Statutory Alert: Amendments to MLC, 2006 on financial security – Entry into force

The 2014 amendments to the Maritime Labour Convention, 2006 will come into force on 18 January 2017. The changes relate to financial security and are as follows.
Standard A2.5.2 – Financial Security

This standard requires a financial security system to be provided to assist seafarers in the event of abandonment. The standard defines abandonment as:

1. when the ship owner fails to cover the cost of the seafarer’s repatriation;
2. or when the ship owner has left the seafarer without the necessary maintenance and support; and
3. when the ship owner has otherwise unilaterally severed their ties with the seafarer, including failure to pay contractual wages for a period of at least two months.

Ships will have to carry on board a certificate or other documentary evidence of financial security issued by the financial security provider. New Appendix A2-1 will detail the information required to be on the certificate or documentary evidence.
Standard A4.2.1 – Ship owner’s Liability

This standard sets out minimum requirements for a system of financial security that assures compensation in the event of a contractual claim (see the definition under Standard A4.2.2 below). Again, ships will be required to carry a certificate or other documentary evidence of financial security issued by the financial security provider.
Standard A4.2.2 – Treatment of Contractual Claims

This standard defines ‘contractual claim’ as “any claim which relates to death or long-term disability of seafarers due to an occupational injury, illness or hazard as set out in national law, the seafarers’ employment agreement or collective agreement.” The standard also requires that effective means are in place to deal with and settle contractual claims for compensation.
Appendices A4-1 and B4-1

Appendix A4-1 details the evidence of financial security that is required. Appendix B4-1 details a model Receipt and Release Form, referred to in new Guideline B.4.2.2. Where there is more than one financial security provider for repatriation or shipowner’s liability, documentary evidence from each provider shall be carried on board.
What the changes mean for the Declaration of Maritime Labour Compliance (DMLC)

Financial security for repatriation and financial security for ship owner’s liability are both areas that have to be inspected and approved when a ship is certified in accordance with Standard A5.1.3, paragraph 1. The DMLC Part I will need to be re-issued by the flag administration and the DMLC Part II will have to be updated by the ship owner. Flag administrations have yet to confirm the form of financial security that will be acceptable but it is likely that most administrations will accept the proposal by the International Group of P & I Clubs.