Be careful of side agreements to LOF/SCOPIC, warns Standard Club

In a web alert on variations to the Lloyd’s Open Form, SCOPIC, Standard Club has noted that the Lloyd’s Open Form (LOF) salvage contract has been in use for more 100 years and is often the best contract in an emergency situation. The Special Compensation P&I Club (SCOPIC) clause has been used in conjunction with LOF for nearly 20 years and, like LOF, is in principle supported by The Standard Club, the Club said

However, Standard noted that there had recently been a trend for shipowners and their hull & machinery underwriters to enter into side agreements with salvors which modify the operation of the LOF/SCOPIC regime, including by varying the way salvors are remunerated.

Standard said that this practice undermined one of the key advantages of LOF – that the contract can be signed un-amended in an emergency when delay could lead to the situation getting worse.

Standard Club said that members should be aware that the use of side agreements could also prejudice P&I cover to the extent they affect the operation of the SCOPIC clause. There was also a risk that side agreements might not be binding, and could be subject to challenge based on provisions of the 1989 Salvage Convention and LOF itself (which relate to unfair contracts and a prohibition on inducements respectively).

Standard Club concluded that “Members contemplating the use of a side agreement should consult their usual contact at the club for advice on cover implications”.