Maritime Labour Convention (MLC) Amendments

2018 Amendments to the Maritime Labour Convention 2006 (MLC) came into force on 26th December 2020.

MLC applies to seafarers working on board vessels whose flag sates have ratified the Convention or vessels that operate in a country that has ratified the Convention or alternatively may apply contractually, by virtue of MLC being incorporated into seafarers’ contracts of employment.  The Convention deals with conditions of employment of seafarers, their working and living conditions, health and safety and welfare in general. The Convention also places an obligation on shipowners to provide assistance and support with respect to the financial consequences of sickness, injury or death occurring during the seafarers' employment.

In the spirit of the Convention, the 2018 Amendments enhance the rights of seafarers by aiming to provide employment certainty and financial protection when seafarers are prevented from fulfilling their contractual duties whilst being held captive on or off the ship as a result of acts of piracy or armed robbery against ships.[1]

The amendment provides that;

1. Seafarers’ contracts will remain in effect while they are held captive. This is regardless of whether the seafarer's employment contract has expired or whether a party to the contract has given notice to suspend or terminate it. (Standard A2.1.7)
2. Seafarers’ wages and other entitlements under employment contracts, collective bargaining agreements or applicable national laws, will continue to be payable during the entire period of captivity and until the seafarer is released and duly repatriated or, in the event of death in captivity, until the date of death or the date of presumed death. (Standard A2.2.7)
3. Right to repatriation will not be lost even if not claimed within a reasonable time, in circumstances where the seafarers are being held captive. (Guideline B2.5.1.8)

Whilst these are welcome changes that give seafarers and their families some relief and protection at a very difficult time, the amendments raise interesting questions from a shipowners’ liability, financial exposure, and insurance coverage perspectives.

Continuing obligation to pay wages

Most seafarer employment agreements include express provisions for termination of employment for any reason by the shipowner subject to written notice or upon occurrence of certain events, such as sale, management change, lay-up or total loss of the vessel. 

The latest amendments to the MLC state that in case a seafarer is taken hostage by pirates or armed robbers, the shipowner will not be able to terminate the employment contract as long as captivity continues whether on or off the ship. This brings with it the obligation to pay full contractual wages, pension contributions and other benefits under the contract, including bonuses or additional wages for sailing into high war or piracy risk areas. A period of captivity can be days, months or sometimes years and in some cases seafarers may not be heard of for a very long time or at all. If it is believed that the seafarer might have died in captivity, it can be possible to obtain a certificate of presumed death from the relevant authority, however this is neither easy nor quick depending on the laws of the relevant jurisdiction.

Some of these costs associated with operating in high war or piracy risk areas, such as crew bonuses, can be contractually transferred to time charterers. However, where the charterparty comes to an end as a result of the vessel having been lost or where captivity continues beyond the charterparty duration, shipowners may face difficulty in receiving these funds from their charterers.

These continuing responsibilities implemented by the latest MLC amendment are by no means new. A similar clause exists in ITF Standard CBA 2015 requiring shipowners to continue paying full wages and other contractual entitlements until the seafarer’s release from captivity and ultimate repatriation, including an obligation on part of the shipowner to make “every effort to provide captured seafarers with extra protection, food, welfare, medical and other assistance, as necessary.”

P&I Insurance

P&I Clubs provide cover for third party liabilities arising from ship operations, including liabilities to seafarers on board the insured vessels, even if such liabilities arise from piracy or armed robbery. The two caveats are that, for P&I cover to respond, such liabilities must not be caused by terrorism and/or by the use of certain weapons of war.[2]

In case of piracy, where a seafarer is injured or killed in an attack, a shipowner’s contractual and legal liabilities to the crew, such as the duty to provide free medical assistance, repatriation and payment of death in service compensation, are protected under P&I cover.

Sick wages

Payment of sick wages is covered by the P&I Club during the legally transcribed periods while a seafarer is under medical care or recuperating following an illness or injury sustained during their employment.[3]

However, payment of wages during captivity of a seafarer on or off the ship as a result of acts of piracy or armed robbery does not fit comfortably within P&I cover, to the extent that these cannot be categorised as sick wages. On the other hand, following release from captivity, a seafarer needing medical assistance as a result of physical or psychological trauma sustained during or as a result of the attack is likely to receive sick wages during their recovery in line with the statutory limits, which may find cover under P&I Rules.

