Lloyds Form - Lloyd's Salvage Arbitration Branch

Water on the deck: in August 2004 the 26,058 GT bulk carrier Ken Explorer grounded in the Gulf of Khambat. The casualty was refloated following the discharge of 21,000 tonnes of copper concentrates.

Assos
The 47,000 DWT laden tanker Assos was the subject of a salvage operation off New York in September 2006, following propeller pitch problems in the Ambrose Anchorage.

During the early hours of February 27 2003 the bow of the LPG carrier Gas Roman struck the port side of the general cargo vessel Springbok, prompting an immediate response from salvors.

In late 2006 the vessel Outsailing 5 became a casualty at Hokkaido, Japan. The vessel was refloated and towed to Hakodate for redelivery.

INTRODUCTION

Lloyd’s Salvage Arbitration Branch is responsible for the administration of Lloyd’s Form. The organisation’s central role is to provide a reputable and secure framework within which the LOF arbitration process can operate.

Lloyd’s is notified when a Lloyd’s Form is agreed. On completion of the salvage services the salvor is required to advise Lloyd’s and the salved property of his security requirements, either as a fixed sum or as a percentage figure where individual values (e.g. in the case of a large container vessel) are not known. Unless otherwise agreed between the parties, the salvage guarantees are lodged with Lloyd’s.

The salvage guarantees are held by Lloyd’s as an independent party, until the amount due has been finalised by Award or agreement and the payment due is made to the salvor. If called on by one of the parties, Lloyd’s will appoint an Arbitrator from the panel. Lloyd’s publishes Awards to the parties concerned. Lloyd’s is responsible for collecting the monies secured by guarantees held by them and due from the salved property.

LOF is unique, in that it has an appeals procedure. The Lloyd’s Appeal Arbitrator will hear an appeal if any of the parties are dissatisfied with the original Award. The Award is not finalised until either there is no appeal or the Appeal Award has been published by Lloyd’s.

Lloyd’s established the Lloyd’s Form Working Party in 1980, to provide a forum for industry discussion of LOF matters and the contract’s use. This is now known as the Lloyd’s Salvage Group. It is chaired by the Appeal Arbitrator, who sits with representatives from all sectors of the salvage, shipping and insurance communities having an interest in salvage.

SETTLEMENT OR ARBITRATION?

Most Lloyd’s Form cases are settled amicably. Indeed, the system actively promotes amicable settlement, as opposed to arbitration of a dispute. Around 30 per cent of LOF cases go to arbitration in London.

Arbitrations are heard by a single Arbitrator, appointed from a small group of highly experienced Lloyd’s Arbitrators. Should settlement evade the parties, the commercial issues will be resolved by the Arbitrator (or the Appeal Arbitrator). Around one-third of arbitration Awards are referred to the Appeal Arbitrator.

FIXED COST ARBITRATION PROCEDURE

There have been a number of recent innovations in the administration of Lloyd’s Form, aimed at enhancing cost-effectiveness. One example is the introduction, in 2005, of a new “short form”. This was designed to reduce the cost of arbitrating smaller cases. The Fixed Cost Arbitration Procedure (FCAP) is for cases where total security does not exceed USD 1 million. The ISU had proposed that the FCAP threshold should be doubled, to USD 2 million, to encourage the use of this cost-effective form of arbitration.

FCAP is a documents-only procedure. There is a cap on the Arbitrator’s charges, Lloyd’s fees and the salvor’s recoverable legal costs, in respect of both the original arbitration and any appeal arbitration.