Salvage – FAQs

In some cases, separate Salvage Security is needed in addition to General Average Security. Why is this?

The instructions to cargo will make it clear whether separate salvage security is required. Under salvage contracts such as the “Lloyd’s Open Form”, salvors have a direct claim against each piece of property saved. This means that the salvors are entitled to salvage security from cargo interests. This is a separate and additional piece of security to the General Average security.

What is Salvage and why does this affect me?

The 1989 Salvage Convention defines a salvage operation as:

“Any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever.”

The general principle is that salvage is paid by the various salved interests in proportion to their salved value as at the completion of the salvage services.

The terms of most bills of lading will state that if a salvage situation arises, then cargo owners are liable to arrange salvage security for their own property. If cargo owners have arranged for insurance on their goods, then the insurance company will usually provide salvage security for the property.

What is the Lloyd’s Open Form (LOF)?

Because of the high values involved, many major container ship casualties are dealt with on Lloyd’s Open Form (LOF) terms. LOF is a contract that deals specifically with complex and difficult salvage situations.

The LOF is a well-established system for arbitrating Salvage Awards and dealing with the provision of salvage security and any associated disputes.

Where can I find out more information about salvage and the Lloyd’s Open Form?

The Salvage Arbitration Branch administers the Lloyd’s Open Form of Salvage Agreement (LOF). Further information and news about the LOF can be found on their website: https://www.lloyds.com/market-resources/salvage-arbitration-branch

There is also a short video with an introduction to the Lloyd’s Open Form that can be viewed here: An introduction to Lloyd’s Open Form