Seafarers’ claims for damages against their bankrupt employer enjoy privilege

Seafarers’ claims for damages against their bankrupt employer enjoy privilege

Arnold van Steenderen
25 November 2015

Avra Towage B.V. in Rotterdam (“Avra”) operated seven seagoing tugs (‘North’, ‘East’, ‘South’, ‘West’, ‘Compass’, ‘Northwind’ and  ‘Southwind’) through seven single-ship-companies owning the respective vessel. Avra went bankrupt on 20 May 2014 and it then transpired Avra had failed to maintain adequate pension arrangements for the seafarer’s crewing the tugs. Eleven seafarer’s started a legal battle against Rabobank, the first mortgagee of the seven tugs involved, arguing that their claims may be recovered from the proceeds of sale of  the vessels they served on. The seafarers’ claims for damages should according to the seafarer’s take precedence over the claims of the bank that had first rights of mortgage on these ships.

A summary shows the following. As of various dates in 2008 the eleven claimants were employed by Avra as masters and first officers on board various seagoing ships. Each of them, except for one, served on multiple ships in the Avra fleet. Each of the ships was in the ownership of a single-ship-company belonging to the same group that Avra was part of. These companies did not qualify as employer of the claimants. All tugs were registered in Curaçao, Netherlands Antilles.

Rabobank held first rights of mortgage over the tugs.

The service contracts of the claimants provided that the employee would be entered into the pension scheme of the Merchant Marine Pension Fund  BpfK (“BpfK”). In accordance with the pension scheme and the law, each of the claimants would have to pay the employee’s share of the pension premium and Avra would have to add the employer’s share and then to pay both parts of the premium to BpfK. As was stipulated, Avra arranged for the entry of each of the claimants into the scheme and withheld pension premiums from their monthly wages. However, over the years 2010 through 2012 Avra did not pay any premiums to BpfK and only made a partial payment over the year 2013.Not until early July 2013 did BpfK inform each of the claimants that retroactively as of January 1st 2010 they were no longer entered in the BpfK pension scheme.

The claimants have held Avra responsible for their loss, however Avra did not settle their claim. On 20 May 2014 Avra was declared bankrupt.

Rabobank has foreclosed four of the ships. A further ship was sold with Rabobank’s consent. Rabobank deposited an amount to cover the claimants’ claims in the event and to the extent it would be held at law that their claims have priority over Rabobank’s right of mortgage.

The claimants brought an action against Rabobank to fulfil these conditions.

The first issue to be decided was whether the claimants were entitled to recovery of the sums withheld from their wages as premiums, or to a sum equaling the accrued pension over the years 2010 through mid-2013.

The Rotterdam Court found that Avra was in breach of its obligations under the service contracts and that the proper remedy for such a breach was to bring the claimants in the position as though the breach had not occurred. Therefore, the recoverable loss amounts to a sum equaling the accrued pension over the full period. The second issue to be decided was whether such a claim for damages ranks over the mortgage.

This issue entailed the construction of article 8:211, first sentence and sub (b) Dutch Civil Code (“DCC”) in conjunction with article 8:216 BW.

Article 8:211, first sentence and sub (b) reads:

The following claims have a privilege on a sea-going vessel in priority to all other claims to which this or any other law grants a privilege, save for the provision in Article 210:

(b) the claims resulting from the contracts of employment of the captain or of the other members of the crew, provided that the claims with respect to wages, salary or remuneration shall be privileged only up to an amount owed over a period of twelve months;”

and article 8:216:

The claims referred to in Article 211 create a privilege upon the vessel and recourse may then be taken on it for them, even where they have arisen during the period that the vessel was made available to a charterer, or during the operation of the vessel by a person other than the shipowner, unless the de facto control over the vessel had been taken away from him by an unlawful act and, furthermore, if the creditor was not in good faith.

The Court considered, following the guideline given by the Dutch Supreme Court in the ‘Pamina’-case  that these articles purport to protect a seafarer’s interest to recover the claims referred to in these articles. On the proper construction the notion “claims arising out of service contracts with the master or other seafarers”  in article 8:211, first sentence and sub (b) BW is not limited to wages or other regular benefits and includes claims for damages for breach of the service contract. Furthermore the Court found that, as Avra had been in breach for a long period of time, the present claims for damages have priority over the mortgage and the period during which the seafarer had served on each of the ships lacked relevance, as long as the seafarer had served on the respective ship.

The proceedings will continue on the issue of the quantum of damages.


A fair and reasonable judgment. The words “claims resulting from the contracts of employment” in article 8:211, first sentence sub (b) include a claim for damage founded on the “pension gap” caused by the former employer Avra. Whereas wages only enjoy privilege up to an amount owed over a period of twelve months this limitation does not apply to claims for compensation due to  breach of the employment agreement.