Amendment to Lloyd's Open Form - Special Compensation P&I Club Clause (SCOPIC) (June 1999)

Circular No. 6/99 June 1999

TO THE MEMBERS

Dear Sirs,

AMENDMENT TO LLOYD'S OPEN FORM SPECIAL COMPENSATION P&I CLUB CLAUSE (SCOPIC)

The 1989 Salvage Convention introduced a "safety net" in the form of a Special Compensation in cases where a salvor performs salvage operations in respect of a vessel which by itself or its cargo threatened to damage the environmenti. If the salvor fails to earn a traditional award under Article 13 of the Convention, but has prevented or minimised damage to the environment, he will be entitled to a Special Compensation under Article 14. Shipowners' liability for Special Compensation is covered by the P&I clubsii.

The concept of Special Compensation has given rise to several problems and questions, some of which have concerned shipowners and the clubs whereas others have concerned salvors. For example, problems have arisen in connection with the interpretation of Article 14, the provision of security, and the method of assessing the Special Compensation. Some of these issues have resulted in time consuming and expensive litigation. The P&I clubs have also been worried about their lack of involvement in salvage operations despite their exposure to Special Compensation claims.

Negotiations were therefore commenced in 1997 between the salvors and the clubs, and subsequently with property underwriters, in order to create a simplified framework for Special Compensation to promote fast response to casualties, but at the same time reduce the potential for legal disputes. After lengthy discussions an agreement has now been reached whereby the current method of assessing Special Compensation under Article 14 of the Salvage Convention will be replaced by the SCOPIC Clause. The SCOPIC Clause is supplementary to the Lloyd's Form Salvage Agreement 1995 (LOF). If the SCOPIC Clause is not included in the salvage contract, Article 14 will continue to be relevant.

The main features of the SCOPIC Clause are as follows:

At its meeting in Stockholm on 31 May 1999 your Committee decided, for a trial period of two years, to recommend the Membership to incorporate the SCOPIC Clause into LOFs agreed with salvors who are members of the International Salvage Union. To date, ten clubs in the International Group of P&I Clubs have approved the SCOPIC Clause.

The operation of the SCOPIC Clause will be reviewed after the trial period.

If you have any questions or would like additional information about the SCOPIC Clause, please contact the Administration.

Yours faithfully, ASSURANCEFORENINGEN GARD -gjensidig-

John G. Bernander Managing Director

Footnotes

1. See Gard News No. 141.

2. See Rule 42 of the Association's Rules.

3. A non-binding Code of Practice has been agreed between the International Salvage Union and the International Group. The clubs have confirmed that although they expect to provide security for SCOPIC it is not automatic.