The shaky fourth pillar: Reneging on the MLC

One of the bedrock tenets of capitalism is that the capitalist investor bears the financial risk of the enterprise, and that workers’ wages are never on the line. This is only fair; after all, the capitalist does not share windfall profits he makes in good times with his workers, so why should labour share his losses when times are bad?

The Maritime Labour Convention- which, I have said before, will fail its stated intentions, since a piece of paper will not change attitude- was, amongst other things, supposed to formalise that capitalist tenet. It was going to ensure that seafarers’ unpaid salaries were protected in the event of financial default by a ship’s owners. Seacurus had even rolled out an insurance policy recently - CrewSEACURE- that covered wages, repatriation, medical and personal accident liabilities if owners defaulted.

In a singular gesture of bad faith, it now appears that shipowners and their P&I Clubs want to reinterpret the MLC regulations to wriggle out of their basic responsibility. They say that, in the event of an owner abandoning the crew, crew repatriation is covered under the MLC but wages are not.

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In short- owners need not spend money buying insurance or making provisions for financial security for crew wages, since those poor suckers are going to be on their own for ‘several years’.

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The UK P&I Club claims to insure 'over 200 million tonnes from more than fifty countries across the globe’. This is what the Club says, in a ‘clarification’ to its members:

“This Standard (they mean MLC and its guidelines) does not include a provision on outstanding unpaid wages following abandonment. Liability for unpaid wages following abandonment is a feature of the principles agreed in the International Labour Organisation (ILO) in 2009. These principles are not applicable at this stage and there is no requirement in the MLC 2006 to provide financial security by way of insurance cover for unpaid wages.”

They further claim, attempting to snidely pass the buck, “It has been suggested that that the MLC introduces an obligation on owners to maintain financial security for unpaid wages. As noted above in the context of insolvency this is incorrect. The MLC does not introduce a requirement on owners to provide financial security for the payment of wages. It does, however, introduce obligations on States Parties and in turn States will require owners to ensure seafarers are paid. This does not require owners to meet their obligation to pay wages through the provision of financial security”. 

Apologists for shipowners will undoubtedly claim that it is the provision of financial security that is a problem for cash strapped owners, many of whom have never- and have no intention of- defaulting on wages. They will add, no doubt, that P&I Clubs are in the business of addressing the collective risk their members are exposed to, and so obviously do not want to accept liability if they can wriggle out by claiming that none exists.

As the UK P&I Club happily claims in the same clarification, (after dismissing the MLC and saying that wages come under ILO rules instead): “The ILO principles (on unpaid wages, they mean) are subject to further discussion and negotiation and to take this forward ILO has scheduled a meeting for April 2014. It will then take several years for the principles to be considered in ILO, finalised and implemented in MLC Member States” (Italics mine).

In short- owners need not spend money buying insurance or making provisions for financial security for crew wages, since those poor suckers are going to be on their own for ‘several years’. 

To be honest, I feel for the shipowner of today; this is no time to look forward to additional high costs of compliance, whether it is in connection with the MLC, ballast water or environmental regulation. There is simply no money out there. But my point is that the MLC, the much overhyped Fourth Pillar of the maritime regulatory regime, does not subject shipowners to any additional obligation as regards crew wages. That obligation already exists- it goes way back to the birth of capitalism. The responsibility to pay crew their wages is a pillar of capitalism, and paying crew their wages, no matter what, has been a legal- and moral- duty forever. 

The formalisation- and the costs involved- of this basic responsibility are now being objected to. This absence of good faith underlines the propensity and ability of shipowners to disregard the much hyped ‘human element’ completely, and will be the undoing of shipping. For, if the MLC is today sought to be reinterpreted to dilute or negate the fundamental duty of paying wages, what are the odds that the other, lesser, elements of the MLC that hit owners’ pockets- pertaining to working conditions, for example, or fatigue- will be allowed to succeed tomorrow? 

