What do Panama and Gibraltar have in common? What about Singapore and Malta? In addition, there are many others such as The Bahamas, the Netherlands Antilles, Cyprus, Liberia, Marshall Islands and Vanuatu.
They all are major players when it comes to the consolidated business of convenience flags.
Why is it so popular for ships to show the flag of a state which they clearly have no ties with?
A growing number of ship owners choose to sail under a flag of convenience (FOC) because it is less expensive, and it allows to operate under lax regulations. As a matter of fact, vessels are taxed and should comply with the law of the country of registration, which seldomly coincides with the state the ship owner resides in. What’s more, ships flying FOC neither operate routes involving the country they’re registered in nor have a crew of that same nationality.
This relevant practice has been widely adopted for many years now. In order to have an idea about the substantial impact that FOC have on the world trade, the study “Quasi-flag of convenience shipping: The wave of the future”, by Singapore Management University, is recalled. According to the authors, in 1991 already, nearly one third of the global trade involved vessels registered in FOC countries. This extremely high percentage is particularly worrying due to the many problems arising from convenience flags.
Seafarers’ rights at risk
First, seafarers are among the stakeholders who pay the highest price. As a matter of fact, FOC vessels have been reported to have much lower standards of working conditions as compared to other vessels.
Moreover, several mariner rights are often not granted on FOC ships, such as the right to form or join trade unions, demand suitable pay, pay scales, and many others. Indeed, many cases have been reported where seafarers weren’t paid their rightful salary or their payments were delayed.
Furthermore, another relevant area in which convenience flags really play a big role is marine wildlife protection, as FOC ships are less likely to abide by stringent fishing laws and safety standards.
On the one hand, several endangered species are at great risk due to less stringent rules that FOC vessels follow. An intriguing case is provided by the initial tension between the International Convention for the Regulation of Whaling(ICRW) and various FOC states.
As highlighted in the report “Sharing the catches of whales in the Southern Hemisphere”, published by the Food and Agriculture Organization (FAO), many FOC countries were particularly unwilling to join the ICRW. This led to many complications with respect to the difference between the number of whales actually killed by each country and its assigned quota.
On the other hand, a 2014 study conducted by D. D. Miller and R. U. Sumalia found that vessels flying FOC are significantly more common among ships involved in spill accidents. Hence, it is safe to say that oil spills, which are among the worst menaces for marine wildlife and environment, are dangerously related to FOC countries.
Flag of convenience in civil aviation
Liberalization and deregulation in the airlines sector have also led to the adoption of flags of convenience for the aforementioned reasons: less rigid safety standards and more favorable taxation.
However, a light was recently shed upon this matter, at least in the United States of America. Indeed, the Irish-registered subsidiary Norwegian Air International, (branch of the Scandinavian group Norwegian Air Shuttle) brought the FOC theme at the center of the attention of the US Congress, which in 2019 tabled legislation that would prevent from issuing permits to foreign airlines engaged in the FOC practice.
In conclusion, it looks like the troubles caused by convenience flags are an extremely delicate matter for countries and international organization to deal with. Still, this phenomenon has such negative consequences that action must be taken as soon as possible.
Luckily, it looks like key players as the European Commission, Taiwan, Thailand, and the United States are going in the right direction. Indeed, on 15th October 2020 they all joined a closed roundtable where they began exchanging ideas on potential actions to tackle the problem.