Marine insurer Gard has published an article by Caglar Coskunsu of Cavus & Coskunsu Law Firm, Istanbul, on the dangers inherent in negotiating the Turkish straits, and the implication of the revised salvage agreement, “Turks 2015”.
Gard noted that the Turkish Straits, consisting of the Istanbul and Çanakkale Straits and the Marmara Sea connecting the Black Sea to the Mediterranean Sea, were one of the most strategically significant waterways of the world. It noted that the average number of vessels passing through the Bosphorus each day in the 1930s was 17, whereas today it was 130. This did not include local traffic such as ferries, supply vessels, fishing boats and yachts. Because of the busy traffic, and with a considerable number of tankers carrying dangerous cargo, there were always considerable concerns for the safety of the public and the environment in the area.
Major incidents such as the Nassia collision with the Shipbroker and the Independent collision with the Evriali proved the existence of such risks. Geographic and navigational challenges as well as the physical characteristics of the Turkish Straits with strong currents and sharp turns made passages a challenging task in terms of navigational safety.
Turkey has stipulated that all salvage operations must be undertaken by the state-owned Directorate General of the Coastal Safety, (Kiyi Emniyeti Genel Mudurlugu). The Directorate covers the Turkish Straits and areas around the islands of Gokceada and Bozcaada in the Aegean Sea, as well as the coastal areas around the entrances of the Dardanelles and the Bosphorus. In addition to salvage services the Directorate General of the Coastal Safety provides:
- Search and Rescue
- Pilotage in the Turkish Straits
- Turkish Straits Vessel Traffic Services (TSVTS)
- Aids to Navigation
- Marine Communication
- Marine oil spill response during salvage operations or in case of emergency.
Salvage in the Bosphorus and the Dardanelles used to be associated with the Turkish Open Form (TOF) standard form of salvage agreement, although its use was almost exclusively limited to salvage operations in the Turkish Straits and adjacent areas covered by the Directorate General of Coastal. However, following a landmark decision by the Turkish Supreme Court where Cavus & Coskunsu represented the SC Sara (the Owners of the SC Sara vs. Kiyi Emniyeti Genel Mudurlugu) the validity of the provisions of TOF was challenged. The main argument was in respect of the arbitration clause of TOF, where only the Directorate General of Coastal Safety had the power to initiate arbitration proceedings and (considering the usually excessive securities put up in favour of the Directorate General of Coastal Safety), Owners and Underwriters were left with little alternative but to settle the salvage claims.
The incident leading to the Supreme Court ruling on TOF happened in November 2007 when, in heavy weather, the 57,346 gt crude oil tanker SC Sara, which was anchored off Bozcaada Island without cargo on board, asked for tug assistance for towage as it had been reported that the weather would soon deteriorate. However, two tug boats owned by the Directorate General of Coastal Safety informed the master of SC Sara that a towage service was not available and that the tugs would be able to give salvage services on the condition that a TOF was first signed. The master refused to sign the TOF and hence the tugs did not proceed. Later the weather conditions worsened and later that night the master again asked for tug assistance. By this time the vessel was in some danger and the master had no other choice but to sign the TOF.
Despite the fact that the TOF was signed, no service could be carried out by the tugs at the time as they were unable to operate in the weather conditions then in play.
SC Sara ran aground
When the weather improved the tugs were able to attend and delivered service to the vessel lasting just over an hour. Shortly after the services were completed, lawyers acting for the Directorate General of Coastal Safety applied to the Court for an arrest order against the vessel for $13m.
Since the TOF applied and the Directorate General of Coastal Safety had received a bank guarantee for $13m the Directorate General of Coastal Safety claimed a salvage reward of around $5m. Owners commenced proceedings before the Specialized Maritime Court of Istanbul to determine the salvage remuneration and to claim for damages allegedly caused by the tugs during the operation. The Specialized Maritime Court of Istanbul, acceding to the objection raised by the Directorate General of Coastal Safety, dismissed the action on the grounds of the mandatory arbitration clause in the TOF;
The Owners appealed to the Turkish Supreme Court and the ruling of the Specialized Maritime Court of Istanbul was successfully challenged. The Supreme Court unanimously set aside the ruling of the Specialized Maritime Court of Istanbul, holding that the arbitration clause was invalid because:
The arbitration clause was incompatible with the principles of access to legal remedies ensured by the Turkish Constitution as well as Article 6 of the European Convention on Human Rights, since the clause granted the right to commence arbitration exclusively to the Salvors. The Supreme Court stated that the local court’s ruling on dismissal of the claim on the grounds of jurisdiction, citing an allegedly valid arbitration clause, automatically deprived the shipowner from pursuing a remedy. since the salvors had not commenced arbitration.
The arbitration clause, by granting the right to commence arbitration solely to one party and so depriving the other party of the power to commence legal proceeding by any means, was regarded as an asymmetric (unilateral) arbitration clause and as such was held to be null and void in accordance with contemporary jurisprudence.
The Supreme Court, by holding the arbitration clause to be entirely invalid, did not examine in detail the provisions relating to arbitrators’ fees as a percentage of the award given but the practical result was that TOF lost its most powerful provision, the arbitration clause.
Revised salvage agreement – Turks 2015
The Turkish Commercial Code, which came into force on July 1st 2012, substantially codified the provisions of the International Convention on Salvage of 1989 and Turkey also became a party to the 1989 Salvage Convention with full effect as of May 29th 2013. Accordingly the Salvage Convention 1989 is now directly applicable to all salvage cases in Turkey with a foreign element.
The Directorate General of Coastal Safety amended the arbitration clause in the new Turks 2015 to comply with the Supreme Court ruling, granting all parties concerned the right to commence arbitration.
However, another controversial part of the original arbitration clause was retained, where arbitrators are entitled to receive 12% of each award that would be equally distributed between them.
Another issue for shipowners under Turks 2015 was that, once they sign Turks 2015, shipowners have to provide security for all salved properties on board, assuming liability for all property on board.
Also, under Clause 7 of Turks 2015 “the shipowner agrees to pay the salvage remuneration and the associated expenses relating to the vessel, bunkers, cargo and the freight in full and also agrees that the relevant claim can be directed to himself alone. The fact that securities are provided separately shall not in any way affect to direct to the parties.”
Therefore, Coskunsu recommended that, if possible, shipowners should try to avoid to enter Turks 2015 until it is revised in terms of payment, security, liabilities and also the dispute resolution clause.
Current Practice in Salvage Claims in the Turkish Straits
The Directorate General of Coastal Safety has traditionally claimed between 8% and 12% of salved values as a reward, with salvage security amounting to some 15% to 20% of salved values. Although there was a salvage claim of the Directorate General of Coastal Safety in a major case in 2018 where the claim amount was exceptionally high at 50%, the recent trend indicated that lower settlements were possible at around 5% to 6%.
Coskunsu concluded that the Turkish Commercial Code, which came into force on July 1st 2012, substantially codified the provisions of the International Convention on Salvage of 1989 that Turkey has been a party to since May 2013. Turkey now applies contemporary principles of salvage law. “Although far from perfect in its current incarnation, future revisions to Turks 2015 may make it a preferable form of salvage agreement”, said Coskunu.