Financial Security in Cases of Abandonment: A Four-Month Limit for Unpaid Seafarers’ Wages?

Introduction

The International Labour Conference (ILC) at its 103^rd session approved the first group of amendments to the Maritime Labour Convention (MLC), 2006. The amendments were agreed by the Special Tripartite Committee at its first meeting at the International Labour Organisation (ILO) in Geneva in April 2014 and entered into force in January 2017. The amendments concerned Regulations 2.5 and 4.2 which deal with the right to repatriation and the shipowners’ liability for sickness, injury or death of seafarers occurring in connection with their employment. In brief, the amendments inter alia set out requirements for shipowners to provide financial security to provide support for abandoned seafarers and to assure compensation in the event of death or long-term disability of seafarers due to occupational injury, illness or hazard. While an exhaustive overview of such amendments is beyond the scope of this blogpost, this blogpost aims to shed light into the operation of Standard A 2.5.2. of the MLC, 2006, as amended, paragraph 9 of which stipulates that the coverage provided by the financial security system when seafarers are abandoned by shipowners shall be limited to four months outstanding wages and four months of outstanding entitlements.

Issues

Let’s take a hypothetical case of seafarers being abandoned for 10 months. Seafarers contact the P&I Club for assistance, providing all the necessary documentation to substantiate their claim. The P&I Club’s claims handlers acknowledge receipt of the claim, check the validity of the financial security system, and investigate whether the shipowners have in fact failed to pay wages to seafarers. If the P&I is satisfied that the financial security system is valid and that the seafarers’ wages are outstanding, the P&I Club will pay four months of outstanding wages and take immediate action to repatriate the affected seafarers. Now, assuming that all the outstanding wages are of the same rate, no further questions arise. But what if the outstanding wages are not all of the same rate? If, for example, after the first four months, there has been a pay rise under the seafarers’ employment agreement.

In such cases, a further question can potentially arise as to how the limit of four months outstanding wages will be calculated. Should it be calculated based on the first four outstanding wages? Or is there a right to pick and choose which of such outstanding wages to form the basis for the calculation of such limit? If the latter is true, seafarers will be keen on calculating such limit based on the higher rate of such outstanding wages. On the other hand, the P&I Club will attempt to calculate such limit based on the lower rate of such outstanding wages. In the next section, this blogpost will explain what the relevant provisions of the MLC, 2006, as amended, provide.

The law

The relevant provision is Standard A 2.5.2 of the MLC, 2006, as amended. Paragraph 9 of this Standard states that:

‘Having regard to Regulations 2.2 and 2.5, assistance provided by the financial security system shall be sufficient to cover the following: (a) outstanding wages and other entitlements due from the shipowner to the seafarer under their employment agreement, the relevant collective bargaining agreement or the national law of the flag State, limited to four months of any such outstanding wages and four months of any such outstanding entitlements; […].’

If one looks at the wording of this provision, it can easily be ascertained that the actual text of the Convention does not give an answer to this question. Certainly, the use of the words ‘limited to four months of any such outstanding wages and four months of any such outstanding entitlements’ gives ample of space for arguments suggesting that the four months limit can be calculated by reference to any such outstanding wages, and not necessarily the first four outstanding wages.

However, it is not clear whether the specific wording was used with such flexibility in mind. The draft text of the amendments of Standard A 2.5.2. of the MLC, 2006, was based on the principles agreed at the Ninth Session (2-6 May 2009) of the Joint IMO/ILO Working Group on Liability and Compensation regarding Claims for Death, Personal Injury and Abandonment of Seafarers. During the negotiations, it was considered whether links should be drawn between paragraphs 2 and 9 of this Standard. Although this discussion took place in respect of the duration of the limitation period (it may be worth noting here that, initially, a limit of three months wages was suggested), it can still be instructive. In this respect, it was explained that the purpose of paragraph 2 is to identify when abandonment takes place, whereas paragraph 9 defines the scope of financial security to be provided in case of abandonment. Thus, it was concluded, it is necessary to allow for a time lapse between the recognition of the abandonment situation and the limitation of financial security.

Against this backdrop, it can be argued that the purpose of the said limit is to ensure that seafarers’ wages are fully paid up for the first four months since their abandonment. Bearing in mind that it is the seafarers who have to initiate the process with the P&I Clubs, it may also be worth noting here that such interpretation can assist with avoiding cases, although rare, where seafarers intentionally allow wages to continue to accrue.

Conclusion

In practice, it is highly unlikely that seafarers are owed only four months’ wages when they are abandoned by their shipowners. Thus, the possibility of different rates for wages or other entitlements cannot be precluded. Given the uncertainty of the wording of Standard A 2.5.2. paragraph 9 (a) of the MLC, 2006, amended, any conflicting arguments can easily be avoided if the purpose of this provision is clarified in future amendments.