Salvaging a Contract – the Ever Given
SMIT Salvage BV & Ors v Luster Maritime SA & Anor
(MV Ever Given - Salvage Claim) [2024] EWCA Civ 260
Background
The United Kingdom Court of Appeal has upheld a finding that no binding salvage contract was concluded for refloating surfaces after the Ever Given was salvaged in the Suez Canal, meaning the entity which performed the salvage was entitled to salvage under the International Convention on Salvage 1989 or the common law.
The Ever Given, a container ship, ran aground in the Suez Canal on the 23 March 2021, blocking the canal. Under direction of the Suez Canal Authority, and with contributions from various entities, including SMIT Salvage B.V, the ship was successfully refloated on the 29 March 2021. Subsequently a legal dispute arose over the nature of the agreement reached between the ship’s owners and the entities that provided the salvage services, specifically, whether the email communications between the ship owners constituted a legally binding contract that specified the terms of remuneration for the salvage efforts undertaken to refloat the ship.
The emails between the parties included draft WRECKHIRE contracts and salvage plans. There was no final agreement on the terms of the WRECKHIRE in the emails. On the morning of 26 March 2021, SMIT gave three ultimatums, stating that an agreement needed to be reached by 12:00 Dutch time that day or they would have to stand down. After the third ultimatum, the parties agreed a number of terms including how much SMIT would be paid, but final agreement on other issues such as the standard of care was not reached.
SMIT then proceeded to refloat the ship, and and following the ship being refloated, SMIT emailed the ship owners stating the offer which had been made by the owners was not accepted and the offer earlier made by SMIT was withdrawn.
The ship owners asserted the exchanged emails amounted to a legally binding agreement, which would limit the salvors’ compensation to the terms outlined in emails and preclude any salvage claims under other legal frameworks. Conversely, SMIT contested this claim, arguing that no binding contract had been concluded given the absence of consensus on several fundamental terms, particularly those detailing the nature and scope of the services as well as the standards of care to be adhered to. In these circumstances, SMIT contended it was entitled to salvage, which is a right that arises under English law where a person acting as a volunteer preserves or contributes to preserving at sea any vessel from danger. Where a right to salvage arises, article 13 of the International Convention on Salvage 1989 sets the criteria for fixing an award payable to the salvager and any such award is expressly required to ‘encourage’ the salvage, such that the award will be above a reasonable commercial rate for the services.
Judgment at First Instance
The Admiralty judge ruled in favour of SMIT and determined that although the parties had agreed on the remuneration terms, the parties had not reached a consensus on a comprehensive set of terms, notably omitting agreements on the scope of services and the standards of care. This led to the conclusion that no binding contract had been established and SMIT was free to pursue its claim for salvage.
This was upheld by the unanimous Court of Appeal, echoing the rationale that the email exchanges did not unequivocally indicate an intention to be legally bound by merely the remuneration terms without a broader agreement on all essential contract aspects. The Court of Appeal rejected the argument that in proceeding to take steps after the parties had agreed on the remuneration, SMIT had evidenced it was satisfied there was a concluded contract.
Implications
Salvage situations typically involve an urgent need to commence a salvage operation. It is critical that when shipowners are negotiating with salvage providers, they reach agreement on all terms required to form a binding contract. It is recommended that ship owners ensure that a contract on WRECKHIRE or similar comprehensive terms be entered into after main terms of a salvage contract are agreed, to avoid the risk of a salvage claim which might impose a greater liability than would have been agreed to on a commercial basis. Section 240 of the Navigation Act 2012 provides that there is no common law claim for salvage independent of the International Convention on Salvage 1989 where the latter applies. Shipowners should be aware of the possibility of salvagors completing the task of salvaging the ship and making a later claim for salvage.
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Solicitor
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E: joanna.neil@nortonwhite.com
Address: Level 4, 66 Hunter Street, Sydney NSW 2000