This was a claim brought by the Federal State Budgetary Institution Morspassluzhba (the salvor claimant) against JSC Holding Co Dalmorproduct (the defendant) for a reward earned for the salvage of the floating fish factory Petr Zhitnikov (the salved vessel). The defendant made a counterclaim for annulment of cll 5 and 6 of the salvage contract, which stipulated the costs and expenses incurred during the operation and the salvor's reward.

On 24 June 2019, the salved vessel caught fire and sent a distress signal, which was received by the Predannyi, Atlas, Champion, Velbot 011, and Sibirskiy. The salved vessel arranged for a salvage operation, to be carried out and organised by the Predanniy on the same day. The Atlas arrived at the scene the next day. The claimant, the owners of the Atlas, and the defendant entered into a salvage agreement. Under this agreement, the defendant was obligated to pay an salvage reward in the event of a useful result in the amount of USD 200,000 (cl 5) and to pay, irrespective of the useful result, the costs and expenses of the Atlas operation in the amount of RUB 750,000 per day (cl 6). After the conclusion of this agreement, the Atlas took part in the salvage operation organised by the Predannyi.

The defendant refused to pay because the salvage operation was conducted ineffectively, and the sums in the agreement were excessive. The claimant brought a claim, and the defendant submitted a counterclaim.

The Court of first instance found for the claimant, and the Court of Appeal upheld this judgment. The Court of Cassation revised the judgment and sent the dispute for reconsideration to the Court of first instance.

Held: The claimant’s claim is satisfied in part. The defendant’s claim is satisfied in full.

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 is stipulated in art 327(2)(1) of the Merchant Shipping Code of Russia (the MSC RF). Under art 339 of the MSC RF, the agreement or any of its terms may be annulled or modified if the agreement has been entered into under undue influence or the influence of danger and its terms are inequitable or the payment under the contract is in an excessive degree too large or too small for the services actually rendered. The same is stated in art 7 of the Salvage Convention 1989.

The parties to the agreement, when entering into a contract, cannot predict the final result of the salvage operation at that stage. Therefore, the reward should be determined in accordance with all the criteria stipulated in art 342 of the MSC RF (art 13 of the Salvage Convention 1989). Therefore, if the salved value of the vessel and other property is sufficient, the costs and expenses normally incurred by the salvors are included in the salvage reward. The definition of ordinary costs and expenses is contained in art 343(3) of the MSC RF. The legislation does not stipulate compensation for the costs and expenses incurred in addition to the salvage reward.

Other vessels participated in the salvage operation besides the Atlas. Under art 342 of the MSC RF, the role of each vessel in the operation must be taken into account when determining the reward for each.

The Atlas participated in the operation for 6 days and 40 minutes. The evidence included an accounting document that demonstrated the Atlas's operating costs for the year. The court calculated the cost for one day of operation to be RUB 165,114.48, against RUB 750,000 stipulated in the salvage agreement. The court also excluded the time the vessel spent after the salvage operation to reach the port since it was not time the vessel actually spent on salvage. As for the other sums, the court found that it was just to fix the salvage reward in the amount of 40 per cent of the reward ordinarily paid in similar circumstances. The final sum of the salvage reward, including the costs and expenses, was RUB 2,343,845.48.

The court satisfied the counterclaim by finding that the disputed terms of the salvage agreement were unjust and the sums therein were excessive.