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Salvage: Tug and Tow

The "Key Singapore"

October 2004

In November 2001 the owners and charterers of the jack-up oil rig Key Singapore arranged to hire three tugs to move the rig a distance of 38 miles from the West Akhen Field to the Port Fouad SW2 Field in the eastern Mediterranean. The tow, which commenced just after noon on 30th November, was expected to take 17 hours. However the weather deteriorated soon afterwards - and the tugs were instructed to alter course towards a stand-by location. In the event, the prevailing weather was such that the rig was unable to pin down in that position. The tugs were, therefore, ordered to take the rig to deeper water where its legs could be lowered. During 3rd December the severe conditions caused tow-lines to break, leaving the rig connected to only one tug. Two additional tugs were despatched from Egypt to assist but, by the time they arrived on the scene, the wind and sea conditions were so bad that the rig had to be evacuated.

A second tug was able to re-establish a towage connection the next day, when additional personnel were put on board, but they had to be withdrawn after an inspection revealed that at least one of the rig's tanks was flooding. On 7th December a repair team was put on board, but soon had to be taken off when the lines to the tugs began to part once more. On 9th December the rig was re-boarded by another team. This was able to re-establish a towage connection with the largest of the tugs available and, in improving weather, the rig was towed to her intended position where she was pinned down successfully at 17.20 on 10 December.

The owners, masters and crews of four of the tugs claimed that they were entitled to salvage remuneration. However, their claim was rejected by the owners and charterers of the rig ("the rig interests") on the ground that, since the situation of danger that had led to the need for salvage assistance had been created by the fault of the tugs, the effect of article 18 of the Salvage Convention 1979 was to deprive them of the remuneration to which they would otherwise be entitled (either wholly or in part). The parties agreed to refer the dispute to arbitration in London.

The original arbitrator held that the tugs had a prima facie entitlement to salvage in respect of the services they performed after the tow-lines to the rig began to part on 3rd December. He accepted that the salvage services became necessary as a result of a series of errors made by the tugs, but found that the rig interests had also been at fault. In particular, both parties were responsible for having failed to ensure that the flotilla heaved to in due time. In the arbitrator's view, article 18 of the Convention meant that the tugs should only be deprived of such part of the amount which he would otherwise have awarded as reflected their share of the blame. He assessed the tugs' share of the blame at 40%. He therefore reduced his notional award of US$3 million to US$1.8 million.

On appeal the appeal arbitrator, though in broad agreement with the approach adopted by the original arbitrator, concluded that a notional award figure of US$3 million was excessive. He reduced it to US$2 million. He also adjusted the apportionment of responsibility by increasing the tugs' share of the blame to 50%. The combined effect was to reduce the actual award to US$1 million. The disappointed tug claimants were given permission to appeal to the Admiralty Court.

Before the Admiralty Judge the tug claimants submitted that the appeal arbitrator had failed to take proper account of a long line of authorities which showed that: (i) where tug and tow are both manned, overall control usually rested with the tow; and (ii) the tug is obliged to obey the directions of the tow, but must warn of any potential danger created by those directions. They contended, therefore, that the appeal arbitrator's finding that the parties were equally to blame was contrary to established law which imposed primary responsibility on the tow.

Notwithstanding these arguments the Admiralty Judge held that the appeal arbitrator had been correct in finding that, for the purposes of Article 18 of the Convention, it was necessary to assess the causative potency and blameworthiness of the tugs' faults relative to the causative potency and blameworthiness of the rig's faults. In his view there was nothing in the case law cited by the tug claimants which supported their proposition that overall command of a towage convoy imports with it an enhanced degree of blame in circumstances where both tug and tow have been at fault. (The claimants had placed a great deal of reliance on the decision in The Niobe (1888), a case to which the original arbitrator had also referred extensively. However, in the judge's opinion that decision did no more than recognise that overall control was relevant to the identity of those who may be at fault: it did not support the argument that the degree of any such fault is, as a matter of law, to be treated as greater than that of the party controlled.)

For those reasons the judge was satisfied that the appeal arbitrator had been entitled to conclude that the tug claimants and the rig interests were equally to blame. The appeal was, therefore, dismissed.

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