# US$2.7m Salvage award to be reduced



## non descript (Nov 18, 2005)

Courtesy and Copyright of Tradewinds

Salvage battle 
Greek owner, George Economou, is poised to have a $2.7m salvage award made to compatriot salvor, Tsalviris, reduced in a closely-observed legal case. 
The award for the salvage of a fully-laden capesize that broke down in mid-Atlantic had been increased in January this year by the Lloyd’s salvage appeal arbitrator, John Reeder, from the original $1.75m made in July 2007 and which Tsalviris had appealed as “too low and unjust to the salvors.” 
But yesterday in the admiralty court in London Economou’s lawyers, Ince & Co, succeeded in getting the higher award referred back to Reeder who, after a review of recent awards in similar “rescue tow” cases where there is no immediate danger, had decided they had been too low. 

The Voutakos with the salvage tug Fairmount Glacier.
Owners have argued that in rescue tows where a ship is immobilised and there is no great urgency, awards should not be out of line with commercial towage rates. 
But this, the so-called disparity principle, was described by Reeder as “seriously flawed” and had lead to the stagnation of salvage towage awards to a level where they no longer encouraged salvors. 
The judge in the case, Mr Justice David Steel, said, “Commercial towage rates are admissible and relevant but their significance will depend on the facts of each case”. 
The case began in October 2006 when the 188,000-dwt Voutakos (built 1989) was immobilised by a main engine breakdown while carrying 175,000 tonnes of coal from Colombia to Rotterdam. 
Tsavliris was hired under a LOF200 salvage contract but subcontracted the 560-mile tow of the bulker to Dutch firm, Fairmount Marine, which deployed its powerful, 16,230-bhp Fairmount Glacier. 
The tow, however, encountered force 6-7 winds as it approached the Dover Strait and a second tug – the 7,200-bhp Alphonse Letzer operated by URS of Belgium – was hired to complete the tow safely to Rotterdam. 
The salvage contract cost Tsvaliris $874,000, mainly in subcontracting the two tugs – the Fairmount Glacier for $638,743 ($95,000 a day, plus a $100,000 salvage bonus) and the Alphonse Letzer for $96,032. 
The value of the salved ship, its bunkers and cargo has been set at $42.5m. 
Tsavliris has argued through his lawyers, Hill Dickinson, that if commercial towing rates are used in immobilisation cases, salvors would, when such rates were high, as at the time of the Voutakos incident, switch their tugs to take advantage and so reduce salvage capabilities. 
The judge yesterday recognised that salvors incur extra expenses, citing the $3m Tsavliris spends a year on fuel burned in “idle time and abortive sorties”. 
But underwriters fear that if awards in rescue tows are increased masters, under pressure from shipowners, will hesitate before signing a LOF contract. 
The amount being argued over might seem to some trivial when set against the profit Economou has made from selling the Voutakos in the middle of the arbitration proceedings. 
In January this year he sold the ship for $78m to Pacific King of Singapore, having paid around $20m for it in 1999. 
++
*By Andrew Guest in London 
Published: 11:30 GMT, 11 July 2008 | last updated: 11:36 GMT, 11 July 2008*


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## Steve Woodward (Sep 4, 2006)

Interesting article - I can see only one set of winners here, and they do not own any ships - the lawyers


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## callpor (Jan 31, 2007)

So nothing's changed then?


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## Iain B (Apr 28, 2007)

Tonga said:


> Courtesy and Copyright of Tradewinds
> 
> Salvage battle
> Greek owner, George Economou, is poised to have a $2.7m salvage award made to compatriot salvor, Tsalviris, reduced in a closely-observed legal case.
> ...



This is a very important judgement for the insurance market and salvors.

99% of owners will want to have a commercial towage contract in a distress situation if they possibly can. 

Regrdless of any other issue about the LOF 2000 (in Management systems, Charters, whatever) the philosophy is that a LOF should be proximate to the costs and risks. In this case it is accepted that a LOF will have a significant increase above a commercial towage contract. 

If the industry wants to have confidence in the use of LOF's there must be some confidence in the level of awards that will made. 

In a non critical situation like this one was, the owners and underwriters wil get into a stand off with the salvors if the difference between an LOF and a towage contract is so large.

Tsvaliris got an initial award of $1.75 million when it cost them $874,000 for effectively sub contracting this to Fairmont on a 'commercial rate'. On appeal the salvage arbitrator appears to have then said that the owners and underwriters should pay $2.7million (i.e.$1,826,000 more than it cost) for the benefit of encouraging salvors to maintain resources. This was then reduced after the judgement by Justice Steel to $876,000 


Iain


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## non descript (Nov 18, 2005)

Iain, your valuable and worthwhile comments are always worthwhile to read; to my mind a fair and accurate assessment. Thank you.
(Thumb) 
Mark


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