Winchester, Nik

English

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How the squeeze on standards enables small flags to flourish

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Open Research OnlineThe Open University’s repository of research publicationsand other research outputsHow the squeeze on standards enables small flags toflourishJournal ItemHow to cite:Winchester, Nik (2001). How the squeeze on standards enables small flags to flourish. The Sea, 151 p. 4.For guidance on citations see FAQs.c© [not recorded]Version: Version of RecordLink(s) to article on publisher’s website:http://www.sirc.cf.ac.uk/Copyright and Moral Rights for the articles on this site are retained by the individual authors and/or other copyrightowners. For more information on Open Research Online’s data policy on reuse of materials please consult the policiespage.oro.open.ac.uk4  the sea   may/june 01The SIRC columnHow the squeeze onstandards enablessmall flags to flourishNik Winchester of the SeafarersInternational Research Centre looksat the difference between theestablished open registers and someof the new arrivals on the sceneWHEN we see the flags flown byships, and the ports of registrypainted on their sterns, we noticethat most of them are attached tosuch places as Panama andLiberia, Bahamas and Malta. Wetake them for granted becausethey have become so familiar andso numerous even though wemay find it difficult to connectthese flags with our under-standing of what constitutes aproper maritime nation.In recent years a number ofother flags have arrived on thescene from countries that are notso familiar, such as Belize, Bolivia,Cambodia, and EquatorialGuinea. Since the registers ofships attached to these flags haveshown extremely rapid growthrates over their short lifespans, itis reasonable to wonder why thisgrowth has occurred and whatthe consequences might be.The initial response to thesenew arrivals is simply to see themas yet further examples of openregisters or flags of convenience.After all, don’t all open registersoperate in the same manner?Well no, they don’t. Not anylonger. In the wake of a longseries of tanker disasters begin-ning, perhaps, with the TorreyCanyon in the late 1960s andculminating in March in the twohalves of the Kristal adrift offnorthern Spain, the world hasdeveloped a regulatory systemaimed at chasing ships com-monly found on the flag ofconvenience registers. The bigregisters such as Panama andLiberia, which are also bigbusinesses, have been obliged todevelop tighter practices. And sothe situation in respect of thesenew flags is less straightforwardthan it first appears, because thesenew registers have had to find amarket niche which does notinvolve them in competing withthe established giants in the flagindustry.Shipowners like to cite cost asthe key reason for choosing toregister a ship under a particularflag. Certainly, when looked at insimple cost terms, these newregisters display similar qualitiesto their much bigger brothers andsisters.Essentially, they make itpossible for seafaring labour to beprocured from anywhere in theworld; they offer tax regimeswhich are low or non-existent;and there are no extensiveregulatory requirements placedupon the ships’ owners.But there are several ways inwhich these new registers differfrom their established peers. Themost immediately obviousdifference is that they have farfewer regulatory restrictions thanthose required by the big flags ofconvenience. Certainly ashipowner resorting to any ofthese new flags may choose tofulfil all international require-ments. But the flag administra-tions – if they may actually becalled that - make it plain thatthis is a matter for the shipownersthemselves and that they, the“administrators”, are in practiceindifferent as to levels of compli-ance with international conven-tions.This practice of passingresponsibility for regulatorycompliance has, or course, beencommon among open registersbut, as we have seen, the largerregistries have begun to placehigher expectations upon theirshipowner clients. This regula-tory squeeze has driven out themore marginal owners who havegone in search of (or, in somecases, actually helped to set up)new flag registries. In short, theraison d’être of these registers isthe provision of a regulation freeenvironment for the shipowner.The very success of these flagsdepends on the continued andanticipated maintenance of a flagstate completely uninterested inregulatory enforcement. It is alsoworth noting that, where thelarger flag of convenienceregisters are anxious to demon-strate their regulatory credentials,the registration requirements forthese new registers are organisedin such a way as to shelter theshipowner from any enforce-ment procedures which otherregulators may seek to apply. Thatis to say the flag state neitherattempts to impinge upon theautonomy of the shipowner, norspecifies any link between the flagand the state. In other words, andin the cases of the new registries,the state as regulator is absent.The administrations of Belize,Bolivia, Cambodia and EquatorialGuinea have no legal means ofrequiring a shipowner’s compli-ance with internationalstandards.The new registries are prettyobviously a commercial responseto the new flag market paradoxi-cally opened up by the world-wide pressure for higher opera-tional standards in shipping. Thelimited success of port statecontrol as a means of enforcinginternational regulations hasbeen well documented. Yet how-ever limited port state control hasbeen, it has nevertheless led tothe increasing deletion of sub-standard ships from establishedopen registers and the introduc-tion of more rigorous entryrequirements for registration.These deletions and height-ened entry standards have led tothe existence of a significantnumber of ships temporarilywithout flags but in need of one.Without a flag, an asset cannottrade legally. In these circum-stances the owner has either toscrap the ship, or find anotherflag willing to take the rejects ofthe big flags of convenience. Thisis where registers such as Belizeand Cambodia enter the scene.The established open registershave closed a portion of themarket to themselves in order toprotect the profitability of theregister. Yet the invisible hand ofthe market always finds a way offilling niches, and the newentrants can do just that bypicking up unwanted tonnageconsidered too risky by thePanamas and Liberias.The decision by establishedopen registers to delete shipslikely to be detained by port statecontrol inspectors is a recogni-tion of the increasingly successfulattempts to enforce internationalstandards. Shipowners wishing toavoid deletion must conform tominimum international stand-ards, but this has cost implica-tions. The net effect of thisprocess has been to slowlyincrease standards in the estab-lished open registers, although itwould be false to claim thatstandards have risen consider-ably across the board. Thisincrease in standards has left agap in the flag market both forships that have been deleted, andshipowners who do not wish, orwho are unable, to cover the costsof increased regulation. It is thisvery space at the rock bottom ofthe market that these newregisters enter and fight foramong themselves.While the success of interna-tional regulation has beenlimited, it can be claimed that theestablished open registers are partof the network of internationalregulatory bodies. Panama andLiberia are, after all, among thelargest due-paying contributors tothe International MaritimeOrganisation. By contrast, thenew registers operate outsidesuch bodies, and their successshows, paradoxically, that theenforcement of standards has ledto the further deregulation of apart of the ship registrationmarket. This, in turn, has had anegative effect on the quality ofshipping and  rights of seafarers.

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How the squeeze on standards enables small flags to flourish

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