Thankfully, with modern technologies, strict safety standards and fast coordinated responses, loss of life at sea is becoming increasingly rare.

However, whether or not a vessel or its cargo can be saved is a different story. For a country with a large coastline, it is a question of time, risk and available resources, with most salvage attempts requiring specialised assistance and specific equipment to keep a sinking vessel afloat.

Given the costs associated with salvage are usually worn by the vessel’s owner, it’s important to have a basic understanding of the law of salvage.

The law of preventative salvage

Salvage is an ancient maritime concept originating from the seafaring Rhodians some 3,000 years ago. In an attempt to discourage pirates and looters from interfering with commercial trade, Rhodian law held that those who rescued property lost at sea were entitled to a percentage of the goods as reward for their services.

This percentage varied depending on the dangers involved in the recovery efforts, which encouraged individuals to sift through flotsam and jetsam in exchange for generous compensation.

From these obscure beginnings, the law of salvage evolved to become a cornerstone of our unique system of Admiralty law.

The modern definition of salvage, in the 1989 International Convention on Salvage, branches out significantly from its Rhodian roots.

In a world of electric pumps, powered crafts and global positioning systems, salvage is now less about recovery and more about the measures taken to prevent the loss.

However, despite the modern definition, one aspect of salvage remains unchanged. Unlike land-locked law that focuses on punitive actions, salvage laws continue to reward the good deeds of individuals.

Where the person off the street voluntarily rescues property from a blazing house fire and does not receive any benefit for his selfless actions, the same individual would be entitled to a significant financial reward for preventing loss to the owner’s property in territorial waters, even if the aid is given without the request or consent of the owner.

This curious discrepancy can be justified on economic grounds, as successful user-pay salvage attempts minimise costly insurance claims, reduce potential litigation and encourage professional salvage operations, saving the state and taxpayers from providing similar infrastructure.

Despite salvages increasingly being carried out by experienced commercial entities, anyone who comes to the aid of a distressed vessel and provides them with salvage services has the right to financial reward under well-established equitable principles.

In order to succeed in such a claim, the courts have identified three elements that must be satisfied.

1. 1. First, a ship, its cargo or crew must be in some form of maritime peril. The danger does not need to be immediate, but must be real or at least based on a reasonably held belief. The courts have been fairly liberal in their interpretation of what constitutes danger, with examples ranging from threat of piracy to the loss of a propeller while being towed.
   2. Once danger has been established, it must then be shown that aid was voluntarily provided by persons with no prior interest in the vessel or its cargo. The traditional interpretation is that there cannot be a contractual or legal relationship that compels the individual to act. This means the distressed vessel’s captain or crew cannot usually be regarded as salvors as they already have a duty to maintain the boat.
   3. Finally, the salvor must succeed or at least partially in their salvage efforts. This is based on the well-established Roman concept of no cure, no pay. As is made clear in the convention, where a salvage attempt fails to produce a useful result, the salvor will typically not be entitled to any reward for their efforts, unless they are attempting to prevent further environmental damage, such as an oil spill.

Overall, anyone who voluntarily provides successful preventative salvage services should be able to tick all the above boxes to be entitled to a financial payment by the salvee.

This amount may be agreed upon privately, however, the courts are best suited to make this determination, taking a number of factors into consideration including the time used, promptness of services rendered and the salved value of the vessel.

However, in practice most salvage attempts are initiated through formal contractual agreements.

Contractual salvage

Although the law of salvage historically operated outside the realm of contract law, almost all modern-day salvages are now carried out by professional salvors with vast resources and large commercial fleets around the world.

Out of commercial necessity, these organisations use standardised salvaging contracts, the most popular of which is Lloyd’s Open Form (LOF).

Developed by insurers, salvors and shipping agents in the late 19^th century, these open agreements acknowledge the highly stressful, time-sensitive nature of the operation and the vulnerability of the signing party.

To overcome the potential issues relating to mistake, duress or manipulation, the LOF allows parties to defer discussions of cost and makes provisions to agree to be bound to an amount of compensation calculated by a neutral arbiter after the event.

The benefit of such a system is that emergency services can be immediately delivered without being bogged down by legal issues or complications.

It should be noted that these operations do not fall within the traditional laws of salvage as commercial salvors are not volunteers and often get paid regardless of the outcome.

Further, one major downside to using the LOF in Australia is that all arbitrations must be heard in London under English law.

Nevertheless, these uniform and virtually universal agreements have been adopted by nearly all professional salvors.