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A ship is said to be flying a flag of convenience if it is registered in a foreign country "for purposes of reducing operating costs or avoiding government regulations".

The term has been used since the 1950s and refers to the flag a ship flies to indicate its country of registration. The country of registration determines the laws under which the ship is required to operate and that are to be applied in relevant admiralty cases.

Background

Today, more than half of the world’s merchant ships (measured by tonnage) are registered under so-called flags of convenience, formally referred to as "open registries".

Traditional reasons for choosing an open register include protection from income taxes and avoidance of wage scales and regulations. A specific example of the type of advantage flying a flag of convenience offers is bypassing the 50% duty the United States government charges on repairs performed on American-flagged ships in foreign ports.

Globalization has significantly influenced the mechanics of world trade and has affected the owning and operating structures of merchant ships. Long gone are the days of the traditional family-owned-and-operated shipping companies. Today’s ships are commonly owned by multinational corporations and operated by multinationals. This fact militates against the argument that ship owners use the flag of convenience to seek an international jurisdiction inasmuch as there are few national owners.

Opponents argue that flags of convenience "do not enforce safety standards, minimum social standards or trade union rights for seafarers."

History

The Belen Quezada was the first foreign-owned vessel to register with the Panamanian registry in 1919. Several US ships followed suit in 1922. The registry slowly grew over the next 15 years, mostly due to transfers from European flags. In the late 1940s, several factors led American shipowners to become unhappy with the registry, and there became a demand for a new registry that could compete with Panamamarker.

The Liberian Registry was formed in 1948 with the help of American businessmen. Stavros Niarchos, a Greek shipowner, registered the first ship (the World Peace) with Liberiamarker in 1949. More shipowners followed suit, and the registry slowly grew and provided the competition that shipowners were looking for.

Currently the three largest ship registries are open registers, namely Panama, Liberia and the Bahamasmarker. All of these are judged by international safety organizations as “white-listed” flags indicating above-average safety performance, even though the worst oil spills such as the Prestige and the Amoco Cadiz involved tankers registered in Bahamas and Liberia.

Opposition

By labour groups

The International Transport Workers' Federation (ITF) website says that “FOCs provide a means of avoiding labor regulation in the country of ownership, and become a vehicle for paying low wages and forcing long hours of work and unsafe working conditions. Since FOC ships have no real nationality, they are beyond the reach of any single national seafarers' trade union.” They also accuse such ships of having low safety standards and no construction requirements.

By environmental groups

Several environmental groups have also campaigned against Flags of Convenience in regards to their use by illegal fishing operations. Opponents argue that many of the countries that allow foreign-owned vessels to fly their flag lack the resources or the will to properly monitor and control those vessels. The Environmental Justice Foundation contends that illegal, unreported and unregulated fishing vessels use Flags of Convenience to avoid fisheries regulations and controls. Flags of Convenience help reduce the operating costs associated with legal fishing methods, and help illegal operators avoid prosecution and hide beneficial ownership. As a result, Flags of Convenience perpetuate IUU fishing which has extensive environmental, social and economic impacts, particularly in developing countries. The EJF is campaigning to end the granting of Flags of Convenience to fishing vessels as an effective measure to combat IUU fishing.

Support

Supporters of flags of convenience argue that where a vessel is engaged in international trade it should be free to register in the jurisdiction which best suits its commercial model. Proponents argue that the choice of flags allows companies to take advantage of another country's infrastructure and the efficiencies of effective and non-bureaucratic maritime administrations typically offered by the prominent open registers.

An open registry allows a Norwegian owner access to US public finance, Japanese shipbuilding expertise with Scottish and Hong Kong shipmanagers, while employing skillful crews from Philippines, India or China. Before the open registry system, national flags required national ownership, national construction and national crew. Flags of convenience enable both lower costs of registration and maintenance. This in turn reduces overall transportation costs.

Many nations, categorized either as open or national registries, effectively implement and enforce the international treaties of the International Maritime Organization, such as the International Convention for the Safety of Life at Sea (SOLAS),International Convention for the Prevention of Pollution from Ships (MARPOL), Standards of Training, Certification and Watchkeeping (STCW) and the International Ship and Port Facility Security Code (ISPS), all of which require minimum standards for vessels trading internationally. Further, several open registers including Liberia have ratified the International Labour Organization’s Consolidated Maritime Convention of 2006, which specifically protects the interest and rights of seafarers. National registries have yet to ratify this international treaty.

