Media Coverage

Jon Waldron, partner and practice group leader in Blank Rome’s maritime group, was recently quoted in a Lloyd’s List article that discussed the MLC 2006 regulations. Full article below:

Industry sources say that support from class societies, as recognised organisations, has been mixed. 

Shipping pleads for clearer rules of engagement.

Confusion over the lines of responsibility in the new MLC 2006 could disrupt its implementation as shipmanagers call for legal clarity to define the term shipowner.

Under the MLC, the shipowner is described as “the owner of the ship or another organisation or person, such as the manager, agent or bareboat charterer, who has assumed the responsibility for the operation of the ship from the owner and who, on assuming such responsibility, has agreed to take over the duties and responsibilities imposed on shipowners in accordance with this convention, regardless of whether any other organisation or persons fulfil certain of the duties or responsibilities on behalf of the shipowner”.

This definition has caused confusion, leading both shipowners and managers to seek to clarify their roles.

Guidance from the International Association of Classification Societies states that the MLC shipowner should be the entity that holds the International Safety Management Document of Compliance.

If the vessel is managed in-house, things are simple: the shipowner will be the ISM DoC holder and therefore the shipowner under MLC.

However, if the shipowner employs a third-party manager, in most cases the shipmanager will be the ISM DoC holder, which causes problems as certain shipmanagers are unwilling to be identified as the MLC shipowner.

Shipmanagers’ Argument:

“We fail to understand how anybody can consider how a service provider, such as a third-party manager, can come under the definition of MLC shipowner. There is no ambiguity in the definition,” said V.Ships group director Matt Dunlop.

The International Labour Organisation’s definition makes it clear that the owner of the vessel cannot escape from his or her obligations under MLC, he said.

Mr Dunlop said IACS’ guidance that the shipowner under MLC should be the entity that holds the ISM DoC had only added to the confusion.

“This is clearly incorrect under the definition and imposes great financial responsibilities on the third-party manager that the ILO originally intended for the true shipowner,” he said.

Support from class societies, as recognised organisations, has been mixed depending on the department in question, Mr Dunlop said.

Third-party managers have many flags within their fleets. V.Ships has 32 flags, 18 have ratified the convention, and all have different interpretations.

Shipowner View:

Inconsistency in interpretation plagues shipowners. Some flag states insist that the DoC holder is the shipowner; others indicate that the DoC holder and the registered shipowner might be jointly named on the certificate, International Maritime Employers’ Council chief executive Giles Heimann said.

“These challenges are primarily caused by the requirements of the ISM Code vis-à-vis those of the MLC as there are different roles and responsibilities encompassed by the two conventions,” he said.

“Ultimately the interpretation and definition of shipowner will be down to individual flag-state legislation; however, this interpretation does vary.”

Class Societies:

Class societies have found themselves playing piggy in the middle, as companies request their service but they act on behalf of the flag states.

This worries the class societies on an operational level and they have generally found the ILO’s use of the term shipowner in relation to MLC to be “unhelpful”.

MLC stipulates that the shipowner must be a single entity that has overall responsibility for seafarers’ living and working conditions.

In practice, although some responsibility remains with the shipowner, much of it falls to the shipmanager or operator, but it is not always clear who will sign the Declaration of Maritime Labour Compliance.

There are concerns that the practice of one party signing the Maritime Labour Certificate and the other signing the DMLC will lead to real problems in terms of accountability. Although this practice may be accepted by the flag state in question, there is no way to know how port state control will react.

There could be practical consequences of having two names on the documents, which goes against the ILO’s desire to have a single entity responsible for seafarer welfare. It also makes it difficult to know who recognised organisations should contact in the event of a problem.

Under MLC, it is possible for either the conventional shipowner or the shipmanager to be named as the shipowner and there is no “wrong” or “right” answer, Bureau Veritas maritime labour department manager Boris Gruden said.

This part of the definition, “who has assumed the responsibility for the operation of the ship from the owner”, is the part of the definition of the ISM Company DoC holder, he said.

For that reason it may be assumed that the MLC shipowner and the ISM company are the same entity, Mr Gruden said.

However, if the DoC holder is declared the MLC shipowner, an agreement should be made with the owner of the ship which defines responsibility of both parties, he said.

As some parts of the MLC requirements are also covered by the ISM system established by the DoC holder, the easiest way to create an MLC related system is to upgrade the ISM system with missing MLC requirements.
This is possible in cases where the DoC holder is declared as MLC shipowner, according to Mr Gruden.

On the other hand, the last part of the ILO’s definition: “regardless of whether any other organisation or persons fulfil certain of the duties or responsibilities on behalf of the shipowner” gives provision to MLC shipowner to delegate certain part of duties to other organisation, he pointed out.

“The owner of the vessel, if declared as the MLC shipowner, may delegate part of the responsibilities to the ISM DoC holder but remain generally responsible for this part also,” he said.

“As the MLC related system has to be created and established by the MLC shipowner, in this case registered owner or BB charterer, it needs to have the organisation and the structure which will fulfil all requirements of MLC, especially the part which is not covered by management agreement.”

Mr Gruden acknowledged that some flags have specified that the ISM company must be the MLC shipowner and that others have defined the MLC shipowner under the terms of the convention.

“This also proves in some way that both understandings may be correct and that the ultimate entity to be asked and who shall define this requirement is the flag,” he said.

Legal Opinion:

Blank Rome partner Jonathan Waldron said MLC, as an international legal instrument, does not apply directly to shipowners, ships or seafarers.

Instead, it relies on implementation by countries through their national laws or other measures. After which the national law or other measures would apply to shipowners.

“As such, the definition of ‘shipowner’ may be further clarified by the member state,” Mr Waldron said.

“However, in my view, as confirmed by ILO guidance, it would appear that the intention of the MLC is to have one entity assume the responsibility of shipowner regarding seafarer living and working conditions. This entity can be the shipowner itself or the shipmanager, but not both.”

Clyde & Co partner Heidi Watson said the definition of a shipowner under MLC has caused huge headaches and it has been one of the key issues since drafting.

“Some managers have been reluctant to sign the DMLC. It is true to say that the complex relationship between owner, manager and crew doesn’t sit well with one person taking overall responsibility and this is not assisted by the confusion over who signs the certificate,” she said.

Ms Watson said the problem had been exacerbated because various flag states are taking different approaches.

Some state the MLC shipowner must be the owner of the vessel, others such as Panama, Liberia and Cyprus, state that it can be the manager but with a power of attorney from the owner. Others have suggested that joint names should be acceptable.

Commercially, the answer is to agree clear contractual arrangements that detail which party will bear the costs of an MLC breach that may arise from delays caused by non-compliance.

“MLC 2006: Who is the Shipowner and Why Does it Matter? “by Liz McMahon first appeared in the August 22, 2013 edition of Lloyd’s List . To learn more about Lloyd’s List, please visit www.lloydslist.com.