This case concerned the determination of fees for the towing of the Kvitnos to safety. The issue was whether a commercial agreement had been entered into, or whether the fee was to be assessed according to the Maritime Code's rules on salvage awards.

Sp/F Skipafelagid Nor Lines (Nor Lines) took out a summons before the Lower Telemark District Court on 30 March 2016, arguing that Nor Lines should pay an amount limited to NOK 750,000 for commercial towing of its vessel, the Kvitnos, to Trond A Kittilsen Shipping AS (Kittilsen Shipping). By email on 6 May 2016, Nor Lines increased its settlement offer to NOK 1.5 million to avoid further litigation. This offer was not accepted by Kittilsen Shipping.

In response, Kittilsen Shipping filed a claim for a salvage award determined at the discretion of the Court, up to NOK 7.5 million. Nor Lines maintained its allegation that an agreement had been entered into on commercial terms, but at the same time filed a subsidiary claim before the District Court for a salvage award up to NOK 1.5 million.

The Lower Telemark District Court ordered Nor Lines to pay a salvage award of NOK 7.5 million to Kittelsen Shipping. Nor Lines appealed.

Held: Appeal allowed.

Maritime salvage is regulated by Ch 16 of the Maritime Code, which was amended in 1997 when Norway acceded to the Salvage Convention 1989. According to the Maritime Code § 442.1, the provisions of Ch 16 are to be applied whenever a salvage case is brought before a Norwegian court.

In the Maritime Code § 441.a, salvage is defined as 'any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever'. It is quite clear that the Kvitnos was towed ('act or activity') by the BOA Sund on 6 December 2015 and that the tow had the purpose of assisting the Kvitnos into port. In order for the Kvitnos to be considered to have been 'in danger' in the sense of the Maritime Code, there must, in accordance with Rt-1999-74 (Los 102) p 80, be a:

real risk that the ship will be lost or suffer significant damage, and this risk must significantly exceed the dangers to which shipping is normally exposed. However, the danger does not have to be imminent for salvage to be involved, nor is it required that there must be a preponderance of probability for damage to occur ...

And further '[a]lthough the risk assessment is objective, the question of whether there is a risk must be assessed based on the situation as it existed at the time of salvage'. The parties agree that the maritime law definition of 'danger' was met here, based on an objective and legal assessment of the concept of danger. There was a fresh breeze to a stiff gale blowing in the outer part of the Oslofjord where the Kvitnos was located. There were 4-6 m high waves, and the weather forecast showed that gales would blow from the west/southwest for another day. The Kvitnos could not get to port by itself, and was thus 'in danger' at sea when engine problems occurred under the prevailing weather conditions.

Chapter 16 of the Maritime Code contains a number of provisions on the duties imposed on the salvor, as well as conditions for determining and distributing salvage awards. In § 445.1.1 of the Maritime Code it appears as a decisive condition that the salvor is only entitled to a salvage award 'if the salvage has led to a useful result'. This provision is considered to be the Norwegian term for 'no cure, no pay'. In order for there to be a useful result that gives rise to a claim for a salvage award, a ship 'in danger' must be brought definitively out of danger and 'to safety' after a concrete assessment of the situation. If the salvage is successful, there will be a claim for a salvage award according to the discretionary elements in the Maritime Code § 446 after a concrete assessment of the individual case. On the other hand, if the salvage is unsuccessful, the salvor is not entitled to any salvage award whatsoever, regardless of the effort and risk involved in the work.

With the exception of the duty to prevent or limit environmental damage, the parties can, by agreement, set aside the provisions of Ch 16 of the Maritime Code. This is included in § 443.1.1: 'The provisions in this Chapter do not apply in so far as otherwise follows from an agreement.' Since the provision on salvage awards is the main rule in law, Conventions, and practice, 'clear evidence that a deviating agreement has been entered into' must therefore be required: Falkanger/ Bull, Sjørett (2016) p 487.

An agreement, either a salvage contract or an agreement on commercial terms, is normally entered into between the salvors and the shipping company, but the ship's master is authorised to enter into an agreement on behalf of the shipowner. In practice, several different agreements are used. Internationally, the Lloyd's Open Form (LOF) is most often used. This was last revised in 2011 and incorporates the Convention's solutions on environmental damage under English law. An additional clause for environmental reasons, called SCOPIC, can also be agreed. According to the LOF, the assessment of the salvage award must be determined according to the 'no cure, no pay' principle, by arbitration in London, and according to English law. In Scandinavia, the Scandinavian Salvage Contract 1994 is also used, which is largely based on the LOF, and which is also based on salvage awards according to the 'no cure, no pay' principle.

Commercial contracts are also common in salvage, where an agreement on remuneration is entered into in advance, regardless of the result. This means that the salvor is entitled to the agreed remuneration, regardless of whether the salvage leads to a 'useful result'. Both parties then have greater predictability in respect of both costs and possible profits. The Baltic and International Maritime Council (BIMCO), the leading independent international trade association in the shipping industry, has drawn up a number of standard form contracts. BIMCO Towhire (an agreement based on hourly or daily prices) or BIMCO Towcon (an agreement based on a fixed price) are widely used. It is also possible to agree intermediate forms, eg so that salvors will be able to claim salvage wages according to normal rules, while at the same time they are entitled to a certain minimum remuneration regardless of the result.

After considering all the facts, the Court of Appeal's assessment is that Nor Lines' representative had reasonable grounds to perceive that Kittilsen Shipping had agreed that the towing would take place on commercial terms, but that the final determination of the hourly price would take place in connection with the subsequent paper work. Remuneration for the towing of the Kvitnos must therefore be determined on commercial terms, and Kittilsen Shipping is not entitled to a salvage award.

Initially, the hourly price was stated at NOK 4,500 per hour. It has been stated, and the Court of Appeal assumes, that NOK 4,500 covers both current expenses, as well as a profit element for Kittilsen Shipping for services provided by its tug, the BOA Sund. It is considered likely that NOK 4,500 would not be the final hourly price. The next day, Kittilsen Shipping demanded a tug rate (hourly price) of NOK 15,000, with the addition of various expenses that might have to be incurred. A salvage sum of NOK 1 million was also demanded.

In both Towcon and Towhire there are several variables in the hourly price, and it was not specifically agreed what the parties should do with fuel, lubrication costs, and any other additional costs. This is sometimes included in the hourly price, and other times not. The Court of Appeal's assessment is that the stated hourly price must be considered a minimum price, and that Kittilsen Shipping will be entitled to an addition to this, precisely because the final determination of the hourly price remained to be clarified.

From the BOA Sund's log book it appears that the assignment lasted for something over 22 hours. In addition, it is common to pay for the tug to return to its own port, ie the task as a whole should be remunerated on the basis of approximately 27 hours. The Court of Appeal takes as its basis the hourly rate put forward by the company on 7 December 2015 of NOK 15,000 per hour. In addition, there are actual expenses for pilotage and assistance from the tug Baus.

In terms of an overall discretionary assessment, the total towage fee is set at NOK 450,000, excluding VAT.