List of flags of convenience

Countries listed as having a flag of convenience by the ITF.
The International Transport Workers' Federation maintains a list of 32 registries it considers to be FOC registries. In developing the list, the ITF considers "ability and willingness of the flag state to enforce international minimum social standards on its vessels," the "degree of ratification and enforcement of ILO Conventions and Recommendations," and "safety and environmental record." The following registries are on the ITF list (with figures sourced from the CIA World Factbook):

Flag of convenience registries and statistics (of ships of 1,000 GRT and greater)
Registry Ships Registered Foreign-owned ships Percent Foreign Foreign-owned ship profile Remarks
Antigua and Barbuda International Shipping Register 1,059 1,021 96% Australia 1, Colombia 1, Cyprus 2, Denmark 15, Estonia 15, France 1, Germany 891, Greece 3, Iceland 9, Latvia 9, Lebanon 1, Lithuania 6, Netherlands 19, Norway 7, NZ 2, Poland 2, Russia 5, Slovenia 6, Sweden 1, Switzerland 5, Turkey 7, UK 4, US 8, Vietnam 1
Bahamas Maritime Authority 1,213 1,134 93% Angola 6, Australia 3, Belgium 15, Bermuda 12, Brazil 1, Canada 13, China 9, Croatia 1, Cuba 1, Cyprus 20, Denmark 66, Finland 8, France 43, Germany 40, Greece 214, Hong Kong 3, Iceland 1, Indonesia 3, Ireland 2, Italy 1, Japan 62, Jordan 2, Kenya 1, Malaysia 11, Monaco 11, Montenegro 2, Netherlands 24, Nigeria 2, Norway 232, Philippines 1, Poland 15, Russia 5, Saudi Arabia 15, Singapore 9, Slovenia 1, South Africa 1, Spain 11, Sweden 5, Switzerland 2, Taiwan 1, Thailand 1, Trinidad and Tobago 1, Turkey 5, UAE 20, UK 68, US 162, Uruguay 1, Venezuela 1 Flag-state self assessment.
Barbados Maritime Ship Registry 71 67 94% Bahamas, The 1, Canada 9, Greece 11, India 1, Lebanon 1, Monaco 1, Norway 35, Sweden 5, UK 3
International Merchant Marine Registry of Belize 261 217 83% China 107, Croatia 1, Cyprus 1, Estonia 1, Hong Kong 5, Iceland 1, Italy 4, Japan 2, South Korea 4, Latvia 14, Norway 3, Peru 1, Philippines 1, Russia 39, Singapore 3, Spain 2, Turkey 11, Ukraine 10, UAE 4, US 3
Bermuda Department of Maritime Administration 133 126 95% Australia 4, Belgium 3, China 10, France 1, Germany 21, Greece 3, Hong Kong 4, Ireland 1, Israel 3, Japan 1, Nigeria 11, Norway 5, Singapore 1, Sweden 15, UK 20, US 23
Bolivia 25 9 36% Argentina 1, China 1, Egypt 1, Iran 1, Italy 1, Singapore 1, Syria 1, Taiwan 1, Yemen 1 Bolivia is a landlocked nation
International Ship Registry of Cambodia 586 463 79% Canada 6, China 166, Cyprus 9, Egypt 14, Estonia 1, Gabon 1, Greece 5, Hong Kong 11, Indonesia 1, Japan 3, South Korea 29, Latvia 2, Lebanon 7, Nigeria 2, Romania 1, Russia 112, Singapore 2, Syria 32, Taiwan 1, Turkey 20, Ukraine 27, UAE 2, US 6, Yemen 3
Cayman Islands Shipping Registry 124 122 98% Denmark 3, Germany 17, Greece 23, Italy 10, Japan 6, Norway 2, Singapore 10, Sweden 1, UK 9, US 41
Maritime Administration of the Union of Comoros 144 70 49% Bangladesh 1, Bulgaria 1, Cyprus 1, Greece 8, India 2, Kenya 1, Kuwait 1, Lebanon 5, Norway 1, Pakistan 2, Philippines 1, Russia 9, Saudi Arabia 1, Syria 8, Turkey 8, Ukraine 13, UAE 5, US 2
