LOF 2000 included the SCOPIC (Special Compensation P&I Club) Clause, a new remuneration system for those cases where a satisfactory, property-based Salvage Award is unlikely to materialise. SCOPIC was developed by industry as a more effective successor to Article 14. It rewards the salvor according to pre-agreed tariff rates for salvage tugs and other craft, portable salvage equipment and salvage personnel.

SCOPIC is applicable in around one-in-five salvage cases. It is a complex clause, with 15 sub-clauses, three appendices and two supporting, non-legally binding codes of practice. This overview is no substitute for the clause itself, which warrants careful reading.

SCOPIC Clause

1. SCOPIC is designed as an addendum to LOF and will be included as part of that contract only if specifically agreed. LOF Box 7 requires the parties to record whether SCOPIC is part of the contract. LOF Clause C provides that if this box is not completed SCOPIC will not form part of the contract.

LOF Box 7
LOF Clause C
LSSA, Rule 3.9

• Note: if SCOPIC is not incorporated, Article 14 (if relevant) will apply.

2. When incorporated into LOF 2000, SCOPIC replaces Article 14 of the Salvage Convention, which thereafter no longer applies (see SCOPIC, Clause 1).

SCOPIC, Clause 1

• Note: if SCOPIC is not later invoked (see 3, below) or is later terminated (see 8, below), the salvor will have neither the protection of Article 14 or SCOPIC.

3. Even when SCOPIC is incorporated into LOF 2000, its remuneration provisions do not begin to apply until specifically invoked by the salvor in writing (SCOPIC, Clause 2). The calculation of SCOPIC remuneration does not begin until that point.

SCOPIC, Clause 2

• Note: there is a discount provision (see 7, below) to discourage salvors from invoking SCOPIC in every case, together with a further provision allowing the owner to withdraw from SCOPIC in certain circumstances (see 8, below). In short, whilst SCOPIC remuneration reduces the financial risk to the salvor in the event of failure or partial success, it only does so at a potential cost. A commercial decision has to be made by the salvor, as to whether and when he invokes SCOPIC.

4. Once SCOPIC had been invoked, the shipowner must provide security in the sum of USD 3 million (SCOPIC, Clause 3). This can be varied later (up or down), according to the circumstances. This provision is for the salvor’s protection. Without security being given at this point, he may have no means of enforcing payment of any SCOPIC remuneration due to him. In such circumstances, SCOPIC, Clause 4, gives the contractor the option to withdraw from SCOPIC, leaving him with the protection of Article 14.

SCOPIC, Clause 3
SCOPIC, Clause 4

5. Once SCOPIC had been invoked, SCOPIC remuneration will be assessed in accordance with the tariff (SCOPIC Clause 5 and Appendix A) for personnel and equipment reasonably engaged or used in the operation, plus a bonus.

SCOPIC, Clause 5
SCOPIC, Appendix A

6. The assessed SCOPIC remuneration is due from the shipowner – not cargo or other property (but it is usually paid by the shipowner’s P&I insurer) insofar as it exceeds the traditional Salvage Award made against salved property under Article 13 of the Salvage Convention (SCOPIC, Clause 6). By way of example, if the traditional Salvage Award is, say, USD 1 million and the assessed SCOPIC remuneration is USD 1.5 million, the salvor will receive USD 1 million from ship and cargo, pro rata to their respective values, and USD 0.5 million from the shipowner, in respect of SCOPIC remuneration.

SCOPIC, Clause 6

7. If the traditional Article 13 Salvage Award exceeds the assessed SCOPIC remuneration, the discount provisions begin to apply (SCOPIC, Clause 7) and the Article 13 Award will be reduced by 25 per cent of the difference between the Award and the assessed SCOPIC remuneration. For example, if the Salvage Award was, say, USD 1.5 million and the assessed SCOPIC remuneration USD 1 million, no SCOPIC remuneration would be due and the Salvage Award to be paid would be reduced by USD 125,000 (1,500,000 – 1,000,000 x 25 per cent).

SCOPIC, Clause 7

8. The owner is entitled to terminate SCOPIC (not the LOF contract) at any time, after giving five days’ written notice (SCOPIC, Clause 9 (ii)), provided the appropriate authorities do not object (SCOPIC Clause 9 (iii)). It is assumed that they would object if there was a threat of damage to the environment. To reinforce this intention, the International Group of P&I Clubs agreed to recommend that owners should not withdraw without good cause (Code of Practice between the ISU and International Group of P&I Clubs, Clause 8). If owners were to withdraw SCOPIC, the salvor would not be protected financially by either SCOPIC or Article 14. Therefore, in order to protect his position, he is entitled to withdraw from the entire LOF contract, if it is no longer financially viable (SCOPIC, Clause 9 (i)). This provision also acts as an additional brake on an owner terminating SCOPIC unreasonably.

SCOPIC, Clause 8
SCOPIC, Clause 9

Clause 8, Code of Practice between the ISU and International Group of P&I Clubs

9. As soon as SCOPIC is invoked, the owner may appoint a Special Casualty Representative (SCR) (SCOPIC, Clause 11) to represent all salved property (ship and cargo). The Salvage Master must keep the SCR informed of his plans and listen to any comments the SCR may have, but the final decision is always that of the Salvage Master. The SCR has no power to bind the salved property but, clearly, his voice is influential. The SCR must either endorse the Salvage Master’s Daily Report or issue a dissenting report. All reports and communications are to be sent to all salved property through Lloyd’s, with copies to the salvors. The duties of the SCR are set out in Appendix B and further explained in the Guidelines for SCRs, SCR Digest 1 and SCR Digest 2.

Guidelines for SCRs
SCR Digest 1
SCR Digest 2

• Note: to protect, encourage and instil trust in the SCR’s independence, it is agreed that the SCR shall not give evidence in any litigation other than salvage (see final sentence of SCOPIC, Clause 11 and Appendix B, Clause 8).

SCOPIC, Clause 11
Appendix B, Clause 8

10. In addition to an SCR, the hull underwriters and the cargo underwriters are each allowed to send a Special Representative to observe and report (SCOPIC, Clause 12, and Appendix C).

SCOPIC, Clause 12
Appendix C