Circumstances

On 24 October 2020, Morspassluzhba FSBI (the salvor) received information on the tank explosion that happened onboard the tanker General Azi Aslanov belonging to Palmali LLC (the shipowner). As part of the salvage operation, on 25 October 2020, the salvor and the shipowner entered into a salvage contract.

After the successful completion of the salvage operation, the salvaged vessel was towed to the port of Kerch and handed over by port tugs to the person nominated by the shipowner. The act of acceptance-transfer of the salvaged vessel dated 27 October 2020 was signed.

Shortly thereafter, the salvor sent a claim to the shipowner to pay for the services rendered in the amount of USD 500,000 (20% of the market value of the salvaged vessel). Upon the shipowner’s failure to pay for the services rendered, the salvor submitted the claim to the commercial court.

Position of the Courts of first and appellate instances

The judgment of the Court of first instance, which was supported by the ruling of the Court of Appeal, upheld the claim. The courts found that it was proved that the salvor performed the salvage operation, and the amount of salvage compensation was determined in proportion to the salvage value of the vessel, considering the criteria set out in Art 342 of the Merchant Shipping Code of Russia (the MSC RF).

Position of the District Court

Based on the principle of balancing the rights of the parties and encouraging salvage operations, salvage reward is paid under the criteria defined in law, as provided for in para 1 of Art 342 of the MSC RF. One such criterion is ‘time spent by salvors, and costs and losses incurred’.

In this case, as explained by the shipowner, in addition to the salvor’s vessels, three other vessels took part in the salvage: the icebreaker Mitridat, the Viktor Lyagin, and the tugboat Nikolay Dmitriev. As proof of this, the shipowner submitted extracts from ship logs, as well as an invoice dated 03 Match 2020 in the amount of RUB 877,910. It follows from the extract from the ship log of the tugboat Nikolay Dmitriev that, on 27 October 2020, it performed escort, towing and mooring for the vessel General Azi Aslanov. The Courts of lower instances did not evaluate the shipowner’s arguments and the documents submitted.

Art 342 of the MSC RF establishes rules which apply for determining reward for all salvors involved in the salvage when they make claims for recovery of such reward separately. Under the relevant provisions, it is necessary to take into account the amount of reward incurred not only by the claiming salvor but by all the other salvors and take into account the contribution of each of them to the salvage. So, the total amount of reward should correspond to the services actually rendered by all the salvors and meet the criteria established by the said provisions, including the requirement of not exceeding the salvage value of the salved ship and other property.

In addition, considering the SCOPIC cost estimate submitted by the salvor, the courts did not verify the according calculation, taking into account the items reflected therein, such as the number of workers involved in the salvage, salving vessels, equipment, materials, transport and other expenses incurred due to the salvage and the documents submitted in support of the said costs.

On the basis of the above, the District Court revised the judgments of the lower courts and sent the case for reconsideration.

Conclusions

Pursuant to para 1 of Art 342 of the MSC RF, it is not enough to be guided by one of the criteria listed to determine the fair salvage reward. The evidence regarding the relevant criteria should be analysed with particular care.

In addition, one should not forget the provision of para 2 of Art 342 of the MSC RF according to which reward is paid to all salvors in proportion to the salved value of the ship and other property. When they claim for recovery of such reward separately, the reward of the other salvors and the contribution of each of them to the salvage should be taken into account. ■