This was a claim submitted by Federal Budgetary State Institution ‘Morspassluzhba’ (the salvor) against Inlun LLC (Inlun) for payment of a salvage reward. Inlun was an agent of the owner of the vessel Iman, Inderton Ltd SA. The owner joined the proceedings as a third party without separate claims or demands. The amount of the claim was RUB 9,124,500.

On 24 November 2017, the Iman caught fire. As a result, it lost power. The vessel’s master contacted the salvage co-ordination centre in Vladivostok and informed them of the incident. On the same day, Inlun, on behalf of the owner, concluded a contract of emergency towage with the salvor.

The Courts of first and appellate instances found that the agent acted beyond its powers. Taking into account the urgency of the situation, they concluded that Inlun was a party to the contract and the proper defendant in the proceedings.

The Courts characterised the relations between the agent and the salvor as salvage since the vessel was in distress. The agent argued against this characterisation since the vessel was not in imminent danger, and the only service required was ordinary towage.

The Courts partially found in favour of the salvor and awarded RUB 4,268,750. The final sum of compensation was based on an expert opinion, which found that the towage was ineffective and the salvor spent much more time than needed.

Both the salvor and the agent submitted cassation appeals.

Held: The judgments of the Court of first instance and the Court of Appeal are revised. The claim is to be reconsidered by the Court of first instance.

Under art 1 of the Salvage Convention 1989, 'salvage operation' means any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever. The same definition is contained in art 337(2)(1) of the Merchant Shipping Code of Russia (the MSC RF).

According to art 12 of the Salvage Convention 1989 and art 341 of the MSC RF, only a useful result gives a right to a salvage reward. As a general rule, if the salvage did not have a useful result, the salvor is not entitled to any reward.

The Court stated that, under 'established international practice', which is reflected in Russian law, the conclusion of a written salvage agreement is not enough to prove the salvor's right to a salvage reward. The salvage reward and the obligation to pay it depend on a useful result and not on the fact of provision of services that another party accepted.

Pursuant to provisions of the MSC RF, the definition of the person obligated to pay a salvage reward is wider than the definition of the shipowner and includes any person that has an actual (economic) and legal interest in the property salved. Under the circumstances before the Court of cassation, the agent was a person interested in the vessel. Thus, they could be a person obligated to pay the salvage reward.

The salvage reward should be paid by all persons interested in the property salved. The criteria to establish the amount of the salvage reward are determined in the Salvage Convention 1989 and the MSC RF. The salvage reward cannot be higher than the value of the property salved. At the same time, the salvor may be deprived of the reward in full or in part if their actions resulted in the necessity or difficulty of salvage operations or to the extent to which the salvor is at fault for fraud or other dishonest conduct.

The Court refused to consider whether the Courts of first and appellate instances correctly applied the criteria for determining the salvage reward. The Court stated in this regard that these considerations are of a discretionary nature and cannot be revised in cassation proceedings. At the same time, it was found that the Court of first and appellate instances did not consider all the factual circumstances surrounding the salvage.

As a general rule, salvage operations are conducted under salvage contracts. Article 422(1) of the Civil Code of Russia stipulates that all contracts should be in line with the mandatory rules of Russian law. At the same time, the parties are free to decide on their contractual rights and obligations by their own will if this does not contradict the mandatory provisions ('freedom of contract', arts 1 and 421 of the Civil Code of Russia). There are no imperative rules for the time of salvage operations and which operations are covered by the definition of salvage. In these circumstances, the Courts of first and appellate instances should have considered the contract terms and calculated the justified amount of the salvage reward accordingly, taking into account the services named therein. The same is applicable to the assessment of the expert opinion.

Therefore, even though the salvage agreement cannot be the sole ground for the operations to be considered as being in the nature of salvage, the agreement should be taken into account in determining the rights and obligations of the parties if its terms do not contradict the mandatory rules of Russian law.