Following LP 20/2021 that summarized causes to anchor loss incidents and potential losses suffered by shipowners, this article is prepared to share some insights on the handling of claims involving lost anchors, with reference to hands-on experience in dealing with such cases.

I. Incident description

The vessel was berthed at a port in Southern China for safety during a typhoon when the portside anchor was lost along with several shackles of cable. Following the incident, the local maritime administration issued a compulsory wreck removal order requiring the Member shipowner to promptly remove the lost anchor and to provide security. The lost anchor and cable were subsequently declared to be a constructive total loss and the vessel’s hull insurer confirmed in writing to relinquish ownership. The Association then appointed a local surveyor and lawyer to help arrange salvage operation and offered security to facilitate the vessel’s departure for scheduled voyage.

II. Rules of the Association

Rule 3 Section 14 of the Rules 2022/23 provides that wreck liabilities under the Association’s P&I cover include “costs or expenses relating to the raising, removal, destruction, lighting or marking of the wreck of an entered ship, when such raising, removal, destruction, lighting or marking is compulsory by law, or the costs thereof are legally recoverable from the Member”.

III. Applicable laws

Applicable laws and regulations that are referred to in the above provision include:

1. Law of the People’s Republic of China on Maritime Traffic Safety

Article 51: The owner, operator or manager of an obstruction shall promptly set up warning signs in accordance with the requirements of the relevant mandatory standards and technical specifications, report the name, shape, size, location and depth of the obstruction to the maritime administration, and salvage and remove it within the time limit set by the maritime administration. The owner of the obstruction shall not be exempted from the obligation to salvage and remove the obstruction if he relinquishes his ownership.

2. Regulations of the People’s Republic of China on Management of Inland Waterway Traffic Safety

Article 42: The owners and operators of sunken, drifting or stranded objects in the navigable waters of inland rivers which may affect the safety of navigation shall set up signs in accordance with state regulations, report to the maritime administration and salvage and remove them within the time limit set by the maritime administration; if there is no owner or operator, the maritime administration shall salvage and remove them or take other corresponding measures to ensure the safety of navigation.

3. Measures of the People’s Republic of China for the Administration of Salvage of Wrecks

Article 5: In the case of wrecks that obstruct ship navigation, channel improvement or engineering construction, the relevant port (navigation) authorities shall stipulate the application period and the salvage period according to the specific situation and notify or announce the owner of the wreck. The owner of the wreck must apply for and salvage the wreck within the prescribed period; otherwise, the competent port (navigation) authorities concerned may carry out salvage or dismantle it.

IV. Claim handling

Generally, hull insurer would take the lead in cases of lost anchors as it is part of the subject matter insured under hull cover. However, where the lost anchors are required to be removed from the seabed by port authorities for purpose of maintaining the safety of the waterway or the anchorage, these cases become wreck removal operations that are compulsory by law and are therefore P&I-related.

1. Inform the Association in the early stage

A previous case of loss of anchor where the Association was involved from the early stage was closed smoothly. In less than 48 hours after the incident, the anchor was recovered, and the vessel departed with no significant costs or risks presented. Early involvement of the Association has guaranteed enough time for coordination between interested parties and reduced risk of delay. We therefore recommend that Members report to the Association in a timely manner in the event of loss of anchor and provide accurate information on the position of the vessel and the anchor at the time of the incident.

2. Be careful in signing the salvage agreement

Considering that the salvage agreements provided by domestic salvage companies may sometimes have ambiguities, it is advisable to include the following aspects when entering into a salvage contract.

First, the ownership of the salvaged anchor and cable. Recovered anchors and anchor chains, if cannot be used again on the ship, have only the residual value of scrap iron, and the subsequent costs of warehousing can be huge considering the weight and volume. It is therefore recommended to agree in the contract to deduct the residual value of the salvaged object from the costs of the operation. Owners may also approach professionals for the exact amount of salvage value and include it in the contract.

Second, it is recommended to agree that the costs of recovery should be all-inclusive that all losses, damages, costs, and expenses associated with the operation should be covered by the salvage company. This may save some unexpected trouble for owners in the event of any accident during the salvage.

Third, terms of payment should be specified. Payment options may include payment for one search and five salvage operations plus additional charges for the sixth or more operations, or first payment for searches plus following payment for salvage operations for unlimited number of times. Either way, owners are often required to pay a percentage of the salvage costs as advanced deposit.

It is also important to clarify the obligations of the salvage company, including not only the number of times of salvage operations to be performed, but also the condition of contract termination and final payment where the company shall facilitate coordination with the maritime administration, regardless of success recovery or not.

V. Advice to Members

The Association has seen in some lost anchor cases that shipowners rush into salvage agreements for worrying delays of the ship’s schedule. The salvage company may also require a rather high percentage of advance payment as a guarantee for the ship’s departure on time. However, after signing of the agreement it may take a lengthy period of time to carry out searching, locating and salvaging. Therefore, shipowners should regularly follow up on the progress of the salvage operation and seek payment by stages, e.g. respective payment for the searching stage, the salvage stage after locating the lost anchor, and final stage when it is successfully retrieved. Meanwhile, maintain contact with the salvage company and the local maritime administration in order not to prolong the time needed for closure of the case.

For more information, please contact Managers of the Association.