Some new MLC liabilities outside scope of standard P&I Cover

P&I Clubs have warned their members that some of the liabilities under the amendments to the Maritime Labour Convention (MLC) that come into force on January 18th next year do not come under standard P&I protection.

Some of the liabilities arising under the new MLC Certificates will fall within the scope of standard P&I cover for crew. Club Rules will normally cover compensation

for death or long term disability. Similarly, repatriation costs and wages following a shipwreck also form part of standard cover.

But other liabilities, such as repatriation costs and wages arising from the abandonment provisions set out in amended Standard 2.5.2 of the MLC, fall outside the scope of P&I cover.

Clubs are able to provide Certificates on the basis set out in the MLC Extension Clause which appears in Annex 3. This provides that the Club will pay claims advanced by seafarers which fall within the scope of the Regulations and Standards specified in the Certificates. The Clause also provides that, if such payments fall outside the scope of standard cover, Members will be obliged to reimburse the Club.

Claims which fall outside the scope of P&I cover will also fall outside of the scope of the International Group’s pooling and reinsurance arrangements. The Group has arranged additional reinsurance cover for liabilities arising under the MLC Extension Clause and falling outside the scope of cover.

Thye Group said that the reinsurance placement was “at an advanced stage” and would be at a level which is sufficient for all Members, with the possible exception of a small number of fleets with exceptionally high crew numbers.

The P&I Clubs noted that “MLC financial security requirements raise many challenges for shipowners, insurers, Flag States and Port States”.

Although there is some resemblance to the compulsory insurance system under IMO Conventions, there are also major differences.

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.

At the moment 79 States have ratified the Convention.