The yacht C ran aground due to strong winds. The claimant owner of the C tried unsuccessfully to refloat it. An inflatable boat A tried to assist the C, but was not able to do so and only transferred the two passengers on the yacht to Kefalonia Port. Thereafter, tug M arrived and, with the contribution of A, tied the C to the tug and removed it from the shallow waters. At the same time a Lloyd's Open Form (LOF) was signed between the claimant and the tug owners. Subsequently, the tug towed the C together with the A for part of the trip, to the port of Argostoli, Kefalonia, where the salvage operation was completed.

The salvors initiated arbitration proceedings in London, as provided for by the LOF. The claimant's lawyers settled with the counterparties for EUR 20,000 (EUR 10,000 to each of the two tug owners). The claimant also paid EUR 3,600 to the owner of the A for the assistance, fuel used, and for cleaning the yacht's equipment. The C's insurance company did not participate in any of the above proceedings. The claimant then initiated legal proceedings against the insurance company, asking it to cover his expenses for the salvage and the consequential costs he had already covered. The Court of First Instance partially accepted the claim. The Court recognised the obligation of the defendant insurance company to pay the claimant EUR 20,000. The claimant appealed the decision.

Held: Appeal partially upheld. The Court recognised the obligation of the defendant insurer to pay EUR 28,206.40: a) EUR 20,000 as salvage remuneration to the owners of the M; b) EUR 2,800 for salvage remuneration and cleaning costs to the owner of the A; and c) legal expenses in Greece and the UK.

The Court of Appeal reviewed the case under the light of the arts 1, 1.a, 2, 6, 8, 12, 13, 13.1, 15, 15.1 of the Salvage Convention 1989 and concluded the following.

Two conditions are required in principle for the creation of the right to remuneration for salvage: a) a salvage operation, as defined in art 1.a of the Convention, ie 'any act or activity undertaken to assist a vessel or any other property'. The term 'act or activity' in relation to the provision of assistance means any action undertaken and executed, which has or contributes to a useful result, alone or in combination with others, by one or more salvors; and b) the vessel or other property, including the cargo, to which the assistance is given must be at risk of loss or damage.

The risk consists in the possibility of physical damage, loss, or injury ('risk of physical damage') and is required to be present, on an objective assessment of the facts, without necessarily being immediate or imminent, but only that it is expected with probability, that the possibility exists before the salvage services are rendered, that it has not elapsed when they are rendered, and that it was not caused by the salvors. Moreover, the risk must be present at the time the rescue services are initiated, without requiring the ship in distress to be incapable of propulsion or self-propulsion. The existence and degree of such serious risk is to be assessed by an overall examination of the circumstances of the particular case. It is also sufficient that, at the time the assistance was given, the object of the assistance was experiencing any mishap or possibility of mishap which could expose it to loss or damage if the salvage services were not provided.

Risk is an essential building block of salvage, because it defines and differentiates it from towage. It must also be serious, not imaginary, not presumed, not indefinite, present, and its existence and degree must be assessed by an overall examination of the circumstances of the particular case. Such circumstances that may indicate a risk are: a) abandonment of the voyage; b) the use of distress signals, if these are used to call for assistance, due to eg damage of the ship; c) total or substantial loss of propulsion means, resulting in a reduction in the ship's ability to cope with difficulties; d) loss of anchors and chains; e) abandonment or preparation for abandonment of the ship; f) immediate requirement for assistance; g) ingress of water into the ship due to damage, etc.

The condition for the existence of the risk includes not only a situation that causes the actual or constructive loss of a ship. It is sufficient that there is a risk of damage and even a calculable risk to justify the cost of the intervention, but not, however, minor damage to the ship or the cargo. Salvage also includes standing by a ship in distress or providing an escort for the necessary security. This element exists when there is a reasonable fear of danger, so that in order to avoid it, no prudent and skilful seafarer at the time of danger would refuse the offered assistance of the salvor, provided that a reward for the rescue is paid. The act of assistance must have had a useful result, alone or in combination with other salvors. It is not necessary that the object of the salvage be subject to the risk of total loss. The risk of serious damage is sufficient. Rescue services may exist, even though the risk can easily be remedied. Useful result means the preservation of the thing by counteracting the risk of loss or damage with which it is threatened, either in whole or in part. At the same time, it is also possible to make a partial contribution to the preservation of the thing, where the rescue services were provided by more than one salvor and contributed to the useful result, even if each of them alone could not have led to it.

As per arts 13, and 15.1, salvage remuneration is the consideration due by law and determined by the Court, payable to the salvor or salvors by the owners of the assets rescued. The amount of the remuneration is to be determined by the Court on the basis of the criteria set out in art 13.1, irrespective of the order in which they are listed. These criteria are either: (i) assessed by the parties to a contract concluded after the salvage and not subject to judicial annulment or modification because it was not concluded under the influence of the risk; or (ii) assessed by the parties to an agreement prior to the salvage, in which case, if the risk existed, the agreement is subject to judicial annulment or modification; or (iii) assessed by the Court. The criteria are stated by law to be exhaustive (restrictive) and not indicative, and are subject to the rule that they are aimed at encouraging the salvor. Moreover, it follows from art 15.1 of the Convention, that if the assistance was provided by several salvors, the apportionment of the remuneration between the salvors shall be based on the above art 13 criteria, distributed among them according to the contribution of each of them to the rescue of the ship in distress, but the agreement of the parties shall prevail over the above criteria.

While the Court of First Instance's finding regarding the nature of the services as salvage services was correct, its finding the amount to be accepted as due as remuneration for the salvage services provided to the claimant's vessel should be apportioned among the several salvors, according to the contribution of each of them to the rescue of the aforementioned vessel, misinterpreted and misapplied the law. This is because such a proportionate distribution would indeed have taken place if a claim had been brought by the salvors against the shipowner for payment of their remuneration, calculated, in the absence of an agreement between them, on the basis of the criteria set out in the Salvage Convention 1989. However, in the present case there is clearly no such claim, since the insured claimant seeks recognition of the obligation of his insurance company to pay him the above sums, which, although they are certainly a salvage remuneration, are allegedly owed to him as reasonable and justified costs of 'sue and labour' which he has incurred in order to prevent or limit the loss of or damage to his insured vessel, which was in maritime peril, as he was obliged to do under the insurance policy, and which, if they are deemed reasonable and justified, he is entitled to claim from his insurer, under the terms of the same policy, but separately and independently for each salvor in respect of the individual funds relating to him, without apportionment between them.

The reasonableness of these sums for each of the salvors is to be assessed in the light of all the circumstances of the case in question and in particular the value of the claimant's boat, amounting to USD 180,000, the diligence and the laborious and painstaking efforts made over a long period by the crew of the tug M and the owner of the boat A to prevent the loss or damage to the claimant's vessel following its grounding, the extent of the success achieved by the salvors, the nature and extent of the risk, which existed in the provision of the salvage as regards both assisting shipowners, the time allocated (12 hours) for the rescue of the claimant's vessel, as well as the timeliness of the services provided and the degree of readiness and adequacy of the equipment, in particular as regards the salvors of the tug M. Accordingly, the Court of First Instance erred in its assessment of the evidence when it held that the obligation of the defendant insurer from the above causes amounted to a total of EUR 20,000.