2

Contents
Itroduction

3

The LOF Process

41.

Vessel Type1.1.1 Year by year trend of vessels involved in LOF services
1.1.2 Total amounts awarded
1.1.3 The Award as a percentage of the salved value

5
5
6
7

1.2

Bulk vessels

8

1.2.1
1.2.2
1.2.3

8
8
9

1.3

1.4

1.5.

2.

3.

Number of vessels
Amounts awarded/The Award as a percentage of the salved value
Time of process

General Cargo vessel

10

1.3.1
1.3.2
1.3.3

10
10
11

Number of vessels
Amounts awarded/The Award as a percentage of the salved value
Time of process

Container vessels

12

1.4.1
1.4.2
1.4.3

12
12
13

Number of vessels
Amounts awarded/The Award as a percentage of the salved value
Time of process

Other vessels

14

1.5.1
1.5.2
1.5.3

14
14
15

Number of vessels
Amounts awarded/The Award as a percentage of the salved value
Time of process

Casualty Type

16

2.1
2.2
2.3

16
17
18

Year by year trend of the cause of casualty
Total amounts awarded
The Award as a percentage of the salved value

International Convention on Salvage 1989

18

3.1

18

Article 13.1

Disclaimer
Lloyd's provides the materials contained in these pages for general information purposes only. Lloyd's accepts no responsibility andshall not be liable for any loss which may arise from reliance upon the information provided. If you have any queries regarding theinformation presented, please contact Kevin Clarke, Manager Salvage Arbitration Branch, Agency Department, at
kevin.clarke@lloyds.com.

3

Introduction
Lloyd’s Standard Form of Salvage Agreement
Lloyd’s Standard Form of Salvage Agreement (or Lloyd’s Open Form or LOF as it is more commonly referred to) istoday a world standard. It consistently aims to reflect best practice in light of changing circumstances and is one of
the finest examples of the use of Lloyd’s name, featuring importantly in the maritime world, but without necessarily
having any insurance connotations directly relating to the Lloyd’s market. Indeed, it exists to serve the wholemaritime community.
Lloyd’s, through the Salvage Arbitration Branch (SAB) of Lloyd’s Agency Department, provides a reputable andsecure framework in which the security and arbitration process referred to in LOF can operate, although it assumes
no direct involvement in the arbitration process itself.

This Report
The data contained in this report takes as its source the LOF cases reported to the SAB over the period 1 January
2000 to 31 December 2010.
It should be noted that approximately 75% of these cases were settled amicably between the parties without needfor recourse to arbitration and that therefore the “Award” data shown reflects only those cases that did proceed toarbitration and in which an Award was issued
The monetary details of the cases that settled are private and confidential to the parties and are therefore notincluded in the statistics shown here.

The LOF Award
Article 13.1 of the International Convention on Salvage 1989 states that “the [salvors’] reward shall be fixed with aview to encouraging salvage operations…”
This echoes the guidance given by a former Admiralty Judge, Sir John Nichol, in the Industry (1835) who wrote thatthe salvors’ remuneration should “encourage enterprise, reward exertion and be liberal in all that is due to thegeneral interest of commerce, and to the general benefit of underwriters, even though the reward may fall upon an
individual owner with some severity”.
At the same time, when taking the above in to account, it is also important that the Award must not be altogether outof proportion to the services actually rendered.
Article 13.1 is reproduced on page 18 of this report.

In Summary
It is hoped that the following statistics will allay many of the misconceived impressions that LOF Awards are often
high and out of proportion to the benefit conferred on the property owners and underwriters.
You will note that while the number of LOF cases reported to the SAB has declined over the past decade theamount of remuneration awarded to salvors in each year ranges between 15% and 35% (on average) of the value ofthe property salved, giving an overall average for the period of this study of 21.6%. Or put another way; an average
benefit for owners and underwriters of almost 80% of the salved values.
I hope you find this publication enlightening and helpful.

