Ocean Crown, the Owners of the Vessel & Ors v Five Oceans Salvage Consultants Ltd

Salvage remuneration must be assessed by reference to the circumstances prevailing at the time of the salvage services. The principle of encouragement permits generous awards where appropriate, but the risk of future economic downturns is not a specific enhancing factor. Post-termination economic conditions must not be used to increase the award. The high value of the salved fund is relevant, particularly where valuable property faces serious risks, but it must not produce an award altogether out of proportion to the services rendered. That moderating principle applies equally to straightforward, dangerous and complex salvage operations. The assessment remains fact-sensitive and requires an overall judgment of the dangers and nature of the services.

Ship and cargo interests appealed under section 69 of the Arbitration Act 1996 from an appeal arbitration award concerning salvage remuneration under a Lloyd’s Open Form agreement. The appeal arbitrator had increased the first-instance award from US$34,500,000 to US$40,750,000.

The appeal raised three questions: whether future economic difficulties could enhance remuneration; whether actual post-termination economic conditions could be considered; and whether the principle in The Amerique applied to complex and comprehensive salvage cases.

1. The appeal was allowed on all three issues. The appeal award was remitted to the appeal arbitrator for reconsideration in light of the judgment.
2. Under article 13 of the London Salvage Convention 1989, salvage remuneration is fixed with a view to encouraging salvage operations, by reference to the specified criteria and the circumstances of the salvage in question. Encouragement has a future element, but the possibility of future economic downturns is not a specific factor which may enhance the award.
3. Using future downturns as an enhancing factor risks double counting, particularly where the salved fund already reflects favourable economic conditions at termination. Considering actual economic conditions between termination and the award would also undermine the established termination-date cut-off and create difficulties concerning post-termination changes in the value of the salved fund.
4. The value of the salved fund is significant, especially where valuable property faces serious risks. However, it must not raise the award to an amount altogether out of proportion to the services actually rendered. That moderating principle, stated in The Amerique, applies to all salvage cases, including complex and comprehensive services. Its application is fact-sensitive and requires consideration of the dangers and nature of the services.
5. The appeal arbitrator’s statement that the principle in The Amerique did not apply in complex cases disclosed an error of law. The court would not speculate that the error made no difference to the award. The appropriate relief was remission rather than reinstatement of the first-instance award.

• High Court (Admiralty Division): appeal from the appeal arbitration award allowed on all three questions of law under section 69 of the Arbitration Act 1996; award remitted.
• Appeal arbitration: appeal arbitrator increased the first-instance salvage award from US$34,500,000 to US$40,750,000.
• First-instance arbitration: arbitrator awarded US$34,500,000 plus interest and costs.