The Shipowners P&I Club has recently handled two claims involving the salvage of towed vessels, where the towage was taking place under Bimco’s TOWCON 2008 form (‘TOWCON’). These claims have highlighted the fact that, although it is one of the most commonly used towage agreements in the industry, TOWCON does not clearly allocate the responsibility for salvage costs between the parties.
The claims
Both claims arose after the tow lines of entered tugs parted in rough weather and attempts to attach replacement lines failed. This resulted in third party salvors being appointed to recover the towed vessels. In both cases the tugs were towing under TOWCON forms with unamended knock-for-knock provisions.
Following the incidents, salvors presented their claims to the towed vessels’ owners, who in turn passed the claims onto the tug owners. The tow owners claimed that the salvage costs should be borne by the tug owners, as it was the tugs’ Masters who had failed to safely perform the towage, necessitating the salvage operations.
Where did the salvage costs sit in this situation?
The principle of a ‘knock-for-knock’ agreement is, of course, that each party should bear responsibility for their own property, regardless of negligence. The Club therefore explored whether the salvage costs of the tow should fall to the owners of the tow.
The knock-for-knock provisions in TOWCON do broadly exclude each party’s liability for ‘loss of or damage to’ the other’s property, as well as a list of other types of claim . However, the salvage costs of another party’s property do not neatly fall within the description of ‘loss of or damage to’.
From the remaining list of exclusions, the only other exclusion which salvage costs could arguably fall under is Clause 25 (b) (ii) (4):
‘Any liability in respect of wreck removal or in respect of the expense of moving or lighting or buoying the Tow or in respect of preventing or abating pollution originating from the Tow.’
However, salvage costs do not neatly fall within this description either. By comparison, Bimco’s Supplytime contracts exempt the tugowner from ‘any liability arising out of [the tow]’, which would certainly include the salvage costs of the tow. It is therefore an unsettled area of law as to whether the tug owner can rely on the knock-for-knock provisions of TOWCON in relation to the salvage costs of a tow. There are other provisions of TOWCON which may assist a tugowner in these circumstances. However, these provisions do not provide the same complete exclusion of liability, regardless of negligence, so their applicability will depend on the facts of each case.
Recommendations
Towage contracts must clearly reflect operators’ intentions in relation to which party will take responsibility for any salvage costs of the tow. Operators should also ensure that the parties named as hirers and registered owners of the tow are clearly identified (Part I of the TOWCON form). The creditworthiness of these parties should be ascertained prior to entering the contract, to ensure that any indemnity can be relied upon in the event of a claim.
Source: Shipowners P&I Club
