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DUBLIN IMCC 2005 SALVAGE SCOPIC CLAUSE HULL
MACHINERY UNDERWRITERS PERSPECTIVE
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INTRODUCTION

• The Salvage Industry, Liability Insurers, and to
  a lesser extent Property Underwriters wanted to
  simplify the salvage process after having
  encountered many difficulties with the Art 14
  special compensation.
• In March 99, SCOPIC was launched after
  protracted negotiations between ISU,
  International Group of PI Clubs and the London
  Market Property Underwriters.
• The SCOPIC clause was then slightly revised in
  2000 and incorporated in the Lloyds Standard
  Form of Salvage, LOF 2000 which was published
  on 1 September 2000.
• ? 6 years after, what are the effects of the
  introduction of SCOPIC on the salvage process?
• ? How does it affect our role from a H M
  Underwriters perspective?

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The main changes with the implementation
of SCOPIC are

• 1. the SCOPIC fixed agreed rate
• 2. the SCOPIC remuneration
• - tariff rates 25 uplift
• - the 25 discount in favour of Property
  Underwriters in case Art 13 exceeds Scopic tariff
• 3. the need to be invoked expressly by Salvors
• 4. the absence of requirement of threat to the
  environment
• 5. the SCR, HM and Cargo Special Representatives
  appointment
• 6. the US 3 M guarantee issued in favour of
  Salvors

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SCOPIC, a step forward for the Maritime Industry

• SCOPIC clause was designed to improve article 14
  of the Salvage Convention, 1989 and the numerous
  difficulties encountered in the past.
• SCOPIC clause has worked as an incentive to salve
  vessels for Salvors, irrespective of potential
  environmental damages. It allows salvage
  remuneration even when salvage values are low or
  prospects of success are poor.
• ? All the Maritime Community benefits from
  this measure.
• SCOPIC is a flexible provision as both Owners and
  Salvors are entitled to terminate the SCOPIC
  service by giving written notice.

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On H M Underwriters side, a progress to be
balanced

• 1- The possibility to appoint a Hull Special
  Representative to monitor the salvage operation
  on our behalf
• However we do not use this possibility that
  often as
• H M underwriters appoint already a Surveyor
• SCR is already appointed by the Shipowner and his
  duty is to perform his functions on behalf of all
  parties and their insurers. His final report
  shall be forwarded to the interested persons.
• In practice, we regret not to receive more
  daily information/SITREPS from the SCR.
• In any case, should a major casualty occur,
  then with no doubt we would appoint a H M
  special representative our H M Surveyor.

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On H M Underwriters side, a progress to be
balanced

• 2 - the 25 discount on Art 13 if the Salvor
  triggers the SCOPIC
• remuneration inappropriately
• However to have the advantage of the 25
  discount we must
• know the amount of the SCOPIC remuneration,
  ie only when
• receiving the SCR final report.
• Therefore, should we wish to negotiate a
  case swiftly with
• Salvors, we may have to renounce to the 25
  discount. (unless
• we are sure the case will give rise to a
  SCOPIC remuneration
• i.e. SCOPIC Tariff Art 13).
• In this sense, we may say that we may not get
  the advantage of the 25 discount each and every
  time.

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A step backward on a H M Underwriter'
perspective

• 1 The negotiation process may be slower
• We are not in a position, as we said to get the
  advantage of the 25 discount nor to accept an
  offer from Salvors until we know the exact SCOPIC
  tariff assessed by the SCR.
• As the process of issuing the final SCOPIC
  assessment can be long (several months after
  completion of services), the costs interests
  can accrue.
• Moreover, the security given by the PI Insurers
  in the ISU 5 form may give the PI Insurer the
  right to be consulted, and to approve/disapprove
  any negotiated settlement of the Art 13

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A step backward on a H M Underwriter'
perspective

• 2 - we may not negotiate with Salvors
  directly in certain cases
• For instance, we had a case in which the
  PI Insurer settled
• the entire SCOPIC tariff to Salvors and
  several months after
• contacted HM Property underwriters to
  get the Art 13
• contribution from them. (It was a
  situation in which art 13 was
• very low as there was almost no salved
  fund).
• 3 - the lack of information from SCR although
  SCR has the duty
• to report to the Leading Hull Underwriter
  in case no Hull
• Special Representative has been
  appointed. (SCR
• Guidelines).
• However, we do not receive this reporting. We
  also were never
• asked to settle the SCR fees !

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A step backward on a H M Underwriter'
perspective

• Before SCOPIC, in salvage cases, HM
  Underwriters were the only pilot on board and
  managed all the salvage aspects from the
  beginning up to the remuneration process.
• Now, this salvage management has been
  transferred to the PI Insurer and to some extent
  HM underwriters have lost control on the
  handling of salvage cases.
• We therefore may have to rely on PI Insurers on
  certain aspects whereas our interests may differ.

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CONCLUSION

• SCOPIC is very effective for high risk and/or
  low values situation.
• However improvements need to be balanced at
  least from Property Underwriters' point of view.
• A first measure on which we may be working on
  could be to set up a deadline for the SCOPIC
  assessment to be published, for instance 2 months
  after termination of services.
• What is making our situation difficult is that,
  contrary to the SCOPIC remuneration, Art 13 award
  is a volatile amount, difficult to assess.
  Reaching a fair agreement with Salvors may be a
  difficult exercise and we have to resort to
  Arbitration in numerous cases.
• What about the shipping community re-considering
  the Art 13 opportunity and working on a standard
  pre-agreed remuneration for all sorts of salvage
  services ?

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• DUBLIN IMCC 2005
• SALVAGE SCOPIC CLAUSE
• H M UNDERWRITERS VIEW
• THANK YOU!