Everything about Flag Of Convenience totally explained
A ship is said to be flying a
flag of convenience if it's registered in a foreign country "for purposes of reducing operating costs or avoiding government regulations".
The term comes from the flag that ships fly to show their country of registration. Under conventions of
international law, the country of registration determines the source of law to be applied in
admiralty cases, regardless of which
court has
personal jurisdiction over the parties.
Background
As of 2000, half the world's tonnage of merchant ships were registered under flags of convenience. Some reasons for this include the avoidance of heavy taxes, the ability to hire crews from lower-wage countries, and an overall reduction in the cost of transportation. and the practice of re-flagging ships grew in popularity during the period from 1920-1933 of
Prohibition in the United States."
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 .
Jurisdictions which are criticised as offering flags of convenience also often have relatively sophisticated maritime codes, and courts which are versed in
maritime law and
admiralty matters.
Registering vessels in such jurisdictions where they can be mortgaged effectively and the mortgagee's property rights respected facilitates the financing of such vessels. Forcing vessels to register in jurisdictions with unsophisticated maritime laws or where mortgaging the vessel is difficult to do effectively, or worse yet, where the vessel becomes vulnerable to
compulsory acquisition causes unnecessary disruption and increased expense in an already volatile international shipping market.
Ultimately, the higher costs of registering ships in traditional registries is passed on to individual consumers every time that they pay for goods or services which require maritime transport. Restrictive, bureaucratic and expensive registries such as the U.S. flag add hugely to the expense of shipping and have arguably resulted in a small, old and inefficient merchant fleet (see
The Jones Act). Tax-efficient flags of convenience enable both lower costs of registration and the maintenance of proper technical, safety and environmental standards, which are influenced not just by the flag that the vessel flies but also by its classification society, insurers, managers and the port state authorities of the countries where it calls to trade.
Supporters note that similar criticisms are rarely raised with regard to aircraft registrations, to which similar considerations apply, but which employ fewer people, and form part of a less
unionised industry.
List of flags of convenience
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,"
|1,021
|1,134
|67
|217
|126
|9
|463
|122
|70
|724
|0
|56
|7
|180
|201
|40
|12
|3
|1,904
|1,197
|857
|2
|62
|8
|125
|29
|4,949
|2
|536
|6
|3
|-
|
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
|
|}
Further Information
Get more info on 'Flag Of Convenience'.
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