Salvage awards and the disparity principle
In a recent salvage award case involving the Vessel Voutakos versus Tsavliris Salvage (International) Ltd in the English High Court, the Admiralty Judge had a rare opportunity to consider an appeal from a Lloyd’ s Open Form arbitration award.
In his Shipping and Transport CaseNotes, David Martin-Clark explains, ‘The case concerned the effect of the so-called ‘disparity principle’ and the extent to which commercial towage rates should be taken into account by arbitrators in the assessment of salvage awards, particularly in cases involving straightforward towage.
Whilst holding the disparity principle to be flawed and unworkable, the judge further held that commercial towage rates were relevant in providing a useful cross check by way of providing a floor to a salvor’s legitimate claim. Their relative significance would depend on the facts of each case.’
The case note is based on an article by Stephen Pink and Joanna Waterfall of Clyde & Co. Having held that commercial tug hire rates are relevant and admissible in salvage cases, the judge appeared to face some difficulty in deciding to what extent this meant that the appeal arbitrator had erred in law. This uncertainty arose because it was not entirely apparent from the reasons on appeal whether the appeal arbitrator had concluded that such rates were always irrelevant, or whether his comments in this respect were directed only to his consideration of the disparity principle.
However, the fact that the award was ultimately remitted for reconsideration appears to suggest that the judge felt that there was a significant possibility that erroneous principles had been followed.
Clyde & Co Ltd go on to explain that the difficulty for the appeal arbitrator now, and for salvors and owners of salved property alike in the future, is to decide exactly how commercial rates are to be taken into account in the assessment of awards. In this case the judge made it clear that in appropriate cases such rates can be a useful cross check in establishing a floor to a salvage award, but to what extent can they be considered to be a restricting factor? Although there are parts of the judgment that indicate such evidence should be capable of restricting awards, the mechanism by which this is to take place and the extent of such influence is much less clear.