Republic of Cyprus Department of Merchant Shipping 868 724 83% Austria 1, Belgium 1, Canada 2, China 10, Cuba 2, Denmark 1, Estonia 5, Germany 197, Greece 292, Hong Kong 2, India 1, Iran 2, Ireland 1, Israel 4, Italy 5, Japan 19, South Korea 2, Latvia 1, Lebanon 1, Netherlands 23, Norway 17, Philippines 1, Poland 18, Portugal 1, Russia 50, Singapore 1, Slovenia 4, Spain 7, Sweden 2, Switzerland 3, Syria 2, Turkey 1, Ukraine 6, UAE 10, UK 21, US 8)registered in other countries: 133 (Antigua and Barbuda 2, Bahamas 20, Belize 1, Cambodia 9, Comoros 1, Georgia 1, Gibraltar 5, Greece 5, Isle of Man 4, Liberia 5, Malta 15, Marshall Islands 39, Norway 2, Panama 15, Russia 2, Samoa 1, St Vincent and The Grenadines 3, Turkey 2, UK 1, unknown 1
Equatorial Guinea 1 0 0%
French International Ship Register 141 56 40% Belgium 6, China 5, Denmark 3, Germany 1, Italy 2, Japan 5, Norway 17, NZ 1, Saudi Arabia 1, Singapore 2, Sweden 10, Switzerland 3)registered in other countries: 145 (Antigua and Barbuda 1, Australia 1, Bahamas 43, Belgium 1, Bermuda 1, Cameroon 1, Gibraltar 1, Hong Kong 1, Indonesia 1, Isle of Man 2, Italy 5, South Korea 8, Liberia 5, Luxembourg 14, Malta 4, Morocco 13, Netherlands 1, Norway 3, Panama 15, Singapore 1, St Vincent and The Grenadines 7, Taiwan 1, UK 9, Wallis and Futuna 6
German International Ship Register 382 7 2% China 2, Finland 4, Ireland 1
Georgia 209 180 86% Albania 2, Azerbaijan 1, China 4, Cyprus 1, Egypt 14, Germany 2, Greece 7, Lebanon 3, Monaco 10, Romania 15, Russia 17, Slovenia 2, Syria 54, Turkey 23, Ukraine 24, UAE 1
Gibraltar Registry of Shipping 216 201 93% Belgium 3, Cyprus 5, Denmark 9, Finland 3, France 1, Germany 117, Greece 8, Iceland 1, Italy 1, Netherlands 11, Norway 27, Sweden 10, UAE 2, UK 3
Honduras 126 40 32% Bangladesh 1, Canada 1, China 3, Egypt 4, Greece 1, Hong Kong 1, Israel 1, Japan 4, South Korea 6, Lebanon 2, Mexico 1, Singapore 10, Taiwan 2, Tanzania 1, US 1, Vietnam 1
Jamaica Ship Registry 13 12 92% Denmark 1, Germany 1, Greece 8, Latvia 2
Lebanon 35 3 9% Greece 2, Syria 1
Liberian International Ship and Corporate Registry 1,948 1,904 98% Argentina 3, Australia 2, Belgium 1, Brazil 3, Canada 3, China 32, Croatia 5, Cyprus 5, Denmark 12, Estonia 1, France 5, Germany 728, Gibraltar 7, Greece 311, Hong Kong 21, India 2, Indonesia 1, Israel 9, Italy 31, Japan 111, South Korea 4, Kuwait 1, Latvia 15, Lebanon 2, Mexico 1, Monaco 8, Netherlands 28, Norway 42, Poland 14, Qatar 2, Russia 87, Saudi Arabia 24, Singapore 42, Slovenia 1, Sweden 11, Switzerland 11, Taiwan 82, Turkey 7, Ukraine 24, UAE 22, UK 74, US 103, Uruguay 3, Vietnam 3
Malta Maritime Authority 1,281 1,197 93% Austria 1, Azerbaijan 3, Bangladesh 3, Belgium 10, Bulgaria 15, Canada 15, China 13, Croatia 12, Cyprus 15, Denmark 10, Estonia 7, France 4, Germany 67, Greece 448, Hong Kong 1, Iceland 7, India 3, Iran 24, Israel 21, Italy 45, Japan 3, South Korea 3, Latvia 36, Lebanon 12, Libya 3, Monaco 1, Netherlands 3, Norway 71, Pakistan 2, Poland 25, Portugal 3, Romania 10, Russia 66, Slovenia 3, Spain 1, Sweden 1, Switzerland 22, Syria 4, Turkey 143, Ukraine 28, UAE 10, UK 12, US 11
