April 22, 2019

Marine Contracts in Saudi Arabia: local and international regulation

In January 2019, Saudi Arabia introduced for the first time a bespoke commercial maritime law, indicating the importance of maritime trade and labour to its economy and development plans. The ambition and projects set out in Vision 2030, such as the development and privatisation of nine ports, and significant growth in logistics and transport, will necessitate the expansion and regulation of maritime labour. We explore below Saudi's local regulatory context and the wider international framework of the Maritime Labour Convention 2006.

Saudi Arabia introduced a bespoke commercial maritime law for the first time in January 2019

The Kingdom of Saudi Arabia (KSA) introduced a bespoke commercial maritime law (the Maritime Law) pursuant to Royal Decree no. M/33 dated 5 Rabi’ II 1440H (corresponding to 12 December 2018G) and published in the Official Gazette on Friday 4 January 2019. The Maritime Law comes into effect on 3 July 2019.

Written Contract

Currently, the KSA Labour Law (originally issued in 2005 and amended in 2015) contains express provisions relating to the employment of crew members and other seafarers on KSA flagged vessels and those in KSA waters.  It defines a marine work contract as "a work contract for a wage concluded between the vessel's owner or chandler or the representative of either of them and a seaman to work on board. Such contract shall be subject to the provisions of this Law, unless they are in conflict with the provisions of this Part and the decisions issued hereunder."

Seamen's contracts are obliged to be in writing and entered in the vessel’s records.  It should state whether it is for a limited period (stating the duration clearly) or for a single voyage. If it is made for a single voyage, it shall specify the city or harbour where the voyage ends, and at what stage of unloading or loading the vessel at this harbour the contract terminates. Also, the contract must include the following information:

  • Date and place of its conclusion
  • Name of the chandler
  • Name of the seaman, his surname, age, nationality and homeland, type of assigned work, method of performance
  • Certification for work in sea navigation
  • The Personal Marine Card
  • Wage and duration of the contract

The contract must be issued in triplicate, one copy for the vessel’s chandler, one for the captain which is to be kept aboard the vessel and a copy for the seaman. The work terms and rules aboard the vessel shall be posted in the crew quarters.  A seafarer must be at least 18 years, have a certificate to provide marine services and be medically fit.

Commercial Maritime Law

The Maritime Law supplements the KSA Labour Law provisions and applies to Saudi and foreign vessels that anchor in Saudi ports or territorial water, save warships and non-commercial ships for public service or those specifically provided, unless in relation to collision, and salvage.

It defines a marine employment contract as being 'a contract between the vessel owner or charterer or their representatives and a person to be employed on board the vessel in return for wages.   This definition is wider than the Maritime Law as it covers any person working on a vessel and not only a seafarer '.  Chapter 4 outlining obligations on both seafarers and owners or charterers expands on this and states that it applies to individuals employed to work on board vessels that carry out international voyages.  Further, KSA nationals employed to carry out works on board vessels that sail outside KSA territorial water may not do so, unless they obtain the marine service certificate from the Ministry.

Obligations of the ship owner or charterer include:

  1. Agreeing the wages in writing;
  2. Paying wages per month or per voyage (with provisions for paying wages to the seafarer's heirs if he dies on a voyage)
  3. Provision of free medical care and continued wages during sick leave;
  4. Covering funeral costs if the seafarer dies during a voyage;
  5. Extending a fixed term until the end of a voyage if the fixed term expires during a voyage or until the seafarer is returned to the agreed port; and
  6. Entering in the vessel's logbook disciplinary procedures, decision to dismiss and the reasons for the dismissal of any seafarer (failing which the dismissal will be unlawful).

Specific Roles – Master and Crew

Under Chapter 4 Section 2, article 100, of the Maritime Law, the operator must appoint a master who must command the vessel and ensure it is seaworthy, apply disciplinary measures as necessary, carry out investigations and run the vessel (including maintaining documents, the ship's log, and taking measures as necessary to ensure safety and security). 

The Maritime Law also provides for the terms and qualifications of shipmasters, maritime engineers, and crew and their number on board the vessels.

Fines of SAR 1,000 and no more than SAR 20,000, can be imposed on any member of the crew of a vessel or marine unit who caused it to stop or precluded its sailing due to misrepresentations.  If the statements are maliciously submitted the fine is SAR 50,000.

Employee Relations

The KSA Labour Law provisions, together with its Implementing Regulations (clarifying how certain Labour Law provisions are to be implemented) apply in full to marine employees on flagged KSA vessels and any seafarers holding KSA residency visas or registered as an employee with the Ministry of Labour and Social Development and General Organisation for Social Insurance (GOSI).  The work regulations including disciplinary and grievance procedures apply to all seafarers and managers on vessels who need to be able to manage employee relations issues.  Disputes can be brought on shore in the Labour Courts and liability for termination of employment assessed in line with article 77 of the Labour Law and anyone employed on vessels has twelve months from the date an entitlement becomes due to bring a claim in the KSA Labour Courts.

International Aspects

KSA is not currently a signatory to the Maritime Labour Convention 2006 (MLC).  In some ways, the Maritime Law and KSA Labour Law match the rules under the MLC.  However, there is no minimum provision for holiday, maximum hours of work and minimum rest breaks, repatriation rights, basic rules on accommodation, food and catering, and the handling of complaints. The KSA Labour Law does cover some of these areas but would only apply to individuals employed on vessels who are also registered with the KSA Ministry of Labour and Social Development and GOSI.

The MLC can have significant effects on seafarers employed by KSA employers and on KSA flagged ships even though KSA is not a signatory. The MLC's enforcement mechanisms subject all vessels to potential inspection and compliance in ports of signatory countries and empower seafarers to hold vessel owners to account for the application and enforcement of MLC rights. Not having the MLC compliant certificates in place to smooth the processing through international ports increases the likelihood of inspections and delays, which can be costly for businesses.

It is also noteworthy that the MLC places significant regulatory burdens on the vessel owner, while the KSA Maritime Law imposes these on the charterer or the owner.

Labour Challenges

Recruiting seafarers is increasingly difficult with a life at sea posing challenges for younger recruits (especially KSA nationals). The impact of a lack of new entrants has meant an aging seafarer population and its resulting employee issues, potential medical issues and upskilling. However, this may change due to the recent establishment of the National Maritime Academy which will see its first batch of 1,400 maritime students graduate soon.  

Given the increasingly regulated environment at sea and KSA's clear intention to promote its logistics sector, it is possible that in the near future KSA will ratify the MLC in the near future. We have seen other GCC countries move towards greater alignment with the MLC, such as the UAE's regulations regarding private medical insurance for individuals on vessels introduced in February 2018.