The Ikan Tongkol, laden with coal dust and anchored in the Everingen (Western Scheldt), went adrift and ran aground at approximately 11h50 on 13 October 1993. Eight tugs from URS and Muller tried in vain to refloat the vessel at the first high tide. In the period until the next high tide (around midnight) Smit Tak/URS offered salvage services on the basis of the Lloyd's Open Form (LOF). Despite a positive recommendation from Rijkswaterstaat (Directorate-General for Public Works and Water Management of the Ministry for Transport, Public Works and Water Management), this offer was declined by the shipowner.

The shipowner subsequently concluded a salvage agreement with Multraship. Multraship's attempt to refloat the Ikan Tongkol around midnight with 11 tugs failed, following which the shipowner concluded a contract on the basis of LOF with Smit Tak/URS on 14 October 1993 around 04h30.

That same night, Rijkswaterstaat placed the Ikan Tongkol under the Wrakkenwet (the Wreck Act). This decision reached the master of the Ikan Tongkol on 14 October 1993 at 07h30. Rijkswaterstaat allowed no further involvement of the shipowner company regarding the salvage unless it provided a guarantee of NLG 30 million. Rijkswaterstaat subsequently contracted with Smit Tak/URS itself on a 'no cure, no pay' basis for a lump sum of 10% of the estimated value of the ship and cargo, being NLG 4,25 million excluding VAT. Smit Tak/URS pulled the Ikan Tongkol free on 14 October 1993 around 13h00. The State received security from the ship and cargo offered in the amount of NLG 5 million. The interested parties in the ship and cargo (Tongkol Shipping (1990) Pte Ltd etc/the plaintiffs) filed a unlawful act (tort) claim against the State for repayment of NLG 2,75 million, stating that this amount was the difference between the amount agreed upon between Rijkswaterstaat and Smit Tak/URS and a reasonable salvage reward.

The Hague District Court held that, as the Ikan Tongkol was placed under the Wrakkenwet, the State itself had the authority to conclude a contract to pull the vessel free. No legal rule obliged the State to contract on the basis of LOF. This would only be different if the State, in the given circumstances, could not reasonably have come to the decision to enter into a lump sum contract with the salvors.

This was not the case because: (a) since the shipowner had already contracted with salvors twice, without the ship being refloated, the State did not have to give the shipowner another opportunity to conclude its own contract with salvors, even if this would have saved the plaintiffs an amount of NLG 743,750 in VAT; (b) in violation of his duty to maintain a listening watch, the master could not be reached by VHF radio in the early morning of 14 Oct 1993, so that no consultation was possible about the decision to place the ship under the Wrakkenwet; (c) the State (as stated and not contested) never contracts on LOF, because the Algemene Rekenkamer (Netherlands Court of Audit) wishes to have certainty in advance regarding the costs and the State could not run any risks with regard to the amount of salvage reward to be paid eventually; (d) LOF is an 'open-ended' contract, whereby no price is agreed in advance; (e) at the time the salvage agreement was concluded, it was by no means certain that the third attempt would succeed; on the basis of LOF, the salvors would possibly receive a considerable compensation in the event of a partially successful attempt, whereas in the contract concluded the 'no cure no pay' principle was adhered to in full; (f) contracting on the basis of 'no cure, no pay' is not unusual; (g) it was clear that the State had to make a quick decision because the ship was in a perilous position, which meant that a thorough analysis of all risks and an extensive cost consideration was not possible.

The State has not acted unlawfully by accepting a lump sum of NLG 4,25 million for the salvage, nor could the State be required to have tried to challenge this amount pursuant to s 8:558(2) of the (old) Dutch Civil Code due to a 'serious imbalance' as referred to in that provision: (a) two previous attempts had failed; time had been lost and the vessel was in a worse position; (b) Smit Tak is a competent salvor, the predicted strong winds would make salvage very difficult, and Smit Tak had to use 15 tugs; (c) the ship was hogging and was in a perilous position; (d) it was in all respects undesirable for the cargo to end up on the river bottom, whereby it had to be assumed that in the event of the ship breaking up, the nature of the cargo would lead to consequential damage, which made quick action necessary; (e) the available figures for LOF-salvages show that 10% of the estimated value of ship and cargo was not excessive; (f) in a worst-case scenario, costs of NLG 30 million would have been incurred.

The plaintiffs appealed to the Hague Court of Appeal.

Held: The guarantee demanded by the State as a condition for the shipowner to proceed on the basis of LOF was not absurd: as the ship was hogging, the State could assume a risk of the ship breaking and the possible consequences for the environment in the event of the outflow of the cargo of coal dust, and therefore require security which would cover the costs of a safe salvage, even in a worst-case scenario.

Furthermore, the State was not obliged to use LOF, unless it could not reasonably have contracted on a lump sum basis. In the given circumstances, the choice for a lump sum contract was not unjustified, nor was the amount agreed upon with the salvors.

However, this does not mean that in hindsight the amount charged by the State to the plaintiffs is not open to criticism, since the actual salvage, with deployment of sufficient equipment, took place within a short time and without special problems. The plaintiffs undisputedly argue that they have immediately and repeatedly insisted that the amount paid by the State was unacceptable, and furthermore, on the basis of reports submitted, they have argued that under LOF a much lower amount would have been awarded. The plaintiffs consider a salvage reward of NLG 2,25 million to be reasonable.

The Court rejects the State's argument that this was not a contract for salvage within the meaning of Book 8 of the Dutch Civil Code, but essentially a removal contract whereby the salvors, pursuant to the Wrakkenwet, work for the State in its capacity as waterway manager, and not for the endangered vessel, and that therefore renegotiating the concluded contract would be impossible. In a case such as this, in which the action required of the salvors by the State consists of providing assistance to a stranded vessel with crew which, after having been refloated, continues its journey on its own power, the salvors' activities cannot be categorised as anything other than salvage (under the supervision of the State) and the relevant agreement can only be regarded as an salvage agreement within the meaning of s 8:558 of the (old) Dutch Civil Code. Smit Tak/URS clearly and rightfully acted on that same assumption in their invoicing.

Since the relevant agreement was entered into during and under peril, the State could, in principle pursuant to s 8:558 of the (old) Dutch Civil Code, submit the agreement concluded with the salvors to the Court for a review of the fairness of the agreed salvage reward, or, in case of proven imbalance between the salvage reward and the services rendered, request the Court to annul or modify the agreement.

Whether the State acted unlawfully towards the plaintiffs by failing to do so, and also by not attempting to renegotiate the agreement amicably, depends on the answer to the question of whether the salvage reward paid was, all circumstances considered, unreasonable. An expert opinion is ordered on this point by the Court.

[For the final judgment, see Tongkol Shipping (1990) Pte Ltd v Staat der Nederlanden (Ministerie van Verkeer en Waterstaat) ECLI:NL:GHSGR:2002:AU6597 (CMI1957).]