International Registries, Inc (Marshall Islands) 990 857 95% Australia 1, Belgium 1, Bermuda 5, Canada 4, Chile 4, China 3, Croatia 4, Cyprus 39, Denmark 9, Finland 2, Germany 214, Greece 226, Hong Kong 4, Italy 3, Japan 5, South Korea 3, Latvia 10, Malaysia 3, Monaco 7, Netherlands 5, Norway 62, Romania 1, Russia 4, Saudi Arabia 4, Singapore 12, Slovenia 3, Spain 3, Sweden 1, Switzerland 14, Turkey 41, UAE 14, UK 17, US 129
Ministry of Public Infrastructure, Land Transport & Shipping (Mauritius) 5 2 40% India 2
Mongolia Ship Registry 73 62 85% Bulgaria 2, China 3, Hong Kong 1, Japan 1, Lebanon 1, Malaysia 1, Russia 17, Singapore 12, Syria 1, Thailand 1, Ukraine 3, UAE 5, Vietnam 14 Mongolia is a landlocked nation
Myanmar (Burma) 33 8 24% Germany 5, Japan 3
Netherlands Antilles 138 125 91% Belgium 1, Cuba 1, Denmark 1, Germany 48, Netherlands 53, Norway 5, Sweden 3, Turkey 12, US 1
North Korea 171 29 17% Egypt 1, India 1, Israel 1, Lebanon 3, Lithuania 1, Pakistan 1, Romania 6, Russia 1, Syria 7, Turkey 1, UAE 4, Yemen 2
Autorídad Maritima de Panamá 5,764 4,949 86% Albania 1, Argentina 8, Australia 4, Bahamas 2, Bangladesh 1, Belgium 11, Bulgaria 1, Canada 17, Chile 8, China 473, Colombia 4, Croatia 6, Cuba 11, Cyprus 15, Denmark 32, Dominican Republic 1, Ecuador 2, Egypt 13, Estonia 3, France 15, Gabon 1, Germany 38, Greece 505, Hong Kong 137, India 25, Indonesia 37, Iran 4, Ireland 1, Israel 2, Italy 10, Jamaica 1, Japan 2,151, Jordan 11, South Korea 316, Kuwait 1, Latvia 5, Lebanon 3, Lithuania 5, Malaysia 14, Maldives 1, Malta 2, Mexico 4, Monaco 11, Netherlands 14, Nigeria 6, Norway 60, Oman 1, Pakistan 5, Peru 15, Philippines 12, Poland 15, Portugal 9, Qatar 1, Romania 8, Russia 9, Saudi Arabia 14, Singapore 83, Spain 61, Sri Lanka 3, Sweden 9, Switzerland 26, Syria 24, Taiwan 306, Thailand 10, Turkey 53, Turks and Caicos Islands 1, Ukraine 8, UAE 108, UK 35, US 115, Venezuela 10, Vietnam 10, Yemen 5
São Tomé and Príncipe 7 2 29% Egypt 1, Greece 1
SVG Maritime Administration (Saint Vincent and the Grenadines) 582 536 92% Austria 2, Bangladesh 1, Barbados 1, Belgium 9, Bulgaria 13, Canada 6, China 106, Croatia 7, Cyprus 3, Czech Republic 1, Denmark 16, Egypt 4, Estonia 20, France 7, Germany 3, Greece 81, Guyana 2, Hong Kong 7, Iceland 15, India 5, Iran 1, Israel 4, Italy 19, Kenya 2, Latvia 20, Lebanon 7, Lithuania 7, Malta 1, Monaco 6, Montenegro 1, Netherlands 5, Norway 19, Pakistan 1, Philippines 1, Poland 1, Portugal 1, Puerto Rico 1, Romania 1, Russia 19, Singapore 6, Slovenia 5, Sweden 2, Switzerland 12, Syria 11, Turkey 20, Ukraine 12, UAE 12, UK 9, US 21
Merchant Shipping Division (Sri Lanka) 24 6 25% Germany 6
Tonga 14 3 21% Australia 1, Switzerland 1, UK 1 International registry suspended in 2002.
Vanuatu Maritime Services Limited 51 51 100% Australia 2, Belgium 4, Canada 5, Estonia 1, Japan 28, Poland 7, Russia 1, Switzerland 2, US 1


See also



References

Further reading

  • Carlisle, Rodney. (1981). Sovereignty for Sale: The Origin and Evolution of the Panamanian and Liberian Flags of Convenience. Annapolis, MD: Naval Institute Press. ISBN 0-87021-668-6
  • Carlisle, Rodney. (2009). Second Registers: Maritime Nations Respond to Flags of Convenience, 1984-1998. The Northern Mariner/Le marin du nord, 19:3, 319–340.


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