Lloyd's Open Form (LOF) salvage contract continues to evolve alongside advancements in technology and the changing landscape of the maritime industry. Salvage operations are critical in mitigating the risks posed by marine incidents. Professional salvors are the emergency services of our seas albeit for reward.
The LOF contract itself has been recognised internationally as “the” salvage contract for vessels in danger and in need of professional assistance. It has a number of advantages over many other forms of contract – it is straightforward in its terms and can be agreed without the need to haggle about cost in times of an emergency; it is a “no cure, no pay” contract meaning that (absent invocation of the SCOPIC clause), if there is no success in salving property which has a value there is no payment; the LOF contract offers significant environmental protection as, while performing under LOF, the salvor has to use its best endeavour, not only to salve the vessel and cargo, but also to prevent or minimise damage to the environment. Finally, it is a contract that’s terms do not change allowing certainty of terms.
So, why has the use of the LOF contract been in decline in recent years? There may be a number of reasons – the number of ship casualties declining generally, obviously a good thing although research suggests that when they do occur they involve greater amounts from all angles; there have been doubts cast on the transparency of the LOF reward assessments and the costs of getting to publication of an Award; finally, increased efficiency in communication from ship to shore has meant that a Captain will almost always now liaise with Owners as to what to do and they will often liaise with their insurers – discussions become convoluted on occasions and other contracts are entered into whether good or bad.
With a noticeable decline in use, in 2021 Lloyd’s indicated that it would withdraw support for LOF. In a case of “you don’t know what you have lost until it’s gone” panic, numerous industry stakeholders in the marine industry (including a significate sector of the insurance industry) requested Lloyd’s to reconsider their position. They did and what they have done is review the contract in an attempt to address the concerns mentioned above.
On 1 June 2024 a new LOF contract was launched. It provides for a “fast track” resolution process, publication of awards and a requirement for reporting on ESG data. The launch is a soft one but there is already renewed optimism that we see from various stakeholders in the process. The hope is that optimism results in support for LOF to refresh a salvage system that has been working for decades and therefore hopefully encouraging further investment in the salvage sector to ensure the safety, efficiency and sustainability of maritime transportation.