4

THE LOF Process

Vessel in Casualty

Assistance not required

Salvage services required

Non LOF services

LOF agreed

LOF Notified to Lloyd’s

Salvage security collected

Salvage security released

Amicable settlement

Salvage security released

LOF Arbitrator appointed

Amicable settlement

Salvage security released

Salvage security released

Arbitrator’s Award

Award acceptedAward appealedAward monies paid

Appeal Arbitrator appointed

Appeal withdrawn

Appeal Award publishedAward monies paidAward monies paid

Salvage security released

5

Vessel Type
What types of vessels are salved under LOF?
The total number of LOF cases reported to Lloyd’s over the 2000-2010 period was 997. Bulk vessels made up the
majority of these cases (41.87%) with a total salved value possibly in excess of USD5bn. Container vessels accounted
for the smallest number of LOFs, but the second largest salved value; perhaps in excess of USD1.5bn.
There were also more Awards issued in Bulk vessel cases; however the number of these Awards, namely 105,
represented 25% of all Bulk cases, while 41% of all Container vessel cases proceeded to arbitration. This is perhaps areflection of the difficulties that may arise with the many diverse cargo interests involved in a Container case.
A further correlation of note is that of the average salved values of the cases that proceed to arbitration. It is clear fromthe data below that the cases involving higher average salved values, namely Bulk (USD13m) and Container(USD16m) are more likely to proceed to arbitration.

VesselGroup

Numberof LOFs% of all
LOFs

Numberof Awards% ofAwards to
LOFs

Total Salved Values(Awards only)

417

41.87%

10525.18%USD 1,362,302,054

USD 12,974,305

Bulk

Average Salved
Value per Award

Container

93

9.34%

38

40.86%USD 606,809,545

USD 15,968,672

General273

27.31%

40

14.65%USD 225,623,131

USD 5,640,578

Other

214

21.48%

27

12.62%USD 197,969,548

USD 7,332,205

500
21.48%
41.87%
27.31%
9.34%

Other

400

General300

Container

200

Bulk

LOFs

Awards

100
0

Bulk

Container

General

Other

Year by year trend of vessels involved in LOF services
Bulk vessels have consistently made up the largest share except for 2005 when there was a spike in LOFs services
involving General Cargo, Container and Other vessels, with General Cargo briefly exceeding Bulk with the largest
number of LOFs.

6

140

Number of Cases

120
100
80
60
40
20
0
2000

2001

2002

2003
Other

2004

2005

Gen. Cargo

2006
Cont.

2007

2008

2009

2010

Bulk

Total amounts awarded
The total amounts awarded under LOF by vessel year-on-year do, of course, vary. When assessing thelevel of the salvors Award the Arbitrator must take into account not only the salved value of the vessel andher cargo (if any), but apply the “criteria for fixing the reward” that is set out in Article 13.1 of theInternational Convention on Salvage 1989 (see page 18 of this report). The weight given to each of thesecriteria will differ from case to case so it would not be correct to expect that the total amount awarded in
LOF cases would correspond to the total number of LOF services in any given year.

USD 100

100%

USD 9090%

USD 8080%

USD 7070%

USD 6060%

USD 5050%

USD 4040%

USD 3030%

USD 2020%

USD 10

10%
0%

USD 0
2000

2001

2002

Other

2003

2004

Gen. Cargo

2005

2006

Cont.

2007
Bulk

2008

2009

2010

Percent

In the graph immediately above; while the high percentage figures of 35% (2008) and 29% (2010) are theones that perhaps catch the eye, they should be looked at in conjunction with the amounts awarded inthose years, namely USD23.9m and USD12m respectively.

Awards as a % of Salved Values

Amounts Awarded (Millions)

It can be seen from the graphs above and below that the higher number of LOF services involving
Container vessels in 2005, with the subsequent rise in the level of salved values, was reflected in a large
increase in the total amount awarded. However, the amount awarded in Container vessel cases over thiseleven year period amounted to an average of no more than 18% of the value of the property salved (seegraph below: The Award as a percentage of the salved value).

7

It will be noted that in 2005, the total amount awarded in LOF Awards was approaching USD85.2m, but
actually represented just 26% of the value of the salved property.

The Award as a percentage of the salved valueAwards as a percentage of the total salved value over the eleven year period of this study were fairly
consistent across vessel type, ranging between 18% and 29%, giving a benefit conferred of up to 82%(Container vessels) of salved values.

Type of Vessel

Bulk

GeneralContainer

Other
0%

10%

20%

30%

40%

50%

Award

Benefit

60%

70%

80%

90%

100%

8

Bulk
An analysis of bulk vessels salved under LOF
The large majority of bulk vessels were dry bulk carriers, followed by tankers. The balance of bulk vessels was made up
of numerous categories, including LPG and LNG.

10
10

2

Dry Bulk Carrier
Tanker
Other
LPG
LNG

130

265

Number of vessels
As stated previously, bulk vessels make up the largest category of vessels salved under LOF between 2000 and 2010,
being 41.87% of all vessels. The number of bulk vessel on a year-by-year basis over the eleven year period of thisstudy is as follows.

