Gard P&I Club attempts to present the Lloyd’s Open Form (LOF) salvage agreement, which is based on the principle of “no cure, no pay” compensation to the salvor(s), which has been mostly used for more than 100 years.
The Special Compensation P&I Club Clause (SCOPIC) was developed and implemented almost 20 years ago to incentivize salvage in situations where the prospects for the salvor to achieve “cure” and therefore “pay” were uncertain.
A standard LOF is used in most situations where a ship faces danger and is in need of salvage services. However, some operators choose to enter into “side agreements” or “side letters” with a salvor. These special terms could then change the terms of the LOF and/or SCOPIC.
Gard advises operators saying that: “By changing the terms of a standard LOF and SCOPIC may cause a change in contractual liabilities and risk allocation. If and to the extent that such a change increases the liabilities of or remuneration payable by the operator in respect of the salvage beyond what would have been the case under a standard LOF with SCOPIC terms had no such changes been agreed, the Association does not cover such increased liabilities or remuneration unless it has first been consulted about and approved the changes.”
Operators should also have in mind that the Lloyd’s Salvage Arbitration Branch (SAB) is to be notified of such side agreements by the salvor and provided with a copy of it. The SAB will then aim to notify all affected parties of the existence of a side agreement but will not disclose its content.
