MLC 2006: Guidance on the financial security requirements

Recent press articles and the imminent entry into force of the Maritime Labour Convention have brought the Convention and its requirements on shipowners into focus and in particular the financial security requirements established in the convention.
By way of clarification and for owners guidance the financial security requirements which will become effective in August 2013 are set out below.
Standard A2.5 - Repatriation
This Standard and accompanying Guidelines provide that seafarers are repatriated at no cost to themselves and shipowners shall provide financial security for the liabilities contained in the Standard.  All clubs considered the provisions on repatriation in case of insolvency.  The Japan P& I 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 - Shipowners' 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, 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 and with the introduction of that policy decision and the rule changes introduced at the entry into force of the MLC 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 licencing 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 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.
Other matters
The International Group of P&I Clubs has contacted each of the 38 States Parties to ask whether their administrations will accept a Certificate of Entry as evidence of the owners financial security (in respect of Standards 2.5 and 4.2).  To date such confirmation has been received from Bahamas, Cayman Islands, Cyprus, Kiribati, Liberia, St Kitts & Nevis, Marshall Islands, Malta, Switzerland Tuvalu and the UK.  Some States have not yet developed their implementing legislation and others have not yet considered the issue.  Engagement with the remaining States on his issue is continuing.  To date no State has said they will refuse a Certificate of Entry.
Source: Japan P&I Club