Flags of Convenience

Have you ever looked closely at an advertisement for a cruise ship line and noticed that the ports of registry are always the same handful of countries no matter where the cruise is located?  How, for example, can the entire fleet of Carnival Cruise lines be registered in Panama if most of the ships are based out of Florida? Even the ships of the quintessentially British Cunard Line, the Queen Mary 2, the Queen Victoria and Queen Elizabeth, are now registered in Bermuda rather than in the United Kingdom. Extend the query to all types of ocean-going vessels, and it becomes even more bizarre. How can Liberia, one of the poorest countries on Earth, and one with less than 4 million people at that, be home to 11% of the entire world’s maritime fleet?

This is the phenomenon known as using a flag of convenience, a practice in which a ship owned by someone in one country is registered in another country and flies that countries flag instead, ostensibly to flout regulations, duties, and labour laws.  Essentially, ship owners shop around for laws that suit them the best and allow them to reduce costs, saving them money but often meaning the ships that have no business on the sea are nevertheless approved for sailing with little more than a rubber stamp.  The practice began in the 1920s when US ship owners began registering their ships under the ship registry of the then-new country of Panama after the US enacted a set of laws bringing sailors’ rights and safety inspections to the forefront.   While this helps bring valuable registration fees into the coffers of the registering government, it makes for great difficulty in enforcing international maritime laws when something goes wrong. The practice even plays roles in national elections, as seen back in 2006 when then-Canadian prime minister Paul Martin came under fire when it was shown that ships in his family-owned Canada Steamship Lines fleet were registered in Barbados, Liberia, Cyprus, and even Vanuatu.

The most notable example in recent months of the difficulty of monitoring ships flying flags of convenience is that of the MV Rena, a Greek container ship employing a Filipino crew formerly registered in Israel as the ZIM America and then in Malta as the Andaman Sea before switching to the Liberian flag in 2010.  The Rena ran aground in the Bay of Plenty off of New Zealand’s North Island in October 2011, creating a major oil spill regarded as one of the worst environmental disasters in New Zealand history.  Over the previous three years, the Rena had been detained after inspection on multiple occasions, including a July 2011 detention in Australia for 17 separate deficiencies.

Use of flags of convenience exploded in the 1940s after the establishment of the Liberian registry by the former US Secretary of State Edward Stettinius, who created the registry in hopes providing of providing the African country with much-needed development funds.  Ship owners flocked to the Liberian registry en masse led by the Greek oil shipping tycoon Stavros Niarchos, and by 1967 Liberia possessed the largest registry in the world.  Eager to reap the large fees foreign ship owners were willing to pay to fly a flag other than their own, other small countries entered the international registry market; today just ten countries ‘control’ more than 70 percent of the world’s shipping fleet.

The International Transport Workers’ Federation lists 34 countries as being flags of convenience.  Of these countries, many of them have been flagged more for their refusal to accede to international maritime conventions than for their actual use as flags of convenience.  Among the countries flagged are Equatorial Guinea, which has registered all of one foreign-owned ship; Tonga, Lebanon, and Myanmar, with two each; and, rather surprisingly, Germany, with just six of its 427 ships registered to foreign owners. The presence of France on the list may surprise many as well, although its proportional of foreign-owned ships (50 of 162) is much higher than that of Germany.

Top Flags of Convenience (Source: The World Factbook, 2012)
Country of registry Registered Foreign-owned % foreign-owned Largest client country (# of ships)
Japan (2 372)
Germany (1 185)
Marshall Islands
Greece (408)
Greece (469)
Antigua and Barbuda
Germany (1 094)
The Bahamas
Greece (225)
Greece (201)
China (177)
Saint Vincent & the Grenadines
China (65)
Germany (123)
China (61)
United States (26)
Cayman Islands
United States (57)
Netherlands (52)

Panama is the largest registrant of ships by far, accounting for 23% of the world’s registered fleet.  The instability of Liberia during the past 30 years (not to mention the position of the registry as a source of legal funding for the Charles Taylor regime) allowed Panama to overtake it as the world’s largest registry, but the relative calm of the past few years has seen renewed growth in the Liberian registry.

