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Flags of Convenience

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After picking up the Flags Of Convenience (FOC) chart I was interested in finding out more about FOCs... some detail follows.

FOC ship-owners are people who, for a variety of reasons all connected with making money, have chosen to give their ship a false nationality. Ships flying the flag of Panama, Liberia etc. have no real connection with these countries. The owner has simply chosen the flag from a wide selection on offer, and then chosen the nationality of the crew in the same way. The FOC countries do not enforce minimum social standards or trade union rights for seafarers. If they did, ship-owners would soon lose interest in them. The countries from which the crew are recruited can do little to protect them, even if they wanted to, because the rules which apply on board are those of the country of registration.

Many seafarers working on FOC ships receive shockingly low wages, live in very poor on-board conditions, and work long periods of overtime without proper rest. They get little shore leave, inadequate medical attention, and often safety procedures and vessel maintenance are neglected (in many cases reported to the International Transport Workers' Federation (ITF), FOC ships have been unseaworthy). In some of the worst cases, seafarers are virtual prisoners on FOC vessels.

Definition: In defining an FOC register, the ITF takes as the most important factor whether the nationality of the ship-owner is the same as the nationality of the flag. In 1974 the ITF defined an FOC as follows: "Where beneficial ownership and control of a vessel is found to lie elsewhere than in the country of the flag the vessel is flying, the vessel is considered as sailing under a flag of convenience."

It is the ITF Fair Practices Committee (or the FPC sub-committee) which decides what is and what isn't an FOC. The FPC maintains a list of countries offering FOC facilities and from time to time adds or deletes countries from the list. The basis for membership of this select club is the so-called "Rochdale Criteria" laid down by a British Committee of Inquiry in 1970. These were:

the country allows non-citizens to own and control vessels;
access to and transfer from the register is easy;
taxes on shipping income are low or non-existent;
the country of registration doesn't need the shipping tonnage for its own purposes but is keen to earn the tonnage fees;
manning by non-nationals is freely permitted;
the country lacks the power (or the willingness) to impose national or international regulations on its ship-owners.

In today's world with second registers, bareboat charter arrangements and other methods designed to get around ITF policy, defining an FOC is becoming more and more difficult. However, ships registered in an FOC register which can demonstrate that they are genuinely owned in that country are not treated as FOCs. Equally, ships from countries not on the list will be treated as FOCs if the ITF receives information that they are beneficially owned in another country.

The list, as at 13 June 1997:

Antigua & Barbuda, Aruba (added June 1997), Bahamas, Barbados, Belize, Bermuda, Burma, Cambodia (added June 1997), Canary Islands, Cayman Islands, Cook Islands, Cyprus, Germany Second Register GIS, Gibraltar, Honduras, Lebanon, Liberia, Luxembourg, Malta, Marshall Islands, Mauritius, Netherlands Antilles, Panama, Sri Lanka, St Vincent & the Grenadines, Tuvalu, Vanuatu.

As well as adding Aruba and Cambodia to the list, the FPC felt that the Singapore, Philippines, Estonia, Ukraine, Djibouti and Madeira flags should be further investigated and that consideration should be given to declaring these as FOCs depending on the evidence.

The second register list: Denmark (DIS), Germany (GIS), Isle of Man (UK), Kerguelen (France), Norway (NIS).

The ship-by-ship list consists of Hong Kong, Philippines (foreign owned ships bareboat chartered to the Philippines) and Singapore (foreign owned ships without approved agreements).

The ITF also maintains a list of blacklisted companies who are particularly prominent in FOC practice.

"There are good shipowners": Not all ship-owners operating FOC vessels are as bad as the worst contingent who scrimp on wages and safety measures, save on food and clothing for crew, and budget by manning their ships properly. The ITF has a good relationship with many companies who take their responsibilities seriously. These are ship-owners who have seen the sense of signing an ITF agreement, and then who have strictly complied with it. In the ITF's experience, their ships are relatively safe, an example to other ship-owners, and prove that it is not so difficult to run an efficient operation without exploiting ships crews or putting their lives at risk. In fact, those ship-owners who do implement ITF agreements are some of the most successful in the industry.

History: ITF unions first raised questions of flag transfers to Panama as early as 1933. The flagging out became a major threat to the world's seafarers after the end of WW2. Following the post-war upswing in trade and plenty of cheap, surplus wartime shipping on the market, a number of US ship-owners began to use the Panamanian register.

By 1948 the Panamanian register had grown to over 3 million gross registered tons. Along with Honduras and Liberia, these nations were referred to as the Panlibhon countries - later expanded, to include Costa Rica, as Panlibhonco.

Flagging out gathered speed in the early 1950s. In 1952 there were 50 FOC ships under ITF acceptable agreements (so there were many more not under agreement). Liberia was now a major FOC nation.

In 1954 there were 6.5 million gross registered tons under the Panlibhonco flags, an increase of 2.5 million tons in 2 years.

In 1956, 300,000 tons of Panlibhonco shipping was covered by ITF agreements. But the tonnage of these flags had leapt to 11 million tons - almost doubling in two years.

By 1967, the Liberian register had passed the UK to become the largest in the world.

Flag of convenience fleets have continued to grow throughout the 1970s and 80s. A new development on the shipping scene are the so-called Second Registers, in countries like Norway (NIS), Denmark (DIS) and Germany (GIS). Ships sailing under the Norwegian NIS flag can employ third world crews. These crews are paid through local agreements in their home countries. The operation of second register ships is often similar to FOC registers.

Today: Every year since 1985 there has been an increase in the volume of seaborne trade worldwide. 104,421 seafarers serve on Panama flag vessels. FOTC accounted for 20.12% of vessels and 46.5% of gross tonnage in December 1996. FOC had the worst record for losses in 1996, both in terms of tonnage lost and absolute numbers of vessels lost.

Safety, the environment and seafarersą conditions all continue to be threatened by the existence of FOC.

References:

Flags of Convenience: The ITF's Campaign published by the International Transport Workers' Federation (ITF), UK.
ITF Maritime News, Number 2, 1997, published by the ITF Maritime Department, UK.

David Cohen, 01 October 1997

The article about Flags of Convenience on Wikipedia further indicates:

"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.

Other arguments against flags of convenience include evasion of taxes and lack of patriotism". This last sentence is especially true in the sense that flags were created to reflect values and patriotism.

There's also another paragraph worth mentioning:
"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 ground breaking international treaty."

Finally, to have a better perspective, here's an incomplete list of vessels registered by country:
http://en.wikipedia.org/wiki/List_of_merchant_marine_capacity_by_country
Esteban Rivera, 15 March 2009