Things Old Are New Again

Maritime commerce has been the backbone of all of great societies, and certainly was essential to the survival of the original 13 colonies. Even though the modes of transportation have changed dramatically, what hasn't changed are the risks associated with the sea.

Historically, the only chance of survival for a vessel in peril was the willingness of another ship nearby to render assistance. Countless lives and millions of dollars in cargo were saved because another vessel was willing to go out of her way to respond to a call for help. To reward these acts of heroism, the vessel was generously awarded an amount that reflected a percentage of the value of what was saved.

As is often the case, there were disagreements as to what was a proper reward for the efforts of the rescue vessel. And to complicate matters even further, the rescued vessel and the rescuer were often from two different countries. Disputes were common as to what country's laws applied, and how the matter would be settled.

Often, the only thing the vessels had in common was that they were insured through Lloyd's of London. So Lloyd's developed a "Standard Open Form Salvage Contract" which set to paper the criteria on which the salvage award would be based, and where and how any disputes would be settled.This program was very successful and continues to this day, being utilized by Lloyds underwriters for both commercial vessel and yachts. The Lloyds contract is still the recognized standard for salvage contracts in the international maritime community.

Unfortunately, for recreational boats in the United States which did need to be "rescued" the Lloyds Contract has proven to be a difficult and disadvantageous route to dispute resolution. First of all, the Lloyd's Open Form Salvage Contract is hard to read, — with a lot of thee's and thou's — and even harder to understand. Ever more daunting was the requirement that any dispute be arbitrated in London England. This meant that a dispute involving two Americans and a salvage in American waters had to go to London, hire English barristers (lawyers) and pay substantial amounts of money to prepare a case to be heard by the Lloyd's Arbitration Committee. It would not be unreasonable for the owner of a boat worth $35,000 to spend half that just to have the case decided.

To make matters even more expensive, the Lloyd's system was based on English law, which includes the provision that the loser pays both sides' attorneys' fees. Salvage claims are almost always a matter of negotiation, since the price is usually not established before the work is done. So if the boat owner's offer to settle a salvage claim was further away from the award than the demand of the salvor (and it often was), the boat owner would also be responsible for the salvor's legal fees as well.

Concern over becoming responsible for the salvor's barrister fees adds pressure to the boat owner (or his insurance company) to settle the salvage claim at a higher amount than they would other wise think is reasonable. Of course this pressure exists for the salvor as well. The American judicial system recognized the inequities in this approach, and ruled that if both parties (the boat owner and the salvor) were U.S. citizens, they could not be forced into arbitration in a foreign country. What remained was how to give both the salvor and the boat owner the same protections provided in the Lloyd's Open Form Salvage Contract. BoatUS drafted a model " Open Form Salvage Contract" in 1989, which provided the needed protections and required domestic arbitration of any dispute.

Domestic arbitration refers to United States arbitration forums, including one available through BoatUS, The Boat Owners Association of The United States' Salvage Arbitration Plan, created at the same time as the Open Form Salvage Agreement. The Society of Maritime Arbitrators (SMA) in New York and Miami Maritime Arbitration in Florida also have salvage arbitration forums.


Salvage: Heavy snow and ice can sink a vessel
Salvage: Heavy snow and ice can sink a vessel
Mystic Salvage