Most Read Contributor in Hong Kong, September 2016
Amendments to the Maritime Labour Convention designed to
address crew abandonment will shortly come into force.
Cases of vessel and crew abandonment are increasingly in the
headlines, as freight rates sink to levels that can fail to cover
shipowners' operating expenses.
Traditionally, the mortgagee bank would come to the crew's
relief, paying outstanding wages and arranging repatriation. This
was not so much altruism as recognition that the crew wages claim
already had priority over the mortgage, and the fact that a sale of
the vessel would not proceed with a striking crew on board who
refused to deliver up possession. However, this solution to crew
abandonment depended on there being a mortgagee willing to take
swift action and a local legal system with the rule of law which
enabled enforcement of the parties' rights. On occasion, the
mortgagee's ability to intervene could also be impeded by the
"automatic stay" resulting from a filing under Chapter 11
or similar bankruptcy protection laws.
To address the issue of abandonment of seafarers, amendments to
the Maritime Labour Convention (MLC) will enter into force in
January 2017. The amendments will be implemented in Hong Kong
through the Merchant Shipping (Seafarers) (Working and Living
Conditions) Regulation (L.N. 69 of 2016) (the
"Regulation"). Section 59 (1) of the Regulation provides
"(1) A financial security must be in force in respect
of a ship to ensure that any seafarer employed to work on board the
ship is provided with assistance when the seafarer is
Having adopted paragraph 9 of Standard A2.5.2 of the MLC
(s.59(2)(b)), the Regulation requires that the financial security,
which will be provided by the P&I Club, must be sufficient to
cover (i) outstanding wages and other entitlements due from the
shipowner to the seafarer, limited to four months; (ii) the cost of
repatriation; and (iii) the essential needs of the seafarer.
Standard A2.5.2 of the MLC paragraph 12 (adopted in the
Regulation by s.59(2)(b)) further provides that the insurer shall,
up to the amount it has paid in accordance with the applicable law,
"acquire by subrogation, assignment or otherwise, the rights
which the seafarer would have enjoyed".
In common law jurisdictions such as Hong Kong, it may be
necessary for the P&I Club to obtain the court's approval
of the payments and also the insurer's subrogation to the
crew's rights. This would ensure that the P&I Club will
receive the priority conferred by the crew's maritime lien.
In future shipping bankruptcies, it is likely that the P&I
Club will bring subrogated crew claims against the vessel and its
court sale proceeds, being the only remaining source of
reimbursement. Mortgagees and others interested in the proceeds may
need to verify the underlying crew claims to ensure that the new
arrangements are not the subject of abuse.
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This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
discussed herein. Please also read the JSM legal publications
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On 22 September 2016, the General Civil Aviation Authority of the UAE issued the new Civil Aviation Regulations Part IV – Foreign Operators Regulation. The FOR shall apply from 1 October 2016.
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