The Greek Seafarer's Pension Fund, Piraeus, Greece (NAT) brought an action against Nuovi Cantieri Apuania SpA, Marina di Carrara, Italy (NCA), claiming that it had priority over NCA for payment from the judicial sale proceeds of the M/V Lucky Rider of SEK 792,886.34 representing pension fees not paid by the shipowner. As a basis for its claim, NAT argued that it had a maritime lien over the ship in accordance with s 244(1) of the Maritime Code 1891 (the Code), and therefore in accordance with s 4(1) of the Preferential Rights Act 1970, it had priority over NCA's ship mortgage.

NCA contended that the wages maritime lien under the Code only applied to onboard employees, not pension funds. NAT's action should thus be rejected. In the alternative, NAT's action should be dismissed on the grounds that the wages maritime lien does not include pension contributions.

The Malmö District Court found NAT's claim admissible, and held that NAT had priority over NCA for the full amount sought. NCA appealed to the Court of Appeal of Skåne and Blekinge. The Court of Appeal agreed with the District Court, but varied the amount that enjoyed priority. NCA appealed to the Supreme Court.

Held: Appeal partially upheld. NAT should not be granted a maritime lien for anything other than the part of the pension contributions deducted from the wages of the onboard employees. Priority amount adjusted accordingly.

It is common ground between the parties that, under Greek law, NAT has a maritime lien over the ship as security for its claim regarding unpaid pension contributions. The issue is whether NAT has a maritime lien over the ship under Swedish law.

Section 259(1) of the Code states that Swedish law shall be applied when a maritime lien referred to in Ch 11 of the Code is invoked before a Swedish authority. If another maritime lien is invoked, it shall be determined in accordance with s 259(2) of the Code under the law of the State where the vessel is registered. In such a case, however, the lien may not be given priority over mortgages or be allowed in any other way to contravene the MLM Convention 1967.

NAT has argued that its claim for unpaid pension contributions is associated with the wages maritime lien mentioned in section 244(1) of the Code, which is included in Ch 11 of the Code. The wages maritime lien was given its current wording in 1976 in connection with Sweden's accession to the MLM Convention 1967, replacing provisions introduced in the Code in 1939 which were based on the MLM Convention 1926. The current wording does not differ significantly from previous iterations.

The question of whether the statutory provisions on maritime liens introduced in 1939 could be considered to cover contributions for pension insurance was not addressed during the preparatory work for the amendment to the law. Nor does the preparatory work for the current regulations deal with the question to a greater extent than that, at a meeting of the Swedish Maritime Law Committee in 1968, there was agreement that the question of whether pension contributions could be conventionally linked to maritime liens could not be answered in general. The answer would depend on the extent to which the pension contribution was in the nature of wages.

The MLM Convention 1967 has also been ratified by Denmark and Norway. Finland has not acceded to the Convention but has introduced legislation that is identical to that of the other three countries. The Convention has not yet entered into force - it is now subject to revision and it can be assumed that it will not enter into force in its current form. Sweden is consequently not obligated under international law to comply with the Convention. However, in view of the fact that Sweden has ratified it, and that the rules in the Code have been formulated on the basis of the Convention, it should be possible to attach significant significance to the Convention's provisions and preparatory work as interpretative data in this context.

The provisions of s 244 of the Code have been transformed from art 4 of the 1967 Convention. According to this article, there is a maritime lien over ships for claims in respect of 'wages and other sums due to the master, officers and other members of the vessel's complement in respect of their employment on the vessel'. During the preparation of the Convention, there was a draft, the Oxford draft, according to which the crew members' claims for 'wages and other sums' would include 'social insurance premiums payable by the employer in respect of such members'. Other proposals along those lines were also put forward. In the final draft Convention submitted to the Brussels conference, the contested addendum was excluded. No reasons for this were given. The issue also does not seem to have been addressed during the conference itself. However, the general focus of the Convention work was to strengthen the ship's credit and thereby limit the number of maritime liens. Compared with the MLM Convention 1926, the 1967 Convention also meant that the number of claims associated with a maritime lien was reduced.

The preparatory work for the MLM Convention 1967 does not provide evidence that, although the text of the Convention was slightly different from the 1926 Convention, it sought to restrict what may have applied under the 1926 Convention regarding the rights of workers to maritime liens for wage claims and other comparable claims. However, the extent to which the MLM Convention 1926 granted maritime liens for claims on pension contributions is uncertain, especially considering that a Protocol drawn up at the time of signing the Convention stated that the Convention did not amend provisions of the laws of the contracting States which might grant maritime liens to public insurance institutions for claims arising from the insurance of persons employed on ships.

