In maritime law, special rules apply on the duty to rescue those who encounter danger at sea and the salvor's right to a salvage award. The purpose of the rules on salvage award is to encourage the salvage of valuables and for salvors to do their utmost in that regard without jeopardising themselves.
In such circumstances, the master and the vessel´s owner have the authority to enter into a salvage agreement on behalf of the vessel and cargo, but the salvage rules of the Maritime Act No 34/1985 apply unless otherwise agreed. This article will highlight the principal points in determining salvage awards according to the provisions of the Maritime Act when an agreement has not been made but salvage has been requested by the master or the owner of the vessel in distress. However, other forms of assistance for ships in distress will not be discussed.
Right to a salvage award
Salvage is specifically defined in the Maritime Act as "any act which has the purpose to help a vessel or other movable property that has perished or is in danger in any sea or water area." Participation in the salvage of a vessel or cargo can therefore create a right for salvage awards but based on the conditions that the salvaged vessel was in danger and the salvage was successful.
Furthermore, the risk must be greater than the normal risk that normally accompanies navigation. A simple example of danger is if a vessel is without engine power or grounded and the crew cannot start its engine. If the crew could have started the engine, there is no danger.
As discussed earlier, salvage must also be successful where financial valuables are saved, but this is the so-called "no cure, no pay" principle of maritime law. Thus, if a grounded vessel sinks during salvage operations, the right to salvage award lapses.
It should be noted that the vessel´s owner and the actual crew of the relevant rescue vessel have the right to salvage awards, but not crew members who are on leave or absent on land when the salvage operation takes place. These can be the owners and crews of one or more vessels involved in the salvage operations, but also includes vessels owned by the Icelandic Coast Guard and rescue services.
Determination of salvage award
If the conditions for salvage are deemed to be fulfilled, the next step is to determine the amount of the salvage award, but the Maritime Act makes a distinction between whether a vessel was in "imminent danger" or only in such danger that it could not reach the harbour under its own engine power. This difference in degree has an effect on which items are taken into considered based on the provisions of the Maritime Act and, thus, the amount of the salvage award is based on the circumstances that existed during the salvage. If judgments of the courts are taken into account, it seems that an objective assessment takes place of the circumstances which is based on the information presented about the incident in question.
When a vessel is considered to have been in "imminent danger", various issues come into consideration, but in practice, it can be assumed that the value of the salvaged item weighs the heaviest, since the salvage award is calculated as a percentage of the value of the salvaged item based on its condition at the end of the salvage operations, i.e. the market price at the salvage site minus repair costs. If, on the other hand, a vessel is in such danger that it cannot reach the harbour with its own engine power, the salvage award is mainly determined based on the costs and loss of income of the salvor, and it depends on the circumstances in each case whether other items come into consideration.
In accordance with the above, the amount of the salvage award is determined by the circumstances in each case, as well as case law which provides important and necessary information for such an assessment, but the rules for salvage have been very similar ever since they were first legislated by the Maritime Act in Iceland in 1913.
The Maritime Act also stipulates the salvor's possible right to a special compensation if there has been a risk of environmental damage during the salvage of a vessel, but it is mainly considered that the compensation shall be equal to the cost of the salvage operation. However, such actions do not have to be successful for the salvor to be entitled to such a compensation, and therefore the aforementioned principle of „no cure, no pay“ does not apply.
Responsibility for the payment and apportionment of salvage awards
It is the responsibility of the owner of the salvaged vessel, and the owners of other movable property which was salvaged, to pay salvage awards in proportion to the value of their salvaged property. In that regard, it should be borne in mind that the salvor may demand that adequate insurance is provided for the payment of salvage awards, and the removal of the salvaged valuables before sufficient insurance has been provided is not permitted without the consent of the salvor.
After the salvage award has been paid out, the owner of the salvage vessel divides it between themselves and the crew, and a distribution plan is prepared which is sent to those who own a share. However, payments are made first for damage caused to the salvage vessel and the cargo together with incurred costs, e.g. fuel and crew wages. The remaining balance is divided so that the vessel´s owner gets 3/5 and the crew 2/5, and the share of the crew is divided so that the master gets 1/3 and other crew members 2/3.
In cases where a special compensation has been paid due to environmental damage, it goes in full to the vessel´s owner, but the crew does not receive any share in such compensation.