In third place are the Marshall Islands, which possess the fastest-growing registry in the world.  The west Pacific island nation of less than 70 000 people only opened its registry in 1988, and yet now has 6% of the world’s deadweight tonnage flying its flags, including 29.5% of US tonnage.  Fourth and fifth are Malta and Antigua and Barbuda, which are also quickly-growing registries.  Malta, for example, is the registered home to two-thirds of the entire fleet owned by Iran.  As of 2009, the top five flags account for 50% of the world’s deadweight tonnage, and the top ten, 70.5%; figures that are increasing year after year.

Another registry is that of Cambodia, whose registry was only opened up in 1994.  Basing its registry out of Singapore and offering low fees with 24-hour processing time for new registrants, the lax monitoring system meant that Cambodian-flagged ships became a haven for illegal activities.  Cigarette smuggling in the Adriatic, oil smuggling out of Iraq during the Iraq war, human trafficking, and large scale drug trafficking and weapons smuggling (including Scud missiles and warheads) out of North Korea into the Middle East.  International pressure after a Cambodian-flagged ship was detained by the French Navy for cocaine smuggling forced Cambodia to stop registering ships in 2002, and a South Korean company took over the registration contract (visitors to the now-defunct registry website receive a 404 error notice in Korean).

Also notable is the number of landlocked countries that nevertheless have ship registries.  Anyone with an understanding of Bolivia’s longstanding desire to reclaim the Pacific coastline it lost to Chile in the 1879-1884 War of the Pacific may understand why it retains both its navy and its ship registry (as well, much commerce is conducted via the bi-national Lake Titicaca which Bolivia shares with Peru), but the other occurrences of such registries are again purely economic.  Moldova’s very short frontier along the Danube River, all of 350 m (1 150 ft), nevertheless gives the country much-needed access to a major international shipping corridor via the port of Giurgiuleşti, where the country constructed an oil terminal in 2006.  The most unlikely ship registrant may be Mongolia, which has absolutely no connection to the ocean whatsoever; like Cambodia, its registry is based out of Singapore and also offers 24-hour processing.

The very tiny frontage along the Danube possessed by Moldova.  The oil terminal at Giurgiuleşti is visible.

Further Reading

Brooke, J. (2004).  Landlocked Mongolia’s Seafaring Tradition.  New York Times, 4 June 2004.  Available at http://www.globalpolicy.org/component/content/article/172/29941.html.  Accessed 5 July 2012.

CBC News (2006).  In Depth: Paul Martin – Flags of convenience.  17 March 2006.  Available at http://www.cbc.ca/news/background/martin_paul/flagsofconvenience.html.  Accessed 5 July 2012.

Harper, P. et al. (2011).  Rena spill: ‘Tomorrow much worse’.  New Zealand Herald, 11 October 2011.  Available at http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid;=10758195.  Accessed 5 July 2012.

International Transport Workers Union (2012).  Flags of Convenience campaign.  Available at http://www.itfglobal.org/flags-convenience/index.cfm.  Accessed 5 July 2012.

Ndege, Y. (2011).  Liberia’s flags of convenience.  Aljazeera English, 15 October 2011.  Available at http://www.aljazeera.com/news/africa/2011/10/2011101575514543985.html.  Accessed 5 July 2012.

Neff, R. (2007).  Flags that hide the dirty truth.  Asia Times Online, 20 April 2007.  Available at http://www.atimes.com/atimes/Korea/ID20Dg03.html.  Accessed 5 July 2012.

United Nations Conference on Trade and Development (2009).  Review of Maritime Transport 2009.  New York and Geneva: United Nations.  Available at http://unctad.org/en/docs/rmt2009_en.pdf.  Accessed 5 July 2012.

Walker, J. (2011).  Cunard Drops Union Jack to Avoid British Labor Laws.  Cruise Law News, 20 October 2011.  Available at http://www.cruiselawnews.com/2011/10/articles/flags-of-convenience-1/cunard-drops-union-jack-to-avoid-british-labor-laws/.  Accessed 5 July 2012.

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One thought on “Flags of Convenience

  • i find it entertaining that the moldovan seacoast beats the bolivian one not just by the few hundred easily measurable meters of frontage on the danube but by countless kilometers of extra siding along the unmeasurably circuitous prut which may be navigable as far up as leova if one doesnt get seasick from all the tacking

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