Singapore Set to Extend the High Court's Admiralty Jurisdiction to Special Compensation Claims Arising from Salvage Operations

On 26 May 2020, the Singapore Parliament passed a Bill to amend the High Court (Admiralty Jurisdiction) Act (Cap. 123, 2001 Rev Ed) (the "Act"), which will become law at a later date to be notified in the Government Gazette.

The Explanatory Statement to the Bill sets out the purpose of the amendments, which includes:

1. To extend the admiralty jurisdiction of the High Court to any claim that falls under the International Convention on Salvage, 1989 (the "Salvage Convention");
2. To provide that the admiralty jurisdiction of the High Court covers any contractual claim for salvage services; and
3. To provide that a claim for services rendered in saving life from a ship is made under the Salvage Convention, and not under Section 166 of the Merchant Shipping Act (Cap. 179, 1996 Rev Ed) as amended by Section 11 of the Merchant Shipping (Miscellaneous Amendments) Act 2019 (Act 3 of 2019).

The Bill complements Singapore's upcoming accession to the Salvage Convention. Briefly, the Salvage Convention replaced the 1910 Brussels Convention for the Unification of Certain Rules of Law respecting Assistance and Salvage at Sea (the "1910 Brussels Convention"), which incorporated the "'no cure, no pay" principle under which a salvor is only rewarded for services if the operation to save the vessel or its cargo is successful.

Although this basic philosophy worked well in most cases, it did not take pollution into account. A salvor who prevented a major pollution incident (for example, by towing a damaged tanker away from an environmentally sensitive area) but did not manage to save the ship and cargo, obtained nothing under the "no cure, no pay" principle. There was therefore little incentive to a salvor to undertake an operation that has only a slim chance of success.

The Salvage Convention seeks to remedy this deficiency by making provision for an enhanced salvage award, taking into account the skill and efforts of the salvors in preventing or minimising damage to the environment.

In that regard, a key aspect of the Salvage Convention is the introduction of special compensation (Article 14). Special compensation claims allow a salvor to be compensated for salvage operations to prevent or minimise environmental damage, even if the salvor did not save the vessel and its cargo, or obtain a salvage award under Article 13 of the Salvage Convention sufficient to cover the salvors' expenses. This differs from traditional salvage claims dealt with under the 1910 Brussels Convention, where salvors are only awarded if the salvage of the vessel and its cargo was successful.

Currently, the High Court's admiralty jurisdiction covers only traditional salvage claims. With the passing of the Bill, the High Court's admiralty jurisdiction is expanded to cover special compensation claims that arise under Article 14 of the Salvage Convention, or by way of contract such as under the Lloyd's Open Form (the "LOF") SCOPIC clause.

It should be noted that due to issues that arose from the interpretation of the various provisions of Article 14 of the Salvage Convention in the English Courts, the International Group of P&I Clubs and the salvage industry agreed to replace Article 14 of the Salvage Convention with the SCOPIC scheme of special compensation under the LOF (if incorporated into the relevant contract), and which is based on agreed tariff rates and bonuses.

The Bill does not provide for special compensation claims to enjoy a maritime lien. Presently, the common law grants traditional salvage claims a maritime lien because property has been saved (either the vessel itself or the cargo or both). In turn, this ensures that there are assets from which all other claims can then be paid. The Senior Minister of State for Law said that this rationale, however, does not apply or may not apply to special compensation claims, because these claims arise in situations where possibly, neither the vessel nor the cargo has been saved.

Separately, responding to a question on how the Bill incentivises salvors in the context of environmental protection, the Senior Minister of State for Law said that by placing special compensation claims on the same footing as traditional salvage claims, the Bill incentivises salvors undertaking a rescue or salvage of a vessel even when the prospects of saving the vessel or the cargo are remote, or it is inherently risky because it allows compensation for these claims, thereby encouraging them to help either to salvage the remains or to move the vessel into another location which is less environmentally damaging.

By placing special compensation claims on the same footing as traditional salvage claims, Singapore is kept abreast with other signatories to the Salvage Convention, including the UK and Hong Kong, who have also made similar amendments to their own admiralty jurisdiction.

The Bill provides an additional avenue for obtaining security for salvage  claims. This avenue may be needed where contractual arrangements for security are absent, or could perhaps, in some cases, be inadequate. By broadening the range of enforcement options available, the amendment gives salvors greater assurance of compensation when they undertake operations to protect the environment.

Salvors commonly obtain security to satisfy their special compensation claims through the relevant P&I Clubs at least under the SCOPIC regime, but remain exposed if they do not obtain security for any Article 14 (of the Salvage Convention) claim if there is no salved property of value or even if there is, other claims take priority.