Salvage Operation due to Unseaworthiness of a Cargo Vessel

In August 2019, a cargo vessel carrying goods that departed the Port of loading in the Black Sea was sailing towards her final destination in good weather condition. Both ports are situated in the Black Sea, which meant that the journey would take 1-2 days to reach the port of destination.

During the said voyage however, we were notified that the cargo vessel suffered distress about 11 nautical miles facing an International frequented Port in the Black Sea and as such grounded by the bow suffering water ingress noted in the Cargo hold No. 1 as well as the forepeak water tank; accordingly, the Master requested immediate assistance via VHF (Very High Frequency). The Captain proceeded to sign the Lloyd’s Open Form – “No Cure, No Pay,” which means “No success in salvage, No payment,” enabling them to proceed with the salvage operation. One of the tugs located at the nearest port was immediately available and departed without delay to the scene of the casualty. Another tug boat arrived and started the salvage operation by using submersible pumps to take the water out of Cargo hold No. 1 and the forepeak tank, as the vessel meanwhile started listing 15 degrees to starboard. The vessel was then towed to a safe port in the Black Sea. The Captain declared “General Average” and consequently, the contributions to the General Average affect the Hull as well as the Cargo owners. The Salvors’ lawyers advised that their clients would be willing to accept a settlement concerning the salvage cost against Cargo interest on the basis of two thirds Cargo interests and one thirds ship interest, based on the full condition survey carried out at the the port of refuge following the request of the Insurer, with the outcome that the vessel had not been in seaworthy condition, which had already created some difficulties at the beginning as regards to the Insurance and Reinsurance cover in place. Although prior to sailing from the port of loading, the assured had presented a Class Certificate (Non-IACS) as well as a valid P&I cover from an international accepted P&I Club meaning that the Assured fulfilled his duty as per policy conditions.

At a later stage, while the insurer continued the investigation, it was found that the P&I Cover was already cancelled due to non—payment of Premium. Hence, the owner had no Third Party Liability cover whatsoever, which is where the GA declaration got more complicated as no P&I cover was in place, meaning the General Average Contribution had to be fulfilled by only the Hull insurer. Unfortunately, it was also discovered that the shipowner had no Hull cover in place worsening the situation when the owner declared bankruptcy. As the Insured insisted to have their intact Cargo delivered to the Port of destination, the whole salvage operation including the Transshipment costs, as well as the GA, ended up to be subject to the Cargo Insurer only; however, Cargo Insurer and Reinsurers declined the continuation of the voyage on the same vessel due to the unseaworthiness, so a new vessel was chartered in order to deliver the cargo to its final destination on a journey of only 8 hours. Accordingly, the Cargo was safely delivered without any claim at all (damages or shortage), taking into consideration that client’s obligations were to act as prudent uninsured and to mitigate loss, being a contractual obligation under the Marine policy of Insurance. The original vessel in question was sent for break-up and the value of the ship’s scraping was used to reduce the claim amount.

As the salvage fees requested were considered on the very high side (approx. USD 800,000/-), the Insurer’s lawyer recommended to present the whole case to an Arbitrator, thus London lawyers and arbitrators are now involved; and the technical involvement of ‘Captain Richard Chalhoub’ in not only the salvage operation, but also in the transshipment, contributed to speed up the delivery of the cargo to the satisfaction of the Insurer and Reinsurers.

The negotiation regarding the Salvage costs are still pending and depends on the report of the Arbitrator.

The case is still open until today…

Article by Sylvain Maalouf - Assistant Manager (Marine Hull) & Roupen Vartanian - Assistant Manager (Marine Pleasure Crafts)