The applicable law sets the parties' rights and obligations, which include, among other things, salaries, indemnities and social security contributions. Considering the vast fleet of foreign boats based in Spanish ports and sailing in Spanish waters, we think it is important to analyse this complex issue. It is essential, for both owners and sailors, to know which regulations are applicable to their relationship and, in the event of a conflict, which is the competent jurisdiction. Contracts subject to the laws of Malta are different from those subject to the laws of Belize or Spain, just as resolving a dispute in a British court is different from resolving it in a court in the Marshall Islands. While owners benefit from applying unknown laws of remote jurisdictions, which will make the process more expensive for the weakest party, employees will hope to resolve the matter quickly and close to home.
The Spanish law says that Spanish courts are competent to resolve employment disputes when:
1. The services were offered in Spain or the contract was stipulated in Spain.
2. When the defendant is domiciled in Spain or has an agency, branch, local office or other office in Spain.
3. When the employee and the employer are Spanish nationals, regardless of where the services were offered or the contract stipulated.
4. In the case of seafarers' employment agreements, if the job offer made before the contract was signed was received in Spain by a Spanish employee.
Point (3) is not controversial. Point (4) is also quite clear, even though the interested party, normally the Spanish employee, will have to prove with any means that they received the offer in Spain. The proof can be an email or the ticket from Spain to the location where the boat was boarded. Considering that many yachts that fly a foreign flag and are owned by foreign companies, are based for tax purposes in Spain, especially those for charter, Point (2) could cause some controversy. Does a foreign owner with a fiscal representative in Spain to operate as charterer on a regularly basis, have "any other operation in Spain"?
Without doubt, the most controversial is Point (1), except if the yacht flies the Spanish flag, in which case any dispute will be settled according to Spanish law. The question is: on a foreign boat, permanently based in a Spanish port, where are on-board services offered? With regards to the place in which the contract is stipulated, in our opinion, it is the place where the employee signed the contract, whatever the location shown next to the signature. Nowadays, normally contracts are signed by employees at their domicile and then board the yacht later elsewhere.
Another case in which the Spanish law applies is when the yacht is boarded in Spain by the employee to pay a work credit. In other words, a wage liability for services provided. In this case, the Geneva Convention of 1991 relating to the arrest of sea-going ships says that, unless otherwise established in the employment agreement, the competent labour court shall be that of the place where the employee boarded the yacht, i.e. a Spanish court.
The law that governs the agreement
The regulations that establish and regulate the substantive elements of the contract, such as salary, allowances in the event of dismissal or end of contract, social security contributions, health cover, etc.. Labour laws tend to protect employees against possible abuse from the employer and are obligatorily applicable, meaning that in most systems the parties cannot agree to derogate these rules. In Spain, the core of labour laws can be found in the Statute of Workers Rights. At this point, it is worth mentioning that the work relation between yacht owner and captain is considered by Spanish labour laws as a top management relationship, therefore, the parties are allowed considerable contract freedom. An important detail regarding top management contracts is the fact that, if not otherwise agreed by the parties, captains are entitled an indemnity equal to three months of salary; quite a significant amount compared to normal employees nowadays, especially considering captains' rotations.
The Statute of Workers Rights says that labour law applies when work is carried out in Spain, which clearly means it applies to all yachts that fly the Spanish flag. The Civil Code establishes that vessels are governed by the legislation of the Country whose flag they fly. However, the problem arises when a yacht flies a foreign flag and the law applicable to the contract is the Spanish law. In the maritime sector, it is common for yacht owners to resort to what are known as conthevenience jurisdictions, whose laws are much more favourable and permissive in multiple fields of the law connected to operating boats, one of them is labour. Therefore, doctrine and jurisprudence, to protect worker's rights, have tried to prevent the unconditioned application of the criterion establishing extraterritorial jurisdiction that flags offer. For this reason, the mentioned criterion (according to which the flag determines the jurisdiction) has been changed applying the 1980 Rome Convention, on the law applicable to contractual obligations in situations involving a choice of laws. The convention establishes that the parties of a contract are free to choose the law applicable to the employment contract. However, this freedom is limited in employment contracts, as the parties are prohibited from agreeing to submit to a jurisdiction in which the sailor's rights are less protected than in the jurisdiction that would be competent if the parties had not agreed otherwise. For example, on a yacht that flies the Marshall Islands flag the parties can agree to apply Spanish laws. This agreement will be valid if the Spanish labour legislation offers more protection to the employee than the Marshall Islands legislation. However, it will not be valid if the Marshall Islands legislation offers better protection. The above-mentioned Convention establishes that if the parties have not agreed otherwise, the applicable legislation is that of the location where the work is carried out or where the establishment that employs the worker is based, following the criterion of the closest connection. For example, if a yacht flies the Cook Islands flag, but is permanently based in Palma de Mallorca, where is the work carried out? In Spain or on the Cook Islands? Where is the establishment that employs the worker based? In Spain or on the Cook Islands? These are not easy questions to answer, but the solution is in the doctrine that says that the flag does not necessarily determine which legislation applies to the employment relationship. In this example, despite the parties' agreement to apply the laws of the Cook Islands, it would be difficult to argue against the application of Spanish laws, as they are more protective towards the worker. However, the courts don't always share this view.
What does the doctrine say?
A recent decision by the Balearic Superior Court of Justice is a good example as it analyses almost all issues. It's a widow's pension claim from the wife of a foreign sailor resident in Palma de Mallorca and working on a boat flying the flag of a tax haven. The claim is based on the fact that the sailor should have been registered with Spanish social security by the employer which would have entitled the widow to receive his pension, based on the fact that:
• The boat was based in Palma de Mallorca, as for 14 years it spent the winter in Palma de Mallorca.
• The dead sailor was resident in Palma de Mallorca.
• The owners of the company that owned the boat resided in Spain.
• The work was carried out in Spain.
Without going into details, the Court denied the claim, considering that:
• The crew knew that they were not registered with social security and could have either registered as self-employed or bought an insurance policy.
• The parties agreed that the employment contract was governed by British laws.
• The company that owned the boat had health insurance that paid for the captain's medical care during his illness.
• Despite the fact that the captain resided in Mallorca, his work was not carried out in Spain, but on board the boat, even when it was undergoing maintenance.
• The place where the work was carried out was only on board the boat, as any maintenance work was done by a shipyard.
• The fact that the yacht was based in Spain does not imply that the work was carried out in Spain.
This decision is no doubt quite hard on the widow and proves that boat owners may impose which laws should apply in the contract even when the connection between the boat and the flag is just on paper. Considering the huge number of private and commercial boats that navigate our waters, for sure there will be more decisions that we will be able to use as reference.
Barcelona, Diciembre 2017
Yamandu RODRIGUEZ CAORSI