The applicant applied to set aside an appeal arbitrator’s award in a salvage remuneration claim. The applicant’s vessel, MV Flag Mette, was en route to Germany when its main engine spontaneously shut down. The vessel engaged the respondent's services pursuant to a Lloyd’s Open Form of salvage agreement (LOF). Salvage was claimed and the assessment of salvage remuneration referred to arbitration. At first instance arbitration, the respondent contended for two dangers - the casualty was: (1) temporarily immobilised and in need of assistance from professional salvors; and (2) subject to a low order risk of collision had she transited the English Channel unassisted. The arbitrator rejected the risk of collision, finding that that the vessel would not have been foolhardy enough to contemplate a Channel transit in the absence of assistance. However, he agreed with the respondent’s first argument and awarded USD 825,000. The casualty was intermittently immobilised but at risk of becoming temporarily immobilised. She was in need of tug assistance, which would inevitably be provided on salvage terms, to be permitted to enter Brest or to anchor.

The respondent appealed against the first instance arbitrator’s rejection of the second danger on the basis that, had the arbitrator properly considered the absence of any alternative assistance, he would have concluded that it was probable that the casualty would have had to contemplate a Channel transit, however dangerous, since it was unlikely that the French authorities would permit the casualty to venture close to the coast unassisted. The appeal arbitrator considered that, in the tug’s absence, there was a significant risk that the French authorities would not have permitted the casualty to proceed close to coast and anchor. He rejected the respondent’s submission that in those circumstances the casualty would be forced to proceed through the English Channel. The casualty would either have moved off the coast to seaward of Traffic Separation Scheme (the TSS) and waited for assistance from a suitable tug, or a service engineer put on board offshore for repairs in the interim. Those alternatives gave rise to dangers not taken into account, namely a prolongation of the casualty’s immobilisation and a heightened risk of collision given the engine’s problems. Accordingly, the arbitrator increased the award to USD 1.2 million.

The owners applied to the High Court to set aside the appeal arbitrator’s award, alleging that the arbitrator failed to act fairly under s 33 of the Arbitration Act 1996, and that the award was affected by a serious irregularity under s 68(2)(a) as it was allowed on grounds not featured in the grounds of appeal or in the appeal hearing. The applicant accepted that the appeal arbitrator had raised with counsel the alternative scenario that in the absence of alternative assistance the casualty might have proceeded to seaward of the TSS, but argued that that was in the context of whether there was a real possibility that the casualty would have proceeded along the Channel. It was not in the context of raising a new danger - a risk of collision whilst the casualty proceeded offshore to seaward of the TSS and awaited assistance.

Held: Application dismissed.

Assessment of salvage remuneration is governed by art 13 of the Salvage Convention 1989 and ‘the nature and degree of the danger’ is one criteria to be considered. Dangers are assessed by considering what might happen to the casualty in the absence of assistance. Thereafter, the question of alternative assistance (other than from the actual salvor) should be considered. This enables the tribunal to reach a realistic view of the casualty’s predicament.

The Arbitration Act 1996, s 33 requires the tribunal to act fairly. The court in Terna Bahrain Holding Company Wll v Al Shamsi [2012] EWHC 3283 held that there would generally be a breach of s 33 if the tribunal decided the case on a point which one party had not had a fair opportunity to deal with. However, Popplewell J in that case said that there was an important distinction between, on the one hand, a party having no opportunity to address a point, or his opponent's case, and, on the other hand, a party failing to recognise or take the opportunity which exists. The latter will not involve a breach of section 33.

The applicant’s complaint here was that the appeal was decided based on dangers with which it did not have a fair opportunity to deal. The appeal arbitrator did not consider that either party had correctly identified the hypothetical scenario to assess damages. The respondent’s scenario was that the casualty, having been refused permission to anchor without the assistance of a tug, decided to proceed along the English Channel, giving rise to a danger of collision in the Channel. The applicant’s scenario was that the casualty was permitted to anchor in the bay and did so, perhaps with the assistance of port tugs. That meant that there was no risk of collision in the Channel. The appeal arbitrator considered that, if the French authorities had refused permission for the casualty to anchor in the bay without tug assistance, the applicant would not have been so foolhardy as to require the casualty to proceed down the Channel. The likely scenario in his view was one in which the casualty would have moved off the coast to seaward of vessels approaching and departing the TSS.

As discussed in The Magdalena Oldendorff [2009] 1 Lloyd’s Rep 7, the issue should be viewed from the arbitrator's, and not the parties’, perspective. The judge found that the appeal arbitrator had put that scenario fairly to both counsel. He did not put expressly to either counsel that there was a risk of collision in such a scenario. However, there was no reason to suppose that the appeal arbitrator was aware that the applicant did not appreciate that on the appeal arbitrator’s scenario there was a risk of collision offshore. Where the appeal arbitrator did not appreciate that the applicant had missed the point, he was not obliged to check with counsel whether he was aware of that risk. The fact that the appeal arbitrator did not, did not constitute unfairness in terms of s 33.