- British-flagged ship owned by a Swedish company was seized by Iran last week, putting 23 seamen in trouble.
- British or American flagged vessels enforce their own safety rules whereas the Caribbean island doesn’t have a large civil service so enforcing the rules are not very good.
- The war risk insurance costs for British-flagged ships have gone up by tens of thousands of dollars per trip since the Stena Impero capture, giving owners incentive to ditch the UK flag.
The current crisis in the Strait of Hormuz has put a spotlight on the murky world of international shipping, where shipowners can register and re-register their vessels within minutes, reports CNN World.
Registration under any flag
Michael Roe, a professor of maritime and logistics policy at the University of Plymouth, said that any ship can be re-registered under the desired flag if they have a credit card.
He added that under marine laws, every merchant ship has to be registered with one country.
Flag of convenience
While the UN Convention on the High Seas says a vessel should have “a genuine” link with its flag state, current rules allow ships to sail under almost any flag regardless of their ownership, as long as they pay the registration fee. This is known in the shipping industry as a “flag of convenience.”
Roughly 40% of the global fleet is registered in Panama, Liberia and the Marshall Islands, three countries that together own just 169 ships, showing that it is a common practice.
Roe mentioned that these are totally irrelevant countries when it comes to shipping, except they’ve got cheap flags with low standards of regulation.
Registration driven by commercial reasons
Roe added that choosing a flag like Mongolia will cut short the costs, as it doesn’t have a cost or port and real direct relevance to shipping. Yet it offers a flag that’s cheap and low standards, therefore it is good for shipowners.
Greece, a shipping superpower that owns the largest fleet in the world, is sailing most of its ships under a foreign flag, because shipowners want to avoid Greece’s high tax rates.
It’s quite common for shipping companies to shop around for a flag which suits them, said Richard Coles, senior research fellow at the Institute of Maritime Law at the University of Southampton.
Enforcement of safety rules
Coles, a long-time shipping lawyer, said the term “flag of convenience” is considered somewhat derogatory in the shipping industry, because under international conventions, every ship has to comply with common safety, environmental and labor law standards, regardless of its flag.
He said that British or American flagged vessels enforce their own safety rules. On the other hand, the Caribbean island doesn’t have a large civil service so enforcing the rules are not very good.
Huge impact on crews
The flag decision can have a huge impact on crews. Stena Impero, the Swedish-owned tanker that was seized in Iran last week, was almost certainly targeted because if was flying the British flag.
Iran captured the vessel after its own tanker was detained in Gibraltar because it was carrying Iranian oil to Syria in breach of EU sanctions.
The crew aboard Stena Impero comes from India, the Philippines, Russia and Latvia, countries that are mostly not involved in the current spat between the Iranians and the West.
David Heindel, the chair of the seafarers section at the International Transport Workers’ Federation (ITWF), said the risk crews are facing in the Strait of Hormuz is “totally unacceptable.”
The ITWF has been campaigning against flags of convenience for decades, saying the practice puts crews at risk of exploitation.
Flag of convenience for national seafarers
When a ship registers with a country, it assumes its nationality and becomes governed by that state’s laws. In return, the country is theoretically responsible for the vessel and its crew regardless of their nationalities.
But Heindel said seafarers sometimes find it difficult to get help from their vessel’s flag state if they are not its citizens.
That is especially true when the flag belongs to a developing country with little diplomatic power and no real labor protections.
Diplomatic missions of countries
At the same time, Heindel said, the diplomatic missions of the seafarers’ own countries may not be able to help either. It may be their citizens who are involved, but they have no power over the vessels.
Ships are allowed to switch flags and re-register as they please, even mid-journey.
In a conflict situation, security becomes a concern and re-flagging could provide respite.
For example, during the first Gulf War, quite a few [Kuwaiti] vessels were re-flagged under the UK flag and some were re-flagged under the United States flag in order to gain the protection of those countries.
Role of insurance
Lloyd’s List reported that the war risk insurance costs for British-flagged ships have gone up by tens of thousands of dollars per trip since the Stena Impero capture, giving owners incentive to ditch the UK flag.
According to the spokesperson of Stena Bulk, Stena Impero’s owner, the British and Swedish governments are leading the diplomatic efforts to have the ship and the crew released, keeping the Russian, Latvian, Philippine and Indian embassies informed.
Erik Hanell, Stena Bulk’s CEO, said he wouldn’t speculate on whether the ship’s flag played a role in the seizure. He said that while Stena Bulk is Swedish-owned, the company operates “all over the globe” and has “a big presence in Britain.”
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Source: CNN World
