Claims for the removal of wrecks following a maritime casualty have become a prominent part of claims handling in the maritime field. To give an outstanding example, removal of the wreck of the “Costa Concordia” is said to have cost in excess of EUR 1,5 billion; the capsizing of the “Golden Ray” in U.S. waters just outside the port of Brunswick is reported to have resulted in a wreck removal bill of about USD 800 million. But even in cases which do not make international headlines, there are a number of issues surrounding wreck removal that deserve a closer look. 

Responsibilities – Salvage and wreck removal

“Salvage” is distinguished from “wreck removal” by reference to the aim of the operations: salvage operations take place where there is still hope of saving property; “wreck removal” is concerned with the clearing up of a wreck as a hazard to the environment or to shipping.

In most cases of wreck removal, the operation takes place in areas over which a State assumes jurisdiction, and is prompted by an order of a national authority issued against the shipowner.

Different insurance covers

One of the complexities in this area arises out of the fact that salvage and wreck removal are typically covered by entirely different forms of cover. Salvage falls under hull insurance, whereas wreck removal falls under a vessel’s P&I cover. There is therefore a particular interface to watch out for, the point at which the operations cease to be salvage and become wreck removal. P&I cover is potentially engaged when the owner becomes liable for the wreck removal by law (as opposed to by contract).

Salvage operations can in practice mutate seamlessly into wreck removal operations. This results in issues in relation to whether the costs that have been incurred, which are often substantial, fall under the hull policy or under the P&I cover.

Identifying the watershed as between the hull and P&I covers involves a consideration of the circumstances and there may appear to be a significant overlap between salvage and wreck removal. Conceivably, a coastal State may order the removal of a casualty because it constitutes an obstruction to navigation at a time when it is not clear whether the vessel, for example a large yacht which has capsized and is adrift, is a constructive total loss. In such a scenario, it is not unlikely that the salvage and wreck removal operations may outwardly look the same in that they both involve stabilising and towing the casualty to a place of safety. In this type of case, if the initial view that the vessel was a constructive total loss is confirmed, ascertaining the watershed between salvage and wreck removal is a delicate task.

Offshore operations

The construction of an offshore wind farm involves many types of vessels and takes place in waters which can be relatively shallow. In this kind of environment, a vessel taking part in the construction of the wind farm could suffer a casualty and sink, constituting a hazard, though not so much for the remainder of the construction phase, but later during the operations phase when service vessels need regularly to attend the wind turbine generators for maintenance work.

The project company constructing the wind farm might seek to include in its contracts with shipowners an obligation to remove the casualty, even if its removal has not (yet) been ordered by the coastal State with jurisdiction over the wind farm. Such an obligation would fall outside traditional P&I cover, because it is based on contract, and it does not fall under the hull policy. The shipowner is accordingly left exposed unless it has special cover. The same would apply to even wider “cleaning up” obligations which may be contractually imposed on the shipowners by the wind farm construction company.

Limitation of liability for wreck removal claims

Looking at issues of limitation of liability for wreck removal claims involves looking at the Nairobi Convention on the Removal of Wrecks 2007 (WRC), the Convention on the Limitation of Liability for Maritime Claims 1976 (LLMC Convention) and domestic law.

The WRC has currently been ratified by nearly 70 countries, thus achieving a welcome and effective unification of the law in this field. The WRC imposes an obligation on the registered owner of a vessel over 300GT to have insurance (or other financial security) in place to cover the cost of marking, locating and removing the vessel should it become a wreck in the exclusive economic zone of a State party to the WRC. A State party may also opt to extend the territorial scope of the WRC to its territorial waters, and many States have exercised this option.

The insurance amount required by the WRC is the amount calculated in accordance with the 1976 limitation convention (LLMC Convention), as amended, which means that it is dependent on the vessel’s gross tonnage. Importantly, the terms of cover required by the WRC must allow a direct right of action against the insurer.

Under the WRC, there are only very limited circumstances in which the registered owner can avoid liability for the wreck, broadly: act of war or exceptional natural disaster, sabotage, and deficient maintenance of navigational aids by an authority.  Notably, the insurer cannot raise any of the defences it may have in its contract of insurance with the registered owner, except for one: scuttling.

The fact that the insurance amount required by the WRC is limited by reference to the vessel’s tonnage, however, is not the end of the matter. It is important to note that State parties to the LLMC Convention are entitled to opt to exclude wreck removal claims from the shipowner’s right to limit. If this option has been exercised by the country in whose waters a vessel has become a wreck, claims for the cost of removing the wreck will not be limited under the international regime, and may thus lead to claims in excess of the direct action claims permissible under the financial security issue pursuant to the WRC.

Overall, it can therefore be said that wreck removal is a multifaceted topic which can prove surprising due to the wide variety of factors which influence the spread of liabilities.