INTERNATIONAL SHIPPING: CHANGING PATTERNS AND PHASES: IS IT GOOD OR BAD?
F R Chowdhury
London, 10 April 2018
“Shipping is a complex and capital intensive business. Major part of the international shipping was owned and operated by the developed western world. After the end of World War-II, the largest merchant fleet was under British flag. Then there were large operators under USA, Norway, Greece, Germany, Japan and Russian flags. Those days there existed close links among ship-owners, crew and flag. For instance, on-board a Greek ship flying the Greek flag and owned by Greek ship-owners the majority of the crew would also come from Greece.
Over the years, this practice has gradually changed. British ships started to employ crew-members from former colonies like India, Pakistan, Nigeria and Jamaica. A number of ship-owners under other flags followed the same pattern for the purposes of saving money by employing cheaper labour. In cases where the Flag’s administration provided for the employment of its own seafarers, ship-owners opted for a flag that offered them the flexibility to chose freely among crew members of different nationalities. Ship-owners started changing flags in order to get the benefit from cheaper costs of operations. As a result, some countries ended up with more ships in their registry – far in excess of their trade requirements. This was the first stage of open registers.
Not all the newly independent countries of Asia and Africa had the means to buy and operate ships. All they had to do therefore was to make their flags as open registers.. Naturally, competition grew amongst open registers. It was no more confined to registering ships owned by other nationals. Some of the open registers reduced taxes to attract more ships. Some even introduced tonnage tax removing the need for corporate audit and tax return. Ship-owners had less head-ache with more ease, convenience and flexibility. Most of these new open registers allowed recognized organizations and classification societies to conduct statutory survey and certification.
Another element joined this new pattern. They are known as labour supplying or crew supplying countries. Up until then, air travel had become more frequent making it possible for crew to fly in order to join or leave ships. As a result of this, another new competition developed for crew training and manning of ships. When the 1982 United Nations Convention on the Law of the Sea (UNCLOS) came into force, many land-locked countries took the opportunity to develop their own shipping.
All these phases of change contributed eventually to the current status quo of international shipping. It has broken all monopoly and indeed has become a global international business. Although shipping being a global business is good news, yet there remains an important issue to consider as a matter of concern.
Recently some of the countries are putting their flag and register with the highest bidder. They have isolated the registry from rest of the duties and functions of the administration. This is concerning. It must not be forgotten that IMO and ILO are not States. They are UN agencies responsible for developing international legal standards for shipping and labour respectively. It is the Member-States that ratify the relevant legal instruments and are responsible for their implementation into their jurisdiction. As soon as the ship is registered under a flag, it comes under the jurisdiction of that State. Hence, it is the responsibility of the Flag State to ensure that the vessel complies with the legal requirements and international standards. How can a State part away with its sovereign rights and duties?
It is to no surprise that during last Assembly of the IMO, we witnessed delegates from Mongolia,Cambodia, Comoros and Palau asking each other about the number of ships they have in their registers. They have no clue on the exact numbers because they have sold it to the highest bidder, namely some brief-case businessman from abroad who is playing around with their name and fame. These operators are not parties to any international treaties because they are not States. As a result they have no obligations and no responsibilities. The only function they perform is to register a ship and make money. This is what we call the flags of convenience.
Good ship-owners and operators would never register their ships in such registers. It is mostly those who engage in illegal trade and perhaps carry contraband items. Often the innocent seafarers become the victim of circumstances when ships are abandoned. They remain without salary and food. Church related charitable institutions and other voluntary organizations come forward with helping hands. It is happening time and again.
Time has come for the world community to find some legal and procedural means to stop this “sale of flag to the highest bidder”. The administration of a Flag State must be located within the country. It must additionally be operated by a department or agency of the government of that country that fully respects the treaties and conventions ratified by it. The registration of ships is just one of many functions of the flag administration and it cannot be separated or delegated elsewhere. The process of registration establishes jurisdiction and the administration must exercise its full jurisdiction and control to ensure compliance of internationally agreed standards. It is high time that experts in IMO and ILO put their expertise onto finding a way forward – perhaps draft one final comprehensive convention on this matter. As an interim measure, I would suggest that all banks, insurances and other financial institutions to stop providing services to ships operating under those fraudulent flags.
This article is by no means against the open registers. It is for each individual State and government to decide whether to operate on a traditional closed or open register. No single solution will suit all. States that do not have the expertise may hire services of experts to work for them with gradual transfer of technology. Yet, the pattern of putting its own flag on auction must stop. It is detrimental to the business of shipping and causes more miseries to seafarers. I would like to call up on ITF, Church institutes and all other welfare organizations and charities to join hands and stop the brief case businessmen to operate registers from outside the country”.
F R Chowdhury, Marine Consultant
Formerly Deputy Chief Examiner of UK-MCA
The opinions expressed herein are the author’s and not necessarily those of Human Rights at Sea.