160

16

140

14

120

12

100

10

80

8

60

6

40

4

20

2

0

Total Losses reported by LLI

Number of LOF cases

The red line shows the number of total losses suffered by Bulk vessels as reported by Lloyd’s List Intelligence (LLI).

0
2000

2001

2002

2003

2004

2005
LOF

2006

2007

2008

2009

2010

LLI

Amounts awarded/ The Award as a percentage of the salved value
The amounts awarded in those cases that proceeded to arbitration (by year of casualty) are set out in the graph below,
which also shows the amounts awarded as a percentage of the value of the property salved (see red line).
It should again be noted that whilst the years 2006 and 2007 show the highest amount of funds awarded, the Awards
corresponded to the lowest levels of percentage of Award to salved values, namely 13% and 12% respectively.

USD 50

100%

USD 4590%

USD 4080%

USD 3570%

USD 3060%

USD 2550%

USD 2040%

USD 1530%

USD 10

20%

USD 5

10%

Awards as % of Salved Values

Ammounts Awarded (Millions)

9

0%

USD 0
2000

2001

2002

2003

2004

2005

Award

2006

2007

2008

2009

2010

Percent

Time of process
Each case that proceeds to arbitration has its own unique characteristics, therefore the length any one case going
through what is a quasi-judicial process will vary. The graph below shows the average time a case took from the dateof the LOF (date of the casualty) to the publication of the final Award.
This time is broken-down in to two segments, namely (1) the number of days from the date of the signing of the LOF tothe appointment of an Arbitrator (shown in blue), and (2) from that appointment to publication of the Arbitrator’s Award.

800
700

Number of days

600
500
343

400

574
314

300
200

262

386

305

244

282
309

206

209
254

100
111

108

93

2000

2001

2002

0

154

2003

97

2004

Casualty to Appointment of Arbitrator

169

139

77

56

2005

2006

2007

2008

2009

114

2010

Appointment of Arbitrator to Publication of Award

10

General cargo
An analysis of General Cargo vessels salved under LOF
General cargo vessels accounted for 27.31% of all reported LOF cases between 2000 and 2010, this being the second
largest category. Of these casualties, 17 (or 5.9%) involved refrigerated cargo vessels.

17

General Cargo
Refrigerated
256

Number of vessels
The number of general cargo vessel on a year-by-year basis over the period of this study is as follows.

45

90

40

80

35

70

30

60

25

50

20

40

15

30

10

20

5

10

total Losses reported by LLI

Number of LOF cases

The red line shows the number of total losses suffered by General Cargo vessels as reported by LLI.

0

0
2000

2001

2002

2003

2004

2005

2006

LOF

2007

2008

2009

2010

LLI

Amounts awarded/ The Award as a percentage of the salved value
The amounts awarded in those cases that proceeded to arbitration (by year of casualty) are set out in the graph below.
The amounts awarded are also shown as a percentage of the value of the property salved (see red line).
Again it is interesting to note that although the years 2000 and 2005 show the highest amounts of funds awarded, theAwards corresponded to a relatively low Award to salved value ratio. Conversely, the highest Award to salved value
ratio, namely 59% in year 2008, is against a total salved value for that year of USD1,003,240. Only 2001
(USD267,544) and 2003 (USD975,000) returned lower salved values.

USD 8

100%

USD 7

90%
80%

USD 6

70%

USD 5

60%

USD 4

50%

USD 3

40%
30%

USD 2

20%

USD 1

Awards as % of Salved Values

Amounts Awarded (Millions)

11

10%
0%

USD 0
2000

2001

2002

2003

2004

2005

Award

2006

2007

2008

2009

2010

Percent

Time of process
It has already been stated that each case that proceeds to arbitration has its own unique characteristics and so thelength of any one case from the date of the LOF until conclusion will vary.
The graph below shows the average time a case took from the date of the LOF to the publication of the final Award.
This time is broken-down in to two segments, namely (1) the number of days from the date of the signing of the LOF tothe appointment of an Arbitrator (shown in blue), and (2) from that appointment to publication of the Arbitrator’s Award.
The unusual spike recorded in 2004 is attributable to one case that due to the many complex salvage and legal issues
took over five years to conclude. When removing 2004 from the data, the average length of time for a general cargocase between 2000 and 2010 is 386 days, or less than 13 months.

