Are you a 'shipowner'?

The crew industry is becoming increasingly regulated, and the Maritime Labour Convention, 2006 (MLC) is one notable area that not only provides today’s superyacht crew with more rights, but cements owners on the spectrum of liability. With a full understanding of these regulations – and owners who are already running their yachts professionally and treating their crew fairly – there is no need for concern. However, since the convention’s August implementation, one particular facet of the Convention has been causing particular problems and should be of special interest to owners.

The term ‘shipowner’ is referred to repeatedly in the Convention, and is the party to which the yacht is, in most cases, liable. Clear definition in this area is paramount, but has caused significant confusion since implementation just over three months ago.

“There is a distinction to be made between the ‘owner’ on the one hand and the ‘shipowner’ as defined in the MLC on the other,” explains Nick Wilcox, senior associate at international law firm Ince & Co. “The former will be the registered owner of the yacht, whereas the latter could well be someone different, such as a yacht management company, if it meets the MLC definition. It is the ‘shipowner’ who has the primary burden of MLC compliance and who, if there are deficiencies, has to rectify them. Depending on what the yacht management contract says, the registered owner may also be liable to the yacht manager in some respects if the yacht is not MLC compliant.”

However, the source of the problem lies in the actual definition of ‘shipowner’ in the convention, one which many parties can adopt within its outlined remit. “The problem is that you may have a number of parties involved in the operation and management of the yacht who believe that they meet the MLC definition to varying degrees,” explains Albert Levy, Ince & Co partner. “For example, a registered owner, a yacht management company, a company providing safety management or a crewing company.”

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In many cases, superyacht owners will register their vessel witj another party, and under these circumstances, Wilcox explains: “If the ‘shipowner’ is someone other than the registered owner, then the ‘shipowner’ has the principle responsibility for compliance under the MLC and is likely to be the party that must resolve deficiencies with the yacht to have a detention lifted. The detention may also have financial consequences for the registered owner, since use of the yacht is being prevented. Who bears the ultimate financial consequences of a detention will depend on what the agreement that is in place between the registered owner and the ‘shipowner’, for example a yacht management agreement, says.”

This is one area where making the assumption that someone else is the defined ‘shipowner’ is dangerous, and negotiations and discussions as to who the responsibility falls with are pertinent. “Our view is that he MLC definition allows for some flexibility, and it is up to the parties to determine between them which is the ‘shipowner’. However, if responsibilities for compliance are in reality shared, the ‘shipowner’ may also want to negotiate contractual indemnities to protect its position,” concluded Levy.

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