Shipwreck indemnity

MLC Regulation 2.6 provides for shipowners to pay seafarers compensation against unemployment resulting from loss or foundering of the vessel, for a maximum period of 2 months. Most International Group P&I Club Rules reflect this requirement by providing cover for compensation payable to the seafarers “for the loss of employment arising out of actual or constructive total loss of the vessel”, otherwise known as shipwreck indemnity.

Once a vessel is accepted by H&M or war risk underwriters as an actual or constructive total loss due to piracy, seafarers who have lost their jobs are entitled to compensation in line with the MLC or national laws. Cover remains available under P&I Club Rules for shipowners’ liability to pay such unemployment compensation. If, however, some seafarers were captured by pirates during the same attack that resulted in loss of the vessel, should they be considered still in employment if their contracts cannot be terminated with the result that Club cover will not respond to payment of unemployment compensation? This seems to be an illogical outcome, so we await the results of its application in practice.

Abandonment

P&I Clubs, under MLC Blue Cards, provide security for unpaid wages up to four months and repatriation costs and other entitlements of the seafarers of the entered vessels, if they are abandoned by their shipowner members. However, where such payments fall outside of Club cover, shipowner members are obligated to reimburse the Club.

Following an attack by pirates or armed robbers, if a shipowner fails to pay wages of captive crew for at least a period of two months, such failure may be deemed “abandonment” triggering the P&I security under the MLC Blue Cards. In this scenario, crew wages can be paid by P&I for a period up to four months, but these payments will be recoverable from the shipowner by the P&I Club.

Closing thoughts

Piracy continues to be a significant risk to vessels and seafarers in certain parts of the world. In the first month of 2021, 8 piracy and armed robbery incidents have been reported according to ICC’s  Live Piracy & Armed Robbery Report of 2021.[4]

Unfortunately one of these incidents resulted in death of one crew member and kidnap of 15 seafarers. There is little doubt that the latest amendments will bring seafarers a welcome relief in the knowledge that their families will not suffer significant hardship until such time that they are released and can return to their homes.
 

Footnotes

[1] Under the MLC “piracy” and “armed robbery” are defined as follows;

'Piracy' has been given "the meaning assigned to it by art 101 of the United Nations Convention on the Law of the Sea, 1982 which states “ Piracy consists of any of the following acts: (a) any illegal acts of violence or detention, or any act of depredation, committed for private ends by the crew or the passengers of a private ship or a private aircraft, and directed: (i) on the high seas, against another ship or aircraft, or against persons or property on board such ship or aircraft; (ii) against a ship, aircraft, persons or property in a place outside the jurisdiction of any State; (b) any act of voluntary participation in the operation of a ship or of an aircraft with

knowledge of facts making it a pirate ship or aircraft; (c) any act of inciting or of intentionally facilitating an act described in subparagraph (a) or (b)

“Armed robbery” against ships means any illegal act of violence or detention or any act of depredation, or threat thereof, other than an act of piracy, committed for private ends and directed against a ship or against persons or property on board such a ship, within a State’s internal waters, archipelagic waters and territorial sea, or any act of inciting or of intentionally facilitating an act described above.

[2] These are defined as, mines, torpedoes, bombs, rockets, shells and explosives and other similar weapons of war. If the attackers use rifles, AK47, RPG and similar light weapons, cover exclusion is not triggered.

[3] Under MLC A4.2.1(4) sick wages are payable for a minimum of 16 weeks from the day of injury of commencement of the sickness.

[4] www.icc-ccs.org/index.php/piracy-reporting-centre/live-piracy-report

For any questions regarding the contents of this Marine Client Advisor or for any other marine insurance enquiries please do get in touch. 

Howden Insurance Brokers is not a technical, commercial or legal adviser. Any commentary made in this document should not be construed as such, and we do not guarantee in any way the accuracy of the resources used or referenced in this document. In case of doubt, formal advice should be obtained that is directly relevant to your circumstances.