These days, flag of convenience ships are commonplace, something many people are unaware of. For the uninitiated, a flag of convenience ship is a ship that is registered to sail under the flag of a country other than the actual country of ownership.
There are many reasons why ship owners choose “Flags of Convenience”. Because other countries have cheaper registration fees, low or non-existent taxes, and more “relaxed” legislation regarding labor practices and other adult oriented activities on the ship such as gambling and drinking, the ship owner can save a significant amount of money by choosing to sail his or her ship under a flag of convenience.
The Flag of Convenience status of a ship has consequences beyond the profit margins of the ship owner—it can also impact the safety and well being of the ship’s passengers, as well as the ship’s crew. Because of this, the International Transport Workers Federation union (ITF) was formed to bargain on behalf of crews working on Flag of Convenience ships.
Because ships are subject to the regulations of the state it is registered under, a ship owner can avoid paying better wages to the crew, ignore strict safety and training regulations, and even avoid paying taxes to the country of ownership as long as the ship owner chooses a permissive flag state to sail under. This legal quirk has allowed ship owners to evade financial responsibility and liability when something goes wrong while traveling in international waters.
Many countries compete for flag registries by emphasizing low registration costs, little or no taxes, low oversight, and a bare minimum of regulation that superficially complies with United Nations Convention on the Law of the Sea (UNCLOS). Because there is no international body that can hold the flag state accountable for its failure to enforce international safety guidelines, there is little redress available for victimized passengers and exploited crewmembers.
The proliferation of Flag of Convenience ships is one of the unfortunate results of globalization, which has exerted a downward trend on working conditions and wages for ship workers. Ship safety is often sacrificed at the altar of cost cutting, because enforcing safety standards can add to the overhead of running a ship. This encourages ship owners to hire the cheapest workers, who may be poorly trained and are unable to communicate effectively to manage the ship without incident.
Passengers can also be negatively affected by a ship’s Flag of Convenience status when a crime or an accident occurs while sailing in international waters. Crime victims have to depend on the flag state to provide the resources for investigating the incident and prosecuting the perpetrator. If the flag state fails to do so, there is little recourse since the victim’s home country has no jurisdiction over a Flag of Convenience ship traveling in international waters.