This was a maritime salvage claim. The respondent's fishing vessel, the Fossá ÞH-362, ran into trouble off Eiðisvík in Bakkaflói, about 1.2 nm from land. The master called for assistance. The respondent's vessel, the Björg Jónsdóttir ÞH 321, arrived at the scene, successfully threw a line between the ships, and towed the vessel to a safe port.

The parties failed to reach an agreement regarding payment of a salvage reward. The respondent's P&I club paid the appellant ISK 8,700,000, but the appellant did not consider that satisfactory, and sued the respondent in the Reykjavík District Court.

The appellant based its claim on the fact that, according to arts 167-168 of the Shipping Act/Siglingalög No 34/1985 (the Act) as amended [which gives domestic effect to the Salvage Convention 1989], it was entitled to salvage compensation from the respondent for the salvage of the respondent's vessel. The appellant claimed that it was in imminent danger, according to the provisions of Ch VIII of the Act on salvage. By Act No 133/1998 on Amendments to Ch VIII of the Shipping Act No 34/1985, the provisions of the Act were amended somewhat, among other things in accordance with the Salvage Convention 1989. This amendment to the law placed greater emphasis on the fact that salvage compensation should be determined in such a way that encourages salvage: see the new provisions in art 168.1 of the Act [cp art 13 of the Salvage Convention 1989].

Salvage rewards are based on the value of the salvaged property and are only paid if the salvage is successful, ie based on the so-called 'no-cure, no-pay' rule. The rule states that if salvage is successful, the salvor shall be paid for the salvage with an amount corresponding to a percentage of the value of the salvaged item. Salvage wages are subject to individual assessment and shall be determined from 0-100% of the value of the salvaged property: see art 167.1 of the Act [cp arts 12.1, 12.2 and 13.3 of the Convention]. The assessment of a salvage reward shall be based on the criteria listed in art 168.1.a-j of the Act [cp art 13.1 of the Convention].

The appellant argued:

a) Value of what was salved

The Fossá ÞH was a new vessel that was built for the respondent in China in 2000, and was especially equipped for shellfish fishing. It was therefore less than 3 years old when the appellant salvaged it. The appellant valued the salvaged property at ISK 290,000,000. The respondent agreed with that assessment.

b) The procedures and energy used by rescuers in saving the ship, other property and human lives

The work and energy of the rescuers should be rewarded in particular, and these factors should have an impact on increasing the reward. The appellant's crew prepared and planned the rescue diligently. The crew then worked together with all parties in a very orderly and precise manner, which ensured that the rescue went quickly and successfully.

c) Procedures and efforts of rescue workers to prevent or reduce environmental damage

This provision does not apply directly. There was no risk of environmental damage unless the ship ran aground.

d) To what extent was the rescue successful

The rescue was 100% successful, and without any damage to the respondent's vessel or its equipment, and the respondent's vessel was not out of action due to this incident. Such a rescue should be rewarded separately and additionally.

e) Nature and extent of the danger

The nature and extent of the danger posed to the respondent's ship in the circumstances of the weather and wind direction were considerable. Due to the weather and sea conditions, one of the Fossá anchors had broken away, and the ship had drifted closer to land. The rescue of the ship could not have endured further delay, and every hour was of great importance.

f) How long the rescue operations took, along with expenses and damage suffered by the salvors

The appellant's direct costs of the salvage are, on the one hand, due to the operation of the ship, oil, etc, and, on the other hand, wear and tear on the towing lines due to towing the ship. It is not a question of the crew being paid wages for work during the salvage, but the crew receives a share in the salvage reward according to art 170.c of the Act [cp art 15 of the Convention]. The salvage began at 19h30, and ended the following day at 11h30.

g) How quickly the assistance was provided

The appellant immediately responded to the request for help and turned the ship to assist and drove it at full power to help as soon as possible. The appellant's ship was about 35 nm from the Fossá when it turned to assist, but no other ship was within 50 nm. It is therefore clear that any other ship would have taken 2 hours extra to rescue the vessel.

h) The risk of the salvors being liable to third parties and other risks to which the rescuers or their property were exposed

A risk of the salvors being liable to third parties did not exist, but the salvors and the appellant's ship were in danger during the rescue.

Article 168.1.i-j of the Act only apply to cases where salvage is carried out by a professional salvor, and therefore those provisions do not apply in the appellant's case. When all of the above is taken into account, a fair and reasonable salvage fee for the appellant and the ship's crew is 25% of the value of the salvaged item, or ISK 72,500,000. Regarding standing in the case, the appellant relied on art 170.4.c. of the Act, which provides that the shipowner is responsible for collecting salvage rewards, receiving them, and then dividing them among the crew: see also art 170.f of the Act [cp art 15 of the Convention].

The respondent agreed that the appellant is entitled to a salvage reward. The respondent, however, argued that with its payment of ISK 8,700,000 ISK, salvage compensation has been paid in full. There was no risk of the ship running aground or becoming stranded. It was easy to get help. The nature and extent of the danger posed to the respondent's ship was insignificant. The salvors did not have to put themselves in significant danger during the rescue. Regarding the assessment of the weight of each criterion in art 168.1 of the Act, the order of the para does not imply any order of priority. Thus, criterion a should not weigh more heavily than other items in determining the salvage award. In fact, criterion a should weigh less in determining the salvage award in the case at issue here, since there was little danger involved in the salvage.

The value of the salvaged property in this case was ISK 290,000,000. The respondent's payment of ISK 8,700,000 amounted to 3% of the value of the salvaged item. That was fully consistent with what is customary with reference to practice and precedents. The appellant's argument in favour of 25% of the value of the salvaged property is far from what is customary when determining salvage awards. The appellant has not demonstrated in any way that the circumstances in this case are so special that they justify a significant deviation from standard practice.

The District Court held in favour of the respondent. The appellant appealed to the Supreme Court.

Held: Appeal allowed in terms of quantum of salvage reward.

The parties do not dispute that the crew of the appellant's vessel responded promptly to the respondent's request for help and prepared their operations well during the voyage to the salved vessel. Their work on the spot was purposeful, took a short time, and was successful, as best as could be expected. They then put their ship in some danger, especially when they worked to establish a tow between the ships so close to land, and in the weather conditions that existed at the scene. When these factors are considered, and also taking into account the value of the salved vessel, which the parties agree amounted to ISK 290,000,000, the appellant's salvage reward is considered to be reasonably set at ISK 30,000,000. From that amount, the ISK 8,700,000 that the respondent has already paid is deducted.