Voutakos, Re the Owners of the vessel v Tsavliris Salvage (International) Ltd

In assessing salvage remuneration under the 1989 Salvage Convention, commercial towage rates are admissible and relevant, although their significance depends on the facts. They are not confined to cases involving straightforward rescue towage. The so-called disparity principle, if treated as a rule limiting relevance to that category, is unworkable because danger, professional status and available contractual alternatives exist on a sliding scale. Commercial rates are not determinative, but may provide an important cross-check and, in simple towage cases, a floor for an encouraging award. The assessment must balance encouraging professional salvors with encouraging owners and underwriters to accept salvage services promptly. The award was remitted for reconsideration.

The owners of the vessel Voutakos appealed under the Lloyd’s Standard Salvage and Arbitration clauses on questions of law arising from an appeal award. The Appeal Arbitrator had increased salvage remuneration for a tow from US$1,750,000 to US$2,700,000.

The appeal concerned the so-called disparity principle, the relevance of commercial towage rates when assessing salvage remuneration, and whether a general increase in towage awards was required by the International Convention on Salvage 1989. The central issue was whether commercial rates were legally irrelevant except in straightforward towage cases.

1. The appeal was allowed to the extent that the award was remitted to the Appeal Arbitrator for reconsideration in light of the judgment.

2. The disparity principle, understood as a rule applicable only where the service consisted of straightforward towage without physical danger, was misconceived. The categorisation was unworkable because the degree of danger, the professional status of the salvors and the availability of commercial assistance vary along a continuum. A vessel may be immobilised while nevertheless exposed to a degree of practical risk, and professional and non-professional towage capacity may overlap.

3. Commercial rates were admissible and relevant to salvage remuneration. They were not determinative and were not themselves an additional criterion under Article 13, but actual subcontracting costs and the general level of towage rates could inform the assessment under the Convention’s criteria, including expenses incurred by salvors. The relevance and weight of the evidence depended on the facts.

4. In straightforward towage cases commercial rates might be particularly influential and provide, subject to the salved values, a floor below which an award could not readily be regarded as encouraging. Where a substantial part of the service was subcontracted, the agreed cost could not be treated as wholly irrelevant, even where the salvors were highly professional.

5. The requirement to encourage salvage operations was reciprocal. Salvors had to be encouraged to maintain readiness and provide services, while owners and underwriters also had to be encouraged to accept salvage terms promptly. The award had to strike a fair balance and remain proportionate to the services rendered and the values salved.

6. Whether a general increase in awards in towage cases was required was not, in the form advanced, a question of law capable of being answered by the court. Individual awards remained to be assessed on their merits through the established LOF machinery.

• High Court (Admiralty Division): appeal by the shipowners on questions of law arising from the Appeal Arbitrator’s Final Interim Award dated 7 January 2008. The award was remitted for reconsideration.
• Lloyd’s Salvage Appeal Arbitration: the Appeal Arbitrator had increased the original salvage award from US$1,750,000 to US$2,700,000.