Law of Tug and Tow and Offshore Contracts

Simon Rainey

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CHAPTER 9 The ISU standard form contracts for the provision of tugs to salvors for use in salvage: “salvcon 2005” and “salvhire 2005”

Part A. Introduction

9.1 The preceding chapter considered the interrelationship of towage and salvage from the perspectives of the provider of a service and of the recipient of that service and focused on the identification of the dividing line between the two types of service or assistance. 9.2 Towage and salvage will, however, often co-exist under the contractual arrangements in place between the various tugs or other ancillary vessels which make up a salvor’s team present at a casualty. A salvor who is engaged to assist a casualty may often be operating far from his base or from the place where his salvage tugs are on salvage station. Similarly, a salvor may need additional tugs or tugs of different capacity or type to assist his own tugs in carrying out the salvage operation. In such cases the salvor will, by means of appropriate sub-contracts, bring in tugs or other vessels from third party tug owners or towage companies. Indeed, the entire salvage service may be performed by a tug or tugs not owned or operated by the salvor but which the salvor has sub-contracted in and which the salvage master will direct in the execution of the salvor’s salvage plan. 9.3 The standard form of salvage contract, Lloyd’s Open Form (LOF), recognises this situation by providing expressly that, in the performance of his salvage service under LOF, the salvor may do so by the use of sub-contractors and that he may recover salvage remuneration for all of the services rendered, whether by himself or his sub-contractors. The relevant provisions of the current form are clauses 13.2 and 13.3 of LOF 2011. These state:

13.2 The Contractors may engage the services of sub-contractors for the purpose of fulfilling their obligation under Clause A and B of the Agreement but the Contractors shall nevertheless remain liable to the Owners for the due performance of those obligations.
13.3 In the event that sub-contractors are engaged as aforesaid the contractors may claim salvage on behalf of the sub-contractors.

9.4 It will be noted that the form leaves it open to the salvor as to the basis upon which any sub-contract may be arranged. The salvor is free to decide for himself on what terms he will contract for additional tug assistance from third parties. 9.5 There are two main contractual bases on which this type of sub-contracting of the tug as respects the salvage service are commonly arranged. 9.6 The first is by means of a sub-contract under which the salvor agrees to share the salvage remuneration to be awarded upon the completion of a successful salvage which entitles the salvor to such remuneration. In other words, the salvor and the sub-contractor both render salvage to the casualty on the same basis of “no cure-no pay” and the remuneration of the subcontractor for his services is made by giving him a share of any eventual salvage award. Loosely put, the tug owner who is sub-contracted on this basis is effectively a co-salvor, albeit subordinate to the salvor head contractor. 9.7 This basis of sub-contracting is usually concluded on the standard form adopted by the International Salvage Union (ISU) for its members, the “International Salvage Union

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Sub-Contract (Award Sharing) 2001” form (hereinafter the “ISU Sub-Contract 2001”) which replaced the former 1994 form in light of the changes required to reflect SCOPIC. The form is now in common use even between non-members of the ISU. Its salient features are that it is a sub-contract between the salvor head contractor and sub-contractor employed where the salvor head contractor is performing salvage under LOF and under which the sub-contractor is engaged on “no cure-no pay” principles. The sharing of the remuneration, unless agreed, falls to be determined under LOF arbitration. The ISU Sub-Contract 2001, being a species of salvage rather than towage, is considered in detail in the leading texts to which reference may be made (see Brice, Maritime Law of Salvage (5th edn, 2012, edited by John Reeder QC), paras. 8–302 to 8–333 (where a detailed commentary on the ISU form will be found). 9.8 The second basis of sub-contracting is where the salvor hires in the tug or additional assistance at a fixed remuneration for the sub-contractor (whether lump sum or at a fixed daily or other rate) and under which there is no sharing of any eventual salvage remuneration to which the salvor may become entitled. Such sub-contracts represent ordinary contracts of towage (or allied services) between the salvor and the tug owner. They will usually contain provisions which exclude or restrict any right in the tug owner to claim salvage in respect of the work he is engaged to do, even if the circumstances in which that work may fall to be rendered become such as would effect the conversion from towage to salvage at common law. Instead of the relationship of co-salvor under a general LOF umbrella, where tugs are brought in on this sub-contractual basis, there will be two contractual regimes at work: the LOF salvage contract between salvor and the casualty, and the towage contract between the salvor and the sub-contracted tug owner. 9.9. Given that this basis of sub-contracting is effectively a sub-contract for towage services, albeit in the context of a salvage service being rendered by a salvor usually under LOF, various forms of contract form are used including the BIMCO standard forms “Towcon” and “Towhire.” However, conscious of the special problems that can arise out of the relationship between towage and salvage under an ordinary contract of towage, as considered above in the preceding chapter, the salvage and towage industry felt the need for a dedicated standard form designed especially for use by salvors and tug owners where the contract of towage is a sub-contract of all or part of salvage services being provided by a salvor under a salvage contract.

Part B. The “Salvcon 2005” and “Salvhire 2005” Forms

The genesis of the forms

9.10 Having formerly addressed the “award-sharing” basis of sub-contracting by the ISO Sub-Contract 1994, referred to above, the ISU, in response to this perceived need, turned to consider standard form fixed remuneration sub-contracts. 9.11 The ISU has drawn up standard form contracts for this type of sub-contract. These are the “Salvcon” and “Salvhire” forms; the forms were revised and the current version of the forms are “Salvcon 2005” and “Salvhire 2005.” The two forms are supplied with “Guidance Notes” to assist those who use the forms with basic explanations of the main provisions of the forms. The notes explain the purposes of and intentions behind the forms. The “Salvcon” notes, for example, state:

This Agreement “SALVCON” is intended to be used by a Salvor working under Lloyd’s Form, or similar contract, who wishes to engage additional assistance, but on a lumpsum, non-award sharing basis, as distinct from the widely-used ISU Award Sharing Sub-Contractors Agreement or the alternative Daily Hire Sub-Contract Agreement. “SALVHIRE 2005.”

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