Further clarification on MLC financial security provisions

Having entered into force on 18 January 2017, financial security amendments to the Maritime Labour Convention, 2006 (MLC) established mandatory requirements for owners to have financial security in place to cover the abandonment of crew, as well as death or long-term disability due to occupational injury and hazard. 

The amendments require that certificates are carried on board any MLC-compliant vessel to confirm that financial security is in place to protect the crew. Upon implementation, it was agreed that the boards of all International Group P&I Clubs would provide the necessary certification.

In recent circulars issued by International Group P&I Clubs, it was clarified that, while some of the liabilities arising under the certificates would be covered by standard P&I cover (such as compensation for death or long-term disability), the liabilities for outstanding wages and repatriation of seafarers together with incidental costs and expenses, would fall outside of the cover. Should the club be required to meet those liabilities in the first instance under its certificate, however, members will be obliged to reimburse the club.

The Shipowners’ Club is one such P&I club issuing MLC certificates for vessels, including MLC-compliant yachts, and therefore providing financial security under Regulation 2.5.2, Standard A 2.5.2 and Regulation 4.2, Standard A 4.2.1 paragraph 1(b) of the MLC (as amended). “We will pay the agreed amount in the first instance, but any entities named on the Certificate of Insurance as Assureds for that vessel will be obliged to reimburse us, the Club, where those liabilities fall outside of Club cover,” explains Nicola Kingman, yacht underwriter at The Shipowners’ Club.

The latest circular clarifies that International Group P&I Clubs will require a signed application form to be completed before issuing the initial MLC certificates for that Assured and vessel, and those application forms make it clear that the person signing the form is giving an undertaking on behalf of all Assureds named on the policy to reimburse the club. “This means that any yacht managers, crew employers, joint owners etc., that may be named on the policy as an Assured will be obliged to reimburse the insurer for claims made under the above-mentioned regulations/standards where liabilities fall outside of Club cover,” concludes Kingman. 

With these signed MLC certificates, therefore, P&I clubs would have the power to demand reimbursement for crew abandonment from Co-Assureds, meaning that management companies and crew employers could be implicated should an owner get into financial difficulty. While this would likely be a decision that would not be taken lightly due to possible commercial ramifications for the P&I club, it may mean that such parties would be more careful to consider who they were going into business with in such situations.

As stated in previous coverage, however, the certificates will certainly make it more straightforward for crew working on MLC-compliant yachts to avoid chasing an elusive owner for compensation in cases of abandonment and instead deal with an insurance company, as exemplified in the recent Indian Empress case.

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