I suspect that the shaking of this fourth pillar of maritime regulation will become a regular affair, as the industry seeks to dilute the MLC’s scope and short change the seafarer wherever possible. The problem is that, when pillars- whether of capitalism or maritime regulation- become shaky, they eventually collapse and bring down the entire house on one’ head. If you don’t believe me, ask Samson or the Philistines.

Reflecting morality

Occurs to me that I may have been wrong all this time, blaming the STCW conventions alone for plummeting seafarer standards and the mess that maritime training is in today. For, although each STCW amendment seems to have done nothing except widen and deepen the fraud that is perpetrated on seamen in the name of training, the law may not be the only ass in the room.  

Occurs to me that western countries- and a few others- have implemented the same STCW conventions without the associated corruption that we have come to take for granted in places like India. It is well known that many countries do not mandate unnecessary (and worthless) STCW courses for seamen. Even the euphemistically named ‘upgradation’ courses are deemed superfluous. So what is unique about India?

I think it is not a coincidence that the rot in Indian shipping- certainly in all aspects of training and the manning of ships, domestic or foreign- accelerated in the mid-nineties, around the same time as ‘economic liberalisation’ was forced on the country.( That the STCW conventions were amended around the same time was unhappy coincidence). As we now acknowledge, that liberalisation heralded, on a structure already weakened by decades of corruption, a new form of rottenness- crony capitalism. It also unleashed a depth and width of corruption never seen before in India, to an extent that today, twenty years later, a leader of the Indian opposition calls the present Indian government a ‘cash and carry’ one. 

It may not help to know this, but I think that the same thing that happened to the country happened (obviously, do I hear you say?) to its shipping establishment. I think that all participants there reflect today the collapse of ethics and morality in the wider Indian society. Some of these entities were corrupt (or corrupt enough, anyway) to begin with; the winds of the phony ‘liberalisation’ seem to have given them a kind of carte blanche to take their corruption to new, dizzying levels. The maritime training establishment has been just one of the many clear beneficiaries of this collapse. 

(Playing devil’s advocate for a moment: To those of you who are ready to buy my explanation as an excuse for the state of the Indian training and body shopping apparatus today, one question, please: Why has morality and ethics in shipping degenerated to an extent not seen in most other private industries in India?)

The STCW conventions (and others too, I bet. Watch the MLC after August) have always had just one major effect in India. Each amendment gives regulators and MET establishments another stick to beat the seafarer with. It helps little that the purpose of the exercise is not the beating; it is the moolah that is arranged to be made. The seaman sits through useless courses time and again, on his own time and paying with his own money that has been earned through blood, sweat and tears. If Pre-Sea, he is exhorted to show, now and when aboard, a level of professionalism and integrity that he does not see in the rest of the industry, ever. He pays a couple of hundred thousand Rupees for his first job or for an on-board training berth. Some of the people taking this money are ex-Masters now sitting ashore. Some of the middlemen are sitting in maritime training establishments; other touts abound in dusty streets across the country. 

We hear often- mainly and obviously, from politicians themselves- that a society gets the governance it deserves. Banal or not, that comment is true across the board. Perhaps a country also gets the kind of shipping- and the kind of seamen- it deserves.

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Paper chase

The International Maritime Organisation is seeking public input on ways to ease the administrative burden across the industry. IMO Secretary-General Koji Sekimizu calls this ‘wasted paperwork;’ I call it bullcrap in spades. During the next six months, the IMO will seek inputs from all stakeholders- including through their website, after which ‘a steering group established by the IMO Council will analyse the responses to identify those administrative requirements that are perceived as burdens, and will make recommendations to the Council as to how any such burdens should be addressed’, the organisation says.

It is not just Masters and crews that are affected by all this, the IMO is quick to point out, but also owners, governments, administrations, port authorities and a wide spectrum of interested parties.

Apart from snidely wondering how much wasted paperwork the IMO’s exercise to reduce paperwork will generate, I feel that the move, long overdue as it is, is being made by the wrong organisation. The IMO legislates, and, although it can perhaps reduce the nitty-gritty paper requirements of its legislations a fair bit (or do what I would like to see- throw out useless legislation altogether, perhaps starting with the ISPS code), the real problem here lies in shipowners’ and shipmanagers’ offices. It will take more than the IMO to address that.

