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International Group – Compulsory Insurance S-C Maritime Labour Convention

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Recent press articles and the imminent entry into force of the Maritime Labour Convention 2006 have brought the Convention and its requirements on vessel owners into focus, in particular the ‘financial security’ requirements. The Group has contacted each of the 38 States Parties to ask whether their administrations will accept an International Group P&I Club’s Certificate of Entry as evidence of the owners’ financial security under the Convention. To date such confirmation has been received from ten States*. Some States have not yet developed their implementing legislation and others have not yet considered the issue but no State has said that they will refuse a Certificate of Entry.

By way of clarification and for owners’ guidance the financial security requirements which will become effective in August 2013 are set out below. The Club will continue to work to keep Members updated on the progress of the Convention and the work of the IG in liaising with the remaining 28 State Parties to obtain approval for Club Certificates of Entry as evidence of financial security. We will endeavour to obtain universal acceptance as originally planned.

Standard A2.5 – Repatriation
This Standard and accompanying Guidelines provide that seafarers are repatriated at no cost to themselves and vessel owners shall provide financial security for the liabilities contained in the Standard. Owners’ liability for this Standard has been discussed extensively. All clubs considered the provisions on repatriation in case of insolvency which were set out in the Board Agenda Note circulated in August last year.  Club Boards subsequently agreed that  they would provide repatriation cover for insolvency risks on a non-poolable basis.

This Standard does not include a provision on outstanding unpaid wages following abandonment. Liability for unpaid wages following abandonment is a feature of the principles agreed in the International Labour Organisation (ILO) in 2009. These principles are not applicable at this stage and there is no requirement in the MLC 2006 to provide financial security by way of insurance cover for unpaid wages. The ILO principles are subject to further discussion and negotiation and to take this forward ILO has scheduled a meeting for April 2014. It will then take several years for the principles to be considered in ILO, finalised and implemented in MLC Member States. The current position, however, is that unpaid wages are not covered by the MLC and there is no requirement to provide financial security for such unpaid wages.

Regulation 4.2 – Vessel Owners’ Liability (for sickness, injury or death)
This financial security requirement is limited to incidents that are broadly already covered by the Clubs in respect of death or long term disability of seafarers. To clarify the cover that clubs have had in place for some time, in 2009 clubs adopted a policy decision to waive the pay to be paid and retrospective withdrawal of cover rules for valid seafarer death and personal injury claims. With the introduction of that policy decision and the rule changes introduced at the commencement of the 2013 policy year, club cover is MLC compliant.

Standard 1.4 Recruitment and Placement
There has been some misunderstanding as to the requirements on owners and insurers as regards recruitment. The MLC does not introduce a requirement on owners to provide financial security in respect of the recruitment of seafarers. The MLC imposes duties and obligations on States Parties to the convention and agencies involved in recruitment and placement services may be subject to specific licensing requirements, but this is a matter for each State Party to consider when implementing the Convention.

Standard 2.2 Wages
It has been suggested that the MLC introduces an obligation on owners to maintain financial security for unpaid wages. As noted above in the context of insolvency this is incorrect. The MLC does not introduce a requirement on owners to provide financial security for the payment of wages. It does however introduce obligations on States Parties and in turn States will require owners to ensure seafarers are paid. This does not require owners to meet their obligation to pay wages through the provision of financial security

* Bahamas, Cayman Islands, Cyprus, Kiribati, Liberia, St. Kitts & Nevis, Marshall Islands, Malta, Switzerland, Tuvalu and the UK.

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