1400
1200

Number of days

1000
800

863

600
400
200
0

126
239

174

227

197

402

184

296
213

360

128

133

158

2000

2001

2002

95

2003

2004

Casualty to Appointment of Arbitrator

213

161

157

119

2005

2006

2007

2008

136
188

2009

316

2010

Appointment of Arbitrator to Publication of Award

12

Container
An analysis of Container vessels salved under LOF
While container vessels account for only 9.3% of the number of vessels salved during this period, by their very nature they
make up a far greater proportion of the salved fund of LOF cases that proceed to arbitration, namely a little over 25%(USD607m).
Number of vessels
The following graph shows the number of container vessels salved under LOF on a year-by-year basis over the periodof this study.

18
16
14
12
10
8
6
4
2
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

LOF Cases

Amounts awarded/ The Award as a percentage of the salved value
The amounts awarded in container vessel cases that proceeded to arbitration (by year of casualty) are set out in thegraph below, which also shows the amounts awarded as a percentage of the value of the property salved (see redline).
We can see that the trend of higher amounts awarded (in total) to lower percentage of the salved fund continues.
For example, in year 2005 the total amount awarded in LOF Awards was USD57m, which amounted to just 15% of thetotal salved fund for that year, while in 2008 the percentage awarded appears high at 39%. However in 2008 thesalved fund was only USD2.7m.

13

100%

USD 6080%
70%

USD 4060%
50%

USD 3040%
USD 2030%
20%

USD 10Awards as % of Salved Values

Amounts Awards (USD Millions)90%
USD 50

10%
0%

USD 0
2000

2001

2002

2003

2004

2005

Award

2006

2007

2008

2009

2010

Percent

Time of process
The design of the modern container ship, with its high sea-board and no on-board discharge equipment can lead tolong and protracted salvage services. In addition to this, the after services administration, which invariably involves
very many parties, means that container vessel cases tend to be protracted. This is reflected in the graph below, whichshows an average case time of 551 days, or 18 month.
As we have seen above, the comparative time for an LOF case involving a general cargo vessel is 386 days, or lessthan 13 months.

900
800

Number of days

700
600

476

500

270

400
300

341

551
359
348

441

203

200

264

380

373
285

100
0

379

175
94

2000

2001

119

2002

167

142

73

61

2003

2004

Casualty to Appointment of Arbitrator

2005

351

312

2006

2007

2008

2009

2010

Appointment of Arbitrator to Publication of Award

14

Other vessels
An analysis of “other” vessels salved under LOF
The many diverse types of vessels making-up this particular category are clearly demonstrated by the chart below. In
total they accounted for 214 (or 21.48%) of the LOF cases reported to Lloyd’s between 2000 and 2010. The total salved
value of the “other” vessels during this period is USD198m (in cases that proceeded to arbitration).

44

Ro/Ro
Yacht
Fishing Vessel
Barge
Vehicle Carrier
Car Carrier
Tug
Ferry
Passenger Ro/Ro
Dredger
Supply Tug
Pontoon Barge
Semi-Sub Hl Vessel
Trawler
Others

45

3
3

3

3
4
5

38
5
8
8
11

23

11

Number of vessels
The following graph shows the number of vessels salved under LOF on a year-by-year basis over the period of thisstudy.

30
25
20
15
10
5
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

LOF Cases

Amounts awarded/ The Award as a percentage of the salved value
The amounts awarded in cases that proceeded to arbitration (by year of casualty) are set out in the graph below, which
also shows the amounts awarded as a percentage of the value of the property salved (see red line).

15

Once again the trend of higher amounts awarded (in total) corresponding to a lower percentage of the salved fundcontinues. We can see from the graph below that in year 2008 the total amount awarded in LOF Awards was justunder USD10.5m, which amounted to 30% of the total salved fund for that year, while in 2005 the percentage awarded
is high at 53%. However this latter figure was based on a salved fund in 2005 of only USD5.05m.

USD 12

100%

USD 10

80%
70%

USD 8

60%
50%

USD 6

40%
USD 4

30%
20%

USD 2

Awards as % of Salved Values

Amounts Awarded (Millions)

90%

10%
0%

USD 0
2000

2001

2002

2003

2004

2005

2006

Award

2007

2008

2009

2010

Percent

Time of Process
It is also a characteristic of this category that the vast majority of the cases are settled amicably between the parties
without the need to refer the matter to arbitration. As can be seen from the graph below, no cases in this category in2003 and 2010 proceeded to arbitration; all cases were settled.
Of those that required arbitration, the graph shows the average number of days a case took from (1) the date of thesigning of the LOF to the appointment of an Arbitrator (shown in blue), and (2) from that appointment to publication of
the Arbitrator’s Award.

