The Flags of Convenience System

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Table of Contents

International Regulations
FOC Liability Issues
The Improvement of the Regulatory Framework
References

The marine flag is the symbol of a vessels nationality, and it plays a significant role in the identification of the existing relationships between the vessel and a state. The flag demonstrates that a ship is subject to the legislation of the country, and it helps to find the location of the ships owners easily (Goldie, 1991, p. 64). The international law requires every vessel involved in the international trade to be registered in the state and comply with the regulations of the state which flag it carries. Moreover, any country, consistent with international law, has the right to allow a vessel to fly its flag and to therefore bestow its nationality upon that vessel (Shaughnessy & Tobin, n.d., p. 1). The states are responsible for the activities of the vessels that carry their flags.

The flag of convenience (FOC) is the system that allows the vessel owners to avoid burdensome international legal regulations (Song, 2005). When the ships are involved in this system, they are not connected to the laws of countries where they are registered. It is found that FOC is beneficial for both owners of the vessels and the states that are in support of the system. The FOC system thrives because of the fiercely competitive shipping market in which ship owners look for the cheapest and least regulated ways of running their vessels (Flags of convenience, 2003, p. 48).

Nowadays, FOC causes many problems for the international community. It raises the issues of national security, environmental protection, labour policies, and illegal immigration.

International Regulations

The United Nations Convention on the Law of the Seas (UNCLOS) is the legislation that deals with maritime laws and jurisdictions. UNCLOS is comprised of 320 articles that cover the issues of usage and allocation of marine resources (Hollis, 2010, par. 1). The Convention is a comprehensive document; nevertheless, it is not flawless.

According to Article 91, Ships have the nationality of the State whose flag they are entitled to fly. There must exist a genuine link between the State and the ship (United Nations, n.d., p. 58). Flagging is meant to facilitate regulation of ships activities. Registration is the administrative formality that grants nationality (Shaughnessy & Tobin, n.d., p. 12).

Overall, flagging may be regarded as a legal agreement of reciprocity between the vessel owner and the country of the flag according to which a ship is required to keep up with the national laws, and the state is responsible for the ships protection. In this way, the international legal norms and standards become incorporated into the regional legislation. The flag nations are obliged to regulate and control the compliance with the international shipping standards on both regional and supranational levels.

Each country engaged in the marine trade activities should be bound to the UNCLOS legal controls and standards. However, the abidance with the international shipping standards implies taxes and other financial expenses. In an attempt to meet commercial interests, the FOC entities and nations frequently operate in a way that is contradictory to international law standards. By operating as open registries, FOC may significantly reduce costs and increase profitability (Shaughnessy & Tobin, n.d., p. 12).

The FOC ship owners avoid national taxation and decrease operating costs by paying low wages to the crews. There are also non-economic advantages to FOCs, such as decreased transparency of ownership for shipowners, decreased likelihood of vessel seizure during times of war or other emergencies, and (generally) stable political climates of the registering country that are conducive to business (Shaughnessy & Tobin, n.d., p. 15).

The marine vessels play a vital role in international trade, and they make a significant contribution to the development of the global economy. FOC countries and corporations represent a desire to derive a larger part of that profit by acting unethically and illegally. Nowadays, the closed registry nations recognize that FOCs cause many problems for the international marine trade by escaping safety regulations, taxes, and social policies.

FOC Liability Issues

Environmental Pollution

FOC is regarded as the major obstacle for the mitigation of the issues of ocean pollution (Keselj, 1999, p. 127). The marine environment deterioration is the international problem, and all national are thus involved in the process of its resolving. The fuel and oil pollution is extremely damaging for marine and coastal organisms. The environmental damage also has financial implications for the States proximate to the disasters location (Baker, 2012, p. 688).

FOC vessels frequently become a cause of environmental pollution. For example, the substandard oil tanker, the Prestige, wrecked near the Spanish coast and spilled over 50.000 tonnes of crude oil into the sea (Hamilos, 2013, par. 2). As a result, the marine and coastal flora and fauna suffered. Moreover, the Spanish and Portuguese fish trade was weakened, and the consequent costs of the environmental damage were borne by the states.

In an attempt to reduce costs provoked by compliance with the safety and ship repair standards, the FOCs underline the significance of safety and standardization control (Pozdnakova, 2012).

Marine and National Security

Dangerous cargo and a lack of transparency regarding ship ownership and crew members, combined with the lack of regulations by FOC states constitute a grave transnational threat (Shaughnessy & Tobin, n.d., p. 23). The containerization of marine trade caused the inability to control the shipping content and is commonly regarded as a potential threat of terrorist and weapon transportation (Mihei, 2012, p. 245). Containerization is proved to be an efficient method of shipping in international trade. Nevertheless, a large number of containers interfere with the successful conduction of safety inspections and, as a result, the identification of dangerous or illegal cargo becomes almost impossible (Karim, 2013, p. 128).

In this way, FOC system that supports the lack of transparency and regulations along with containerization of the trading industry creates the conditions in which the threats to national safety such as terroristic attacks are facilitated.

The Improvement of the Regulatory Framework

For the improvement of the marine security control, it is important to strengthen the links between the ships and the flag nations. Nowadays, FOCs create barriers for the development of a well-regulated shipping trade. For the problem resolving, the researchers suggest a two pronged approach, the creation of a dual incentive structure in which the benefits accrued by businesses and governments outweigh the costs of operating under increased regulation (Shaughnessy & Tobin, n.d., p. 24). In this way, the organisations and nations will obtain multiple advantages by following the UNCLOS standards.

The enforcement of the international marine regulations and eradication of FOCs through the elaboration and adoption of the appropriate domestic legal policies will have many positive implications for the safety of nations, human rights, environmental protection, and economy.

References

Baker, B. (2012). Flags of convenience and the Gulf oil spill: Problems and proposed solutions. Houston Journal of International Law, 34(3), 687-716. Web.

Flags of convenience: What are flags of convenience? (2003). The Ecologist, 33, 5. Web.

Goldie, L. (1991). Environmental catastrophes and flags of convenience does the present law pose special liability issues? Pace International Law Review, 3(1), 63-90. Web.

Hamilos, P. (2013). Spanish government cleared of blame for Prestige oil tanker disaster. The Guardian. Web.

Hollis, D. (2013). United Nations Convention on Law of the Sea (UNCLOS), 1982. The Encyclopedia of Earth. Web.

Karim, M. S. (2013). Flag state responsibility for maritime terrorism. The SAIS Review of International Affairs, 33(2), 127-134. Web.

Keselj, T. (1999). Port state jurisdiction in respect of pollution from ships: The 1982 United Nations Convention on the Law of the Sea and the memoranda of understanding. Ocean Development & International Law, 30(2), 127-161. Web.

Mihei, A. S. (2012). Flag of convenience risk factor in the security environment. International Scientific Conference Strategies XXI, Centre for Defence and Security Strategic Studies. Web.

Pozdnakova, A. (2012). Criminal jurisdiction over perpetrators of ship-source pollution: International law, state practice and EU harmonisation. Boston, US: Martinus Nijhoff Publishers. Web.

Shaughnessy, T., & Tobin, E. (n.d.). Flags of inconvenience: Freedom and insecurity on the high seas. Web.

Song, H. (2005). Declarations and statements with respect to the 1982 UNCLOS: Potential legal disputes between the United States and China after U.S. Accession to the Convention. Ocean Development & International Law, 36(3), 261-289. Web.

United Nations (n.d.). United Nations Convention on the Law of the Sea. Web.

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