What impact do Flags of Convenience Have on sailors and passengers?

Maritime Articles

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. 

For now, passengers and ship employees alike need to be educated on the rights they currently have, and what they can do to protect their own interests and well being.

Flag of convenience and abuse of international maritime law

Maritime Articles

The International Law of the Sea is, although vast, incomplete, having significant gaps. Its application is uneven and patchy, largely determined by the non-binding nature of certain agreements or the wide margins of discretion that much of this legislation grants to governments.

In April 29, 1958, the first United Nations Convention on the Law of the Sea (UNCLOS) signed the Geneva Convention on the High Seas (CHS). This convention establishes in article five that “Each State shall fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory, and for the right to fly its flag. Ships have the nationality of the State whose flag they are entitled to fly. There must exist a genuine link between the State and the ship; in particular, the State must effectively exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag”.

Protected by this Convention, large shipping companies and cruise lines choose to register their vessels in certain countries, taking advantage of their lax laws of convenience, avoiding high international standards – this practice is known by the term "flag of convenience".

Understanding the importance of international maritime trade, it would be easy to assume that there should be a relationship between the most developed countries and the number of vessels that carry their flag. This leads us to assert that countries with more vessels would have to correspond with the major economic powers: USA, England, Germany… but we would be mistaken.

In 2007, 22.2% of the world tonnage was registered in Panama, followed by Liberia, with 9.8% of the world fleets. Bahamas was third with 5.6% of the world fleet. It should be noted that 51.9% of the merchant fleet of bulk carriers are registered in Panama, while 50.6% are oil tankers are registered in Liberia. 50% of the world fleet of cruise ships is registered in the Bahamas.

Maritime accidents due to the use of a flag of convenience from countries with low requirements

The data presented reveal that the vast majority of shipping companies choose to flag their ships by the tax breaks they could gain from the flag State or, worse, by the weakness or lack of rigor in compliance with the flag states’ international requirements. This will have increased the so-called "flags of convenience" phenomenon characterized by the registration of ships that do not meet minimum safety conditions for transporting dangerous goods and cause several preventable accidents.

This situation constitutes a major safety breach and requires a solution. States should be required to comply with the rules of international maritime law on the supervision and control of ships registered in their territory. Shipping companies and cruise liners should be restricted in their choice of their flag, requiring a clear link between the ship and the flag State.