700
600

Number of days

500
400

456

234

400

300

427

100

283

301

200

0

163

141

189

329
253
89

67

0
2000

2001

332
178

86

144

128
1

2002

2003

2004

Casualty to Appointment of Arbitrator

2005

2006

2007

2008

2009

0
56

2010

Appointment of Arbitrator to Publication of Award

16

Casualty TypeWhy were LOF services required?
Over the 2000-2010 period by far the largest cause of casualty to vessels receiving services under LOF was grounding,which accounted for 447, or 45%, of all cases reported to Lloyd’s. The next largest cause of casualty wasengine/mechanical breakdown; 229 cases or 23%.

Numberof LOFs% of all
LOFs

Numberof Awards% ofAwards to
LOFs

Total salved Values(Awards only)

Grounding

447

45%

82

18.34%USD 1,021,523,527

USD 12,457,604

Engine/mechanicalbreakdown

229

23%

68

29.69%USD 706,047,755

USD 10,383,055

Fire/Explosion

84

8%

19

22.62%USD 246,341,445

USD 12,965,339

Collision

55

6%

4

7.27%

USD 112,371,659

USD 28,092,915

Flooding

42

4%

15

35.71%USD 58,244,834

USD 3,882,989

Other

140

14%

22

15.70%USD 248, 175,057

USD 11,280,684

Casualty Type

Other
14%
6%
4%

45%

8%

400

Collision

300

Flooding

200

Fire/Explosion
23%

500

Average Salved
Value per Award

LOFs

Awards100
0

Breakdown
GroundingYear by year trend of the cause of casualty
We can see from the graph below how grounding, as a cause of casualty, is consistently year-on-year, the single
biggest reason for vessels receiving services under LOF. Further, apart from 2004 and 2005, the second largest
contributing cause was engine/mechanical breakdown.

17

140
120

Number of LOF cases

100
80
60
40
20
0
2000
2001
2002
Other
Collision

2003
2004
2005
Flooding
Fire/Explosion

2006
2007
2008
2009
2010
Engine Breakdown
Grounding

Total amounts awarded
It has already been explained that the amount awarded to a salvor for services rendered under an LOF contract will
depend on a number of factors and that the arbitrator must have in mind when assessing the level of the Award the“criteria for fixing the reward” set out in Article 13.1 of the International Convention on Salvage 1989 (see page 18 of
this report). The weight applied to each of these factors will, of course, differ from case to case so it is therefore notcorrect to expect that the total amount awarded in LOF cases will correspond to the total number of LOF services inany given year, or indeed the type of vessels or casualties.
If we could confidently correlate the number of vessels and type of casualty with the amount awarded then we would
expect to see groundings accounting for a far greater proportion of the amounts awarded. We can see from the graphbelow that this is indeed so for years 2005 and 2007, but the other years covered by this study do not support this.

USD 70
Amounts Awarded (Millions)

USD 60
USD 50
USD 40
USD 30
USD 20
USD 10
USD 0
2000
Grounding

2001

2002

Breakdown

2003

2004

2005

Fire/Explosion

2006

2007

Flooding

2008
Collision

2009

2010
Other

18

The Award as a percentage of the salved value
As can be seen from the graph below awards as a percentage of the total salved fund over the eleven year period of
this study were fairly consistent across all types of casualty, with the average level of benefit conferred to the property
owners/underwriters being around 82% of the salved value.

Other

Casualty Type

Flooding
Collision
Fire/Explosion
Breakdown
Grounding
0%

20%

40%
Award

60%

80%

100%

Benefit_____________________________________________________________

International Convention on Salvage 1989
Article 13.1
Criteria for fixing the reward
The reward shall be fixed with a view to encouraging salvage operations, taking into account the following criteria
without regard to the order in which they are presented below:(a) the salved value of the vessel and other property;(b) the skill and efforts of the salvors in preventing or minimizing damage to the environment;(c) the measure of success obtained by the salvor;(d) the nature and degree of the danger;(e) the skill and efforts of the salvors in salving the vessel, other property and life;(f) the time used and expenses and losses incurred by the salvors;(g) the risk of liability and other risks run by the salvors or their equipment;(h) the promptness of the services rendered;(i) the availability and use of vessels or other equipment intended for salvage operations;(j) the state of readiness and efficiency of the salvor’s equipment and the value thereof.