and Termination by the ContractorTariff RatesArticle 13 awardDiscountPayment of SCOPIC RemunerationTerminationDuties of ContractorSpecial Casualty Representative (SCR)Special RepresentativesPollution prevention
- General Average
What is the difference between SCOPIC incorporating and invoking?
SCOPIC was first introduced in LOF 2000. It appears on Block 7 in the LOF as ―Is SCOPIC incorporated in this agreement? When “No” is deleted/cancelled out, the SCOPIC clause is considered as incorporated into the agreement, not invoked. Once incorporated, it replaces Article 14 and the salvor loses his right to claim special compensation under Article 14.
The salvor shall have an option to invoke the SCOPIC clause by written notice to the Owner of the vessel at any time after SCOPIC is part of LOF. Upon invoking, within 2 working days security deposit of 3 million USD is provided.
It appears that it is good for salvors to invoke SCOPIC at the start of the operations. But Paragraph 7 prevents him from doing so. It states that if SCOPIC is invoked, and the Article 13 reward is more than the SCOPIC remuneration, then the Article 13 reward will be discounted by 25% of the difference between the Article 13 reward and the SCOPIC remuneration that would have been assessed had the SCOPIC been invoked on the first day of the services. This ensures that the salvor will not invoke the SCOPIC clause unnecessarily when he is certain about saving the property.
Once SCOPIC is invoked, the owner deposits 3 million dollars as security. But if the salvor is not able to save the property and his expenses are more than 3 million dollars, what will happen next?
SCOPIC remuneration is payable even the salvage was unsuccessful. So, if the security deposit paid was 3 million USD and the SCOPIC remuneration is assessed to be more than that, the additional amount is to be paid by the Owner to the Salvor. This is paid by the P&I Club on behalf of the Owner.
Does hull and machinery come into the picture in salvage operation?
Yes, H&M will come into the picture as costs related to Salvage are usually covered by H&M underwriters, except the special compensation of Article 14 and SCOPIC. In simple words, it does not provide cover for any cost exceeding Article 13 reward.
So in the case of a ship collision, cost of damages to the H&M of own ship will be fully paid by the H&M underwriter. The resultant payable costs for damages to the H&M of other ship will be paid only upto 3/4th as per the policy. Any other third-party claims will be covered by the P&I Club. A H&M Cover may also include Sue and Labor costs, loss of hire, etc. depending on the type of cover chosen. Hence, H&M underwriter will always be involved so as to ascertain the costs that are to be paid by them and those that are to be excluded. For example, vessel before being salved, tried to refloat using her engines and caused damage to her engines. This damage comes under General average. The H&M underwriter is liable to pay for the repair of this engine but also is entitled to take contribution for the same from the other parties that will contribute as part of General average.
SCOPIC has a provision that once it is invoked, the H&M underwriters can anytime appoint one special representative (Special Hull Representative) at its own expense to attend the casualty to observe and report upon the salvage operation. Such Special Representatives shall be technical men and not practising lawyers.
What will you do if a salvor is not helping and demanding more money?
I will sign a LOF with the salvor so that no money or remuneration is required to be negotiated and the salvage operation can be completed smoothly. I will inform the Company / Owner, if applicable, the Special casualty representative (SCR) and other special representatives (Special Hull representative & Special Cargo representative)
What is a special casualty representative? How many SCRs would normally be there for a salvage operation? What are the duties of SCR?
As per SCOPIC Para 12, Special Casualty Representative (SCR), once the SCOPIC clause has been invoked, the owners of the vessel may at their sole option appoint an SCR to attend the salvage operation in accordance with the terms and conditions set out in Appendix B (of SCOPIC). Any SCR so appointed shall not be called upon by any of the parties hereto to give evidence relating to non-salvage issues.
There will normally be one SCR appointed from among the SCR Panel. The SCR panel is chosen by the SCOPIC committee members.
Duties of SCR as stated in the Appendix B of SCOPIC:
To assist in the salvage of the vessel and the property thereon and in doing so, prevent and minimise damage to the environment. The Salvage Master shall at all times remain in overall charge of the operation.
- To remain well informed of all activities and take all updates from the Salvage Master. To offer the Salvage Master advice. To receive the Daily Salvage Reports‘from the Salvage Master.
- Upon receipt of each Daily Salvage Report, to endorse his report if satisfied and transmit a copy to Lloyd’s, owners of the vessel, their liability insurers and underwriters and to the Special Hull Representative and Special Cargo Representative.
- If not satisfied with the Daily Salvage Report, prepare a dissenting report setting out any objection or contrary view and deliver it to the Salvage Master and transmit it to the parties named above.
- After the Salvage services terminate, to issue the “SCR’s Final Salvage Report‖ and send it to the owners of the vessel and their liability insurers and to Lloyd’s who shall forthwith distribute it to the Interested Persons.