2. The introduction of SCOPIC ( The Special Compensation P&I Clause)
UK P&I CLUB
SALVAGE
The introduction of SCOPIC
( The Special Compensation P&I Clause)
Graham Daines
Thomas Miller P & I Ltd.

3. SCOPIC Circulated paper: LOF and SCOPIC The development of LOF
The introduction of SCOPIC
The role of the SCR
SCOPIC in practice

4. SCOPIC LOF Contract - used for over 100 years
Why the need for radical change?
The Development of SCOPIC
Advantages and Disadvantages
The role of the SCR
SCOPIC – a review

5. SCOPIC International Convention on Salvage 1989
Extension of ‘Safety Net’ provisions
Application beyond laden tankers

6. SCOPIC ARTICLE 14 PROVISIONS Special compensation payable to salvor:
If threat of environmental damage
Article 13 award less than special compensation
Special compensation based upon ‘fair rate’ for expenses
Uplift by up to 30 per cent (or up to 100 per cent if tribunal considers it to be fair and just)
If:
Salvor has prevented or minimised environmental damage

7. SCOPIC Difficulties experienced with interpretation of Article 14
Dissatisfaction not confined to one party
Geographical restriction to environmental threat (compared to LOF80):
“Coastal or inland waters or areas adjacent thereto”
Uncertain assessment of special compensation – the uplift (Art.14.2)
Uncertain assessment of fair rate (Art.14.3)

8. SCOPIC Lack of incentive for salvor due to uncertainty of reward
Security for Art.14 awards not always available
No P and I club involvement
Inadequate information available from scene – no dialogue
Lengthy Art.14 disputes – affecting cashflow
Costly arbitrations

9. SCOPIC SPECIAL COMPENSATION P&I CLAUSE (SCOPIC)
Developed by all parties to the salvage contract
An attempt to resolve problems inherent in Article 14 – and to achieve certainty
Not designed to replace 1989 Salvage Convention
No geographical restriction
Replaces Article 14 provisions
Initial two-year trial period
Not perfect? – but an improvement

10. SCOPIC
SCOPIC
Voluntary agreement: Parties may contract on LOF terms, lumpsum basis or daily rate
SCOPIC must be invoked by salvor – ‘No cure – No pay’ without safety net until then
May be invoked at any time –
No geographical restriction –
No need to establish environment threat

11. SCOPIC
SCOPIC
SCOPIC remuneration based upon agreed tariff plus 25 per cent uplift
Salvage services still assessed under Art.13
SCOPIC remuneration payable by P and I club – only to extent it exceeds Art.13 award
Discount applies if SCOPIC invoked unnecessarily – i.e. Art.13 award exceeds SCOPIC remuneration

12. SCOPIC
SCOPIC
Security for SCOPIC remuneration of US$3 million to be provided within 2 working days (adjustable later)
Withdrawal from SCOPIC provisions
- if no security is provided salvor may request tribunal to apply Art.14
Payment : SCOPIC remuneration payable within 30 days
Shipowner may terminate under SCOPIC upon giving 5 days notice

13. SCOPIC SCOPIC Tariff schedule to be reviewed and agreed regularly
Worldwide, commercial rates
Banded tug rates based upon BHP
Equipment rates capped at 150 per cent of replacement cost

14. SCOPIC
SCOPIC
Appointment of Special Casualty representative (SCR) achieves :
Much improved access to current information
Available to ALL parties
Salvage master’s daily reports and SCR final report circulated
SCR may record disagreement with salvor and report
Disputes capable of being resolved earlier

15. SCOPIC SCOPIC Advantages and disadvantages for salvors Advantages
No need to prove environmental threat
No geographical uncertainty
Profitable tug rates apply
Improved cashflow
Amount payable under SCOPIC usually guaranteed

16. SCOPIC SCOPIC Disadvantages for salvors
Shipowner acquires right to terminate
Uplift limited to 25 per cent

17. SCOPIC
SCOPIC
Advantages and disadvantages for shipowners and their P & I clubs
Advantages
Much improved flow of information
important when pollution threatened or ship in danger of becoming a wreck
Reduced legal costs
Certainty of cost of operation
Clear right to terminate

18. SCOPIC Disadvantages for shipowners
Environmental threat/location of casualty
- No longer factors
Commercial rates plus, always apply

19. SCOPIC SCOPIC 2000 – AMENDMENTS
SCOPIC may be used with any LOF e.g. LOF 2000
SCOPIC replaces Art.14 – ART.14 does not apply even if SCOPIC not invoked
Right of withdrawal by contractor under SCOPIC only exercisable up to provision of initial security
SCOPIC remuneration only payable in excess of potential Art.13 even if no Art.13 award is sought or paid
Termination provision re-worded to achieve clarity
Amendments / clarification of tariff rates and application

20. SCOPIC In the years for which figures are available there were:
123 LOF cases in 1999; SCOPIC was invoked in 14 cases,
133 cases in 2000; SCOPIC “ “ “ 16 cases
108 cases in 2001; SCOPIC “ “ “ 23 cases
104 cases in 2002; SCOPIC “ “ “ 18 cases
89 cases in 2003; SCOPIC “ “ “ 27 cases
91 cases in 2004; SCOPIC “ “ “ 13 cases
To June there have been 52 LOF cases in 2005 and SCOPIC has been invoked in 7 cases

24. SCOPIC The role of the SCR from SCOPIC and the SCR Guidelines:
“The primary duty of the SCR shall be the same as the contractor, namely to use his best endeavours to assist in the salvage of the vessel and the property thereon and in so doing to prevent and minimise damage to the environment”.

25. SCOPIC
Role of the SCR
Provider of up to date information to all parties – not just shipowner
Salvage master in charge and responsible
SCR has the right to consult with and be consulted by the salvage master – and to express his views
SCR may issue dissenting report
SCR should receive salvage plan and notice of changes

26. SCOPIC
Role of the SCR
Record daily expenditure based upon SCOPIC tariff
Aim to discuss and agree calculations with salvage master
Produce final salvage report
Within one month
Facts and circumstances
Allowable tugs, personnel, equipment
Total remuneration under SCOPIC

27. SCOPIC Role of the SCR Advantages
For shipowners - knowledge and progress
For salvors line of communication to all parties
For insurers - knowledge; ability to react immediately to changing events e.g. pollution threat

28. SCOPIC SCOPIC: A review Encouraging results from the first three years
Increasing use of LOF with SCOPIC
SCOPIC invoked in 15+ per cent of cases
More cases capable of being settled swiftly
Improved flow of information
Adaptable format

29. SCOPIC SCOPIC: A review (2) Structured chain of communication
Greater certainty over expenditure
Improved cashflow
Earlier resolution?
Knowledge/influence over events