YACHTING NEWS

THREE MONTHS ON...IS THE MLC 2006 HELPING OR HINDERING SMOOTHER YACHT OWNERSHIP?

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By far one of the most important changes to the business of yachting and the way in which it functions was the long-awaited introduction this year of the Maritime Labour Convention (MLC) 2006 on the 20th August.

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Now firmly established as the Fourth Pillar of international maritime law, the MLC embodies "all up-to-date standards of existing international maritime labour Conventions and Recommendations, as well as the fundamental principles to be found in other international labour Conventions" being the SOLAS, STCW and MARPOL. The MLC applies to all commercial yachts either registered in or visiting a country that has ratified the Treaty.
 
Covering everything from minimum requirements for seafarers to work, conditions of employment; accommodation, recreational facilities, food and catering; health protection, medical care, welfare and social security protection; and compliance and enforcement, the MLC 2006 now brings the world of yachting firmly into line with the codes, practices and procedures long since adopted in shipping.
 
So three months on, we ask YPI Head of Yacht Management, Frédéric Laporte, if the MLC is actually achieving all its aims in properly protecting owners and crew or if it is merely resulting in added paperwork, more cost and little change on the ground. 
 
 
 
“Let me start by saying that irrespective of any extra workload or costs, anything that results in there being a more disciplined, thorough and clear approach to the business of running a yacht is a good thing,” says Frédéric. “The MLC is unequivocally achieving this. And in yachting today, discipline and attention to detail are tantamount to running a yacht effectively and smoothly.
 
“Of course much of what is now in the MLC has been in yachting for quite some time, it is now simply formalising everything. However it has pushed all yacht managers and owners to standardise and re-draft work contracts for crew as well as re-structuring or re-negotiating employee insurance policies with the best possible premiums and more comprehensive coverage.
 
“It was difficult at first to find products that matched all the requirements of the MLC with regards to Protection and Indemnity insurance (P&I) cover. It was made even trickier in that many of the requirements were still to be ironed out just weeks ahead of the implementation. It took a lot of exploration and liaising with insurance brokers but we eventually managed to have the underwriters extend the necessary coverage and I am pleased to say for the most part we were able to do this within the existing premiums resulting in no extra cost to owners.  
 
“It wasn’t quite the same for Medical Insurance. With the introduction of the MLC there is a move away from ‘no-name’ policies to ‘named’ policies linked to employee contracts. This has, as you would expect, resulted in a significant increase in administration. Crew change all the time and new contracts and coverage need to be dealt with in each case. That has brought the average crew medical coverage up to between EUR 1,000-2,000 per crew member and that, unfortunately is an extra cost for owners.
 
“With MLC requiring increased medical and general employee protection overall, the issue of human resources is now paramount in yachting. In many ways it has had to become a new and clearly defined role that management companies have needed to take on board. Many owners have now either set up companies or work with independent employment companies to specifically handle crew employment issues such as contracts, background checks, payroll, mediation and so forth. This helps to ensure the two very different roles of operating a yacht and managing crew are kept apart. It allows owners to put some proper professional human resources into place introducing an important separation between the crew member and the vessel in the event of any disputes as well as occasionally offering some useful tax and social charge benefits.
 

 
 
 
 
 
 
“With regards to contract formalities, all crew must have contracts and be covered by the P&I, that includes day workers brought on board even at the very last minute. Of course that increases the volume of paperwork, and as an employer a background check needs to be conducted on every employee irrespective of whether they are on the yacht for a few hours or a whole season. Passports, proof of address, medical certificates and a host of other items are requested to show the owner has taken every reasonable step to properly employ legal and qualified crew in a clean and transparent way, thus avoiding any possible implications of money laundering or tax evasion. Again, this brings with it a significant amount of extra work for my team, but it is no different to the normal requirements when working ashore. And frankly, why should it be? All these steps are important as we start to clean up so many aspects of the business of yachting.
 
“There are no two ways about it…the MLC does place significantly more constraints on owners when it comes to crew and the operation of their yachts. Though it could be argued that it is simply bringing yachting into line with employment laws and procedures for any business organisation onshore. The added responsibility doesn’t just lie with owners either – crew have a significant responsibility now to ensure they are properly registered for tax and social security somewhere in the world. We are also adamant that crew fulfil their side of the contract when it comes to giving proper notice periods. However the reality can sometimes make the ideal difficult to follow. One need only consider the all-too-common scenario of the 20-year old crew member who has found a job on another yacht that starts in two weeks’ time!
 

The MLC and Port State Control Inspections…

“There have already been a number of yacht detentions for MLC as a result of Port State Control Inspections this year. Inspectors have no concern for any commercial implications of a detention and will just as readily detain a yacht even if it is in the middle of a charter. That frequently quoted example of a crew member yawning being the only justification required for an inspector to demand to see his time sheets and working hours is very real and can result in uncovering breaches of MLC.
 
“I must say however that this year I have a few concerns regarding the approach some officers have been taking to inspections. We had one officer claiming he had been denied access to a yacht when in reality he came when the vessel was half-way through some major repairs in the shipyard. The yacht had been successfully surveyed by Class just two days before and we recommended he come back when it was in a more orderly state and frankly, a lot safer for him. Of course, it is the end goals that are important and any personal disputes such as I describe can be properly dealt with by contacting the flag directly.
 
 
“Another consequence of the MLC is the increased role quality, properly staffed  management companies are playing in helping owners achieve more effective, technically proficient and smarter operating yachts. Assuming an owner doesn’t want to be bitten unnecessarily by the tax man or the  Port State Authorities, or get hit with a large and unexpected maintenance bill, the days of the captain or ‘one-man’-management company are over. 
 
“Being able to properly deal with the full array of legal, fiscal, procedural and technical implications of owning and operating a multi-million dollar vessel demands a full and qualified team of professionals. The consequences of getting even the smallest aspects wrong are significant and the workload doesn’t suddenly disappear when one of the team are off for whatever reason. It is a lot of intensive work and it has meant companies like YPI having to bring in more experienced shipping professionals, marine accountants, engineering and legal expertise to bolster our teams. But then again, that’s the business we are in today. When it is done correctly and efficiently, it means owners and crew can spend less time worrying about possible negative outcomes and more time doing what they enjoy…working and getting pleasure from the yacht.”
 
This interview is based on a more in-depth piece conducted by the Superyacht Report which will appear in the Superyacht Report Annual Review early 2014.
 
 
For more information please contact Frédéric Laporte on:
 
Tel: +377 99 99 97 97 or + 00 33 (0) 646 273 085