The preparatory work for the MLM Convention 1967 thus provides little guidance for the interpretation of whether the Convention can be considered to also include a maritime lien for pension contributions.

With regard to the interpretation of the 1967 Convention, the parties have also referred to ongoing work aimed at a new Convention. During this work, a proposal has been made to add to the current Convention provisions on maritime liens for onboard employees a provision on maritime liens for insurance fees. However, it is unclear whether the participating nations thereby intend to clarify what is already considered to apply under the 1967 Convention, or wish to expand the possibilities for maritime liens. It should be noted, however, that one objective of the continued Convention work is to further strengthen the ship's credit. What has emerged about this Convention work does not provide any guidance for the interpretation of the 1967 Convention regarding the issue at hand.

From the text of the 1967 Convention and its preparatory work, however, it can be concluded that the Convention does not in any case allow an independent maritime lien for pension contributions. The decisive factor for whether a pension institution's claim for fees is to be granted a maritime lien must therefore be whether such a claim is attributable to an onboard employee's claim for wages from the shipowner, which claim is considered to have been transferred to the institution.

According to Swedish legal opinion, pensions for employees are to be seen as a claim on deferred wages that has been earned during the working period. There can therefore be no doubt that an employee's pension claim against the shipowner is associated with a maritime lien. In Swedish case law, pension contributions, which an employer as a result of provisions in a collective agreement or other commitment had to pay to an insurance institution, have also been regarded as part of the employee's wages, even if no deduction for the contribution is made on wages. The insurance institution's claim for unpaid fees has been considered to be a wages claim taken over by the institution and has therefore been able to be asserted with the preferential right that the wages claim enjoys.

The situation is different with pension contributions, which in the Swedish statutory pension system have the character of social security contributions. Such contributions are generally calculated on the wages of employees and paid by the employer to the State. If the contributions are left unpaid, the State pursues a claim against the employer. In such cases, however, the State is considered, in the same way as in the case of a claim for tax that has been deducted from the employee's wages, not to have taken over any wages claim, and the State consequently does not enjoy preferential rights for the claim. The claim against the employer is independent.

Here, NAT is a Greek State pension fund to which Greek shipowners are legally obliged to pay pension contributions for onboard employees. If the shipowner fails to pay the fee, this in principle does not affect the employee's right to a pension. It is undisputed between the parties that 51.25% of the fee is to be deducted from the employee's wages, and 48.75% is paid by the shipowner.

The part of the pension contribution to NAT that is to be deducted from the onboard employee's wages forms part of the employee's entire wages claim against the shipowner. The shipowner is legally obliged to pay this part to NAT. The employee's claim may hereby be considered to have been transferred to NAT. The claim against the shipowner which thus accrues to NAT is consequently a claim that according to s 244(1)(1) of the Code, is associated with a maritime lien over the ship. It may be noted that in a couple of Norwegian cases (ND 1978 s 426 and 1979 s 380) the Supreme Court has similarly found that a maritime lien exists for the contribution to the National Insurance Scheme which according to the Act on Pension Insurance for Seafarers must be deducted from the seafarer's wages. The Supreme Court of Finland, by contrast, has ruled that a claim a Finnish seafarers' pension fund has by law against shipowners is not linked to a maritime lien (ND 1984 s 51: see KKO: 1984-II-124 (CMI1843)).

Regarding the part of the fee to NAT that is to be paid by the shipowner, it is not clear from the investigation whether its size is determined by law or determined in another way. The extent to which the fee affects the available wages is unclear. However, the fact that NAT's activities are regulated by law and that the pension in the individual case is paid to the person on board, regardless of whether the shipowner paid a fee for him or her, suggests that the shipowners' fee is almost in the nature of social security, and consequently NAT's claim for unpaid fees cannot be considered as a wages claim transferred to NAT. In connection with this, it should be taken into account that so-called silent preferential rights, to which preferential rights due to a maritime lien belong, have been considered to constitute a troublesome element of uncertainty when granting credit and therefore have a negative effect on the ship's credit. As previously mentioned, the MLM Convention 1967, on which the current rules on maritime liens are based, has generally focused on limiting the scope of maritime liens. It should also be noted that such weighty social considerations that formed the basis for protecting wages claims through a maritime lien do not apply in the same way when it comes to an insurance institution's claim for unpaid insurance contributions.

In view of what has been stated, NAT should not be granted a maritime lien for anything other than the part of the pension contributions that is deducted from the wages of the onboard employees.