Last modified: 2000-05-24 by ole andersen
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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 shipowners 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, shipowners 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 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 shipowner 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 isnıt 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:
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).
(So, the FOC chart this correspondent picked up in Fremantle recently is somewhat out of date - it has the HK flag, not the Aruba or Cambodia flags etc.)
The ITF also maintains a list of blacklisted companies who are particularly prominent in FOC practice.
"There are good shipowners": Not all shipowners operating Foc vessels are as bad as the worst contingent who 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 shipowners who have seen the sense of signing an ITF agreement, and then who have strictly complied with it. In the ITFıs experience, their ships are relatively safe...an example to other shipowners, 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 shipowners 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 worldıs 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 shipowners 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. FOCs accounted for 20.12% of vessels and 46.5% of gross tonnage in December 1996. FOCs had the worst record for losses in 1996, both in terms of tonnage lost and absolute numbers of vessels lost.
Safety, the environment and seafarersı conditions all continue to be threatened by the existence of FOCs.
Isn't that stretching the theory of a "flag of convenience" a little too far?
I mean, the sea route between the North and South Islands isn't exactly "International Waters," is it?
Anyone well versed in "flags of convenience" care to comment?
Nick Artimovich 09 September 1998
If New Zealand Government doesn't outlaw the practice then the ship's owner is free to register their ship anywhere they find advantegous.
Using a foreign flag on a ship that travels between two points within the same country is not without precedent. In treaty port days (1840s through mid-1940s) before World War II several nations: US, UK, France, Russia until 1917, Germany until 1914, Italy and Japan (among others) had their flags used extensively on merchant ships plying their trade on the inland and coastal waters of China. Most of these ships seldom or never left Chinese waters.
Phil Abbey, 09 September 1998
In a debate on Danish TV, I believe it was in December, fears were ventilated that Dannebrog was becoming a flag of convenience. You see, for some years we've had Dansk Internationalt Skibsregister [if I tell you that 'skib' in 'ship' in Danish, you should be able to decode it], the purpose of which is to keep the ships under Dannebrog by tax-exempting the sailors. When they don't have to pay taxes, they can be paid less. Since we usually pay around 50% of our income in tax, it is quite a lot of money involved.
Ole Andersen, 01 February 1999
The problem is that flags of convenience conflict with the law of the flag, one of the oldest traditions of admiralty. This law is customary, not actually codified. In its simplest form, the law states that, in governing disputes regarding a vessel, the law to be utilized is dictated by its registry. In older times, this was simply shown by the flag flown by the ship - - its nationality.
The problem is that many modern shipping firms register their ships in Liberia, the Bahamas, Panama, etc. While the corporation owning the ships may be located in those