I am not too concerned with reduction of paperwork in shore offices of any kind; they can and do hire more people and they never suffer the kind of fatigue seamen do at sea as a direct result of paperwork overload. I therefore will only look at shipboard paperwork here.

A driving force in the shipmanagement business is the manager’s need to have his backside covered at all times and preferably in triplicate. To do this successfully, the shipmanager demands from the ship reams of checklists, reports, emails, letters, photographs and declarations that all is hunky dory, or, if it is not, ‘appropriate’ action is being taken. Appropriate implies, here, that the managers do not end up with egg on their faces; solving the problem is secondary. The IMO can do very little unless this mindset changes. Incidentally, Indian managers are amongst the worst offenders here- whoever said that the British invented bureaucracy but the Indians perfected it was spot on.

There needs to be one manager level person- preferably a Superintendent- tasked in all shipowning or shipmanagement companies, whose responsibility it should be to examine management and safety systems and reduce, mercilessly, unnecessary or duplicated paperwork. He or she should, amongst other things:

•  First of all, realise that the organisation’s love for paper is putting ships at risk because it is the last nail in the coffin for fatigued and overworked crews.
•  Secondly, realise that the main purpose of the organisation is not its administration.
•  Dispense with all those monthly, quarterly, half yearly and yearly reports that managers are so fond of- and, as one admitted candidly to me, never actually read.
•  Payroll should be moved ashore, where it belongs. All that should come from the ship monthly are the deductions to be made to a seaman’s salary- cash taken, bond and communication costs etc. A simple spread sheet once a month. That is all. Stop using Masters as data entry operators; employ a couple of those ashore instead.
• Planned Maintenance Systems should be streamlined to effectively become the one stop combined source for inventories and requisitions. Many are capable of being just that, but are rarely used as such. An exported file should be all that is required to be emailed to the office. The utilisation of PMS software is a joke aboard most ships (I often joke that PMS is not just restricted to women; sailors know the acronym- and the stress- differently, is all). Realise that office insistence on following older systems in parallel on ships increases workload without advantage.
•  Simplify ISM manuals. Very few of the crew understand them to begin with, and then manuals are usually unwieldy, often incoherent or incomplete and so unsurprisingly not followed.
•  Put enough computers aboard. Give other crew – cooks, bosuns, junior engineers et al- the responsibility to keep their equipment and inventories updated. Something is wrong if a Chief Engineer is spending four hours almost every day on the computer updating PMS or other systems, or a Master is spending similar time doing essentially worthless work that is detracting from his main job.
•  Put aboard an additional ‘administrative officer’ or seaman/clerk. To those already doing so, take a bow.
• Reduce the number of people in shipmanagement offices authorised to send emails to Masters. (And demanding immediate responses or clarifications to usually useless queries, many of which have already been addressed). Stop demanding repeat information just because your office filing or email systems are disorganised, or because there is incomplete communication between departments ashore, or because you are too lazy to look it up.
•  Reduce the number of checklists. Curb shore enthusiasm in creating checklists for ships even when not mandated. (If you must create them, then fill them yourselves, please).

I am sure sailing seamen would have an almost endless supply of practical suggestions, and I know many who surface these to managers ashore. The problem in third party managerial offices- especially the big ones- is one of organisational inertia. Change seems impossible, especially when nobody wants to stick their necks out for fear of being beheaded.

The IMO may simplify regulations and compliance associated with them. It may even help with certain kinds of paperwork directly- related to port formalities and such, for example. (I know standard forms exist, but every country seems to want its own format anyway). The IMO can even try to streamline the Port State Control system- the present one is odd, and consists of PSC inspectors having the ability to board a ship at any time and occupy the entire crew for hours on end at a time when urgent operations are happening at multiple locations aboard. In doing so, they compromise safety and add to fatigue.

The IMO- or any one body- cannot change the mindset that prevails in shipping and administrative offices around the world. That mindset uses seamen as cheap labour, dumping increasing administrative workloads on them without thought and without sufficient additional compensation. That mindset dumps paper aboard that belongs ashore, simply because it is expedient to do so.

Ultimately, and besides anything else, that mindset is directly responsible for fatigue and its proven impact on safety. When will all the smart men and women in the industry begin to understand that?

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Interesting times

Reports from the sale and purchase market for newbuilds often resemble, these days, the confusing and contradictory reports we are used to seeing emanating out of places like the stock market. This probably has a lot to do with the fact that confusion has increased as some people sense a bottom may have been reached last year in new asset prices, and that this is a good time to buy ships. But this is a simplistic approach, and, given the big ticket items that ships inevitably are- recession or not- this can be a dangerous approach too, especially at a time when speculation is driving asset prices.

Shipping does not like to advertise that, as billionaire Wilbur Ross says, “You make your big money based on your entry point in the market and the exit point”. Like the stockmarket, you buy low and you sell high with a trader’s outlook, not an investors; you don’t worry too much about the intrinsic worth of the asset, its revenue or profit generating potential.  

Anyway, this is what all I have heard and read over the last month. The Greeks are buying- more correctly, ordering newbuilds- in large numbers because of fears of a domestic levy on bank deposits similar to the one proposed in Cyprus. Other European countries may soon follow suit, somebody says. No, no, says another report, the Greeks are buying because they have an instinct for these things; prices have bottomed out, freight rates will triple this year and the Greeks have a nose for the opportunity that is there for the taking. They don’t control 16 per cent of the global fleet for nothing.

Then, one report says that the Chinese are ordering big containerships of the Maersk Triple E Class type- 18000 TEU behemoths. Actually the Chinese seem to be buying- or building- everything; the country is responsible for 40% of all deliveries made in the last three years, and the 11,000 vessels China has built so far constitute a fifth of the global fleet. Besides, the country still holds 40% of the global orderbook. A significant proportion of this tonnage is Chinese owned, by the way; the country is only behind Japan and Greece as a shipowning nation. 

Some analysts on the other side of the fence say that Chinese shipping growth is not based on market principles but on strategy, and imply that it would be unwise for individual shipowners to take their cue from there. 

Many people seem to be ignoring, for the time being, the restructuring (read survival attempt) that Nobu Su’s TMT is undergoing today. It was not long ago that Su could do no wrong. Like John Fredriksen of Frontline, another company that went through ‘restructuring’ a while ago, he was the golden boy. (That Wilbus Ross quote above goes on to refer to Fredriksen as being ‘brilliant at both’ buying and selling). With Taiwanese Su, it seems that his last wager went belly up. In stock market lingo, his last trade tanked.

It seems clear that speculation is driving the purchase of ships today. People with access to funds, sensing that prices cannot go much lower, are snapping ships up like they would a blue chip stock that has crashed 30 percent for no good reason. Like in the stockmarket, many of the purchasers are not long term investors. They will buy low now, putting pressure on struggling shipyards to get rock bottom prices. Including in Japan, where shipyards are being encouraged by government policies and sweet deals to push for orders to gain marketshare. 

And these speculators will sell when asset prices rise a year or two or ten down the line. Just like the stockmarket; the only difference is the longer time horizon speculators in shipping have to live with. Just like in the eighties, when older ships were snapped up by punters only to be laid up, then reactivated when prices started rising. And sold. The only difference today is that the gamble is being made with newbuilds.

Long term traditional shipowners will be at a huge disadvantage in this atmosphere- any attempt by them to manage today’s overtonnaged reality (some shipowners in Europe are even contemplating collective lay-ups) will come to nought in this environment of stockmarket-like speculation that is close to gambling. Because, although the newbuilds being ordered today will come online a year or two down the line, the psychological impact of this additional tonnage at a time like this may well be crippling for freight rates, which are at unsustainable levels even today.

This is not a good time to be a traditional shipowner. You could easily lose your shirt being prudent and wise and following sound economic principles. You may not lose your shirt because your rationale is faulty; you can lose it because you are in the wrong place at the wrong time and because, to put it bluntly, you insist, still, on playing a game whose rules were changed long ago.

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