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MLC introduces financial security ‘Saftey Net’ for crew

Ever been left high and dry without pay, repatriation or compensation whist working on a super yacht? Well, these changes will help you to avoid chasing a yacht owner for what you are owed. Instead, you can now deal with an insurance company directly. No longer will you be on your own thinking that you don’t stand a chance against the big boss and here’s why...Since the 18th January 2017 a new enforcement on crew pay rights have been brought into action. Here’s what you need to know to give you the power to get paid!

In a nutshell

As of January the 18th the 2014 MLC amendments come into play. These changes seek to provide better financial security and look to protect crew who are abandoned. The changes will also help families in circumstances where a crew member dies or gains a long-term disability through their work and occupation. The good news for crew is that these new requirements have been made mandatory and state that owners have a financial responsibility to the crew that work for them. 

“These requirements guarantee that seafarers are not abandoned, alone and legally adrift for months on end, without pay, adequate food and water and away home,” said Cleopatra Doumbia-Henry, director of the ILO Labour Standards Department, upon their announcement. “They also clearly define the role of flag states that register ships in ensuring that adequate security exists to mitigate against the financial, legal and human cost of abandonment, and death and long-term disability due to occupational hazards.”

Who’s in charge of the changes?

In 1998 a cross group was established between the ILO and International Maritime Organisation (IMO). This group has been working to improve the rights of crew and are the ones responsible for the 2014 amendments. Many believe these changes will strengthen the 2006 MLC.  

The Paperwork

The new rules mean that any vessel covered by 2006 MLC will have to carry evidence to show that the vessel has policies in place that provides financial security for its crew. This will be in the form of certificates, insurance policies and documents. Failure to show these documents to authorities could lead to detention, and we are not talking about the after school kind!

One very important change is that vessels will now be required to have a financial system in place that assures there are funds available in the event of a crew member making a claim against said vessel. This means that for vessels/yachts that already have their Declaration of Maritime Labour Compliance (DMLC) they will need it to be re issued by the flag state to show they now comply to the new amendments.  

What else do yacht owners need to know?

Bargate Murray's Managing Partner, Adam Ramlugon says “It should simply be a matter of acquiring a compliant insurance product ahead of the 18 January 2017 deadline in order for yacht owners to comply”. Ramlugon continues, “The rules will now require owners to display ‘documentary evidence’ on board their yachts to confirm that appropriate financial security is in place for their crew,” he adds. “The format of this document is a matter that we expect to be agreed between the Flag State and the insurance market"

Abandoned Crew

“At the moment, if a seafarer is ‘abandoned’, the yacht owner is in default of its obligations under the MLC and liable to sanctions under the laws of their yacht’s Flag State. Owners of Cayman-flagged yachts, for example, are liable to a significant fine. The trouble is, however, that this particular sanction, or the risk of it to the owner, does not actually do very much in terms of getting the seafarer home.”

To be exact and go into detail a little further, the new changes (Standard A2.3.2) state that crew should be protected financially against abandonment. The standard defines abandonment as follows: 

1. “When the owner fails to cover the cost of a crewmember’s repatriation.”

2. “When the owner has left the crewmember without the necessary maintenance and support.”

3. “When the owner has otherwise unilaterally severed ties with the crewmember, including failure to pay contractual wages for a period of at least two months.”

The main scope of the changes is that there has to be a system in place that automatically starts in the event of a vessel owner negating their crew obligations. If for example a vessel owner refused to repatriate a crew member this system would ensure the crew members gets back home.  

Help is at hand

The new amendments require a third party to act as the financial security net.Under the rules, this ‘safety net’ could be provided in a number of ways, but it is highly likely that this is a matter that will be dealt with by way of insurance,” continues Ramlugon. “Discussions are currently underway between leading Flag States and the major P&I insurers, including the International Group of P&I Clubs, to work out how to best go about this. Other underwriters outside of that group are also, we understand, in separate discussions.”

Possible Issues

As predicted by many industry specialists these new amendments will cause some issues and raise certain problems when implementing them. Nicola Kingman from The Hipowner’s club said the following: “Although there is some resemblance to the compulsory insurance system under IMO Conventions, there are considerable differences. For example, MLC does not stipulate a prescribed wording for the security. In addition, individual States have a degree of flexibility as to how they implement and enforce MLC from both a Flag State and a Port State perspective. The International Group has been instrumental in establishing an informal Correspondence Group of 18 states who have been consulted and given the opportunity to comment on the proposed steps taken by the International Group. The aim has been to provide a system for security that meets with the requirements of MLC and is accepted in all states where MLC is in force.”

To Conclude

Many say this amendment is aimed at the commercial shipping industry where there is more probability of a crewmember being abandoned or shipping owners negating their obligations. This said, we are seeing more and more cases where crew are finding themselves unpaid, abandoned in a foreign port or not compensated for injury in the work place. We hope that these new changes will offer an overdue level of protection and assurance to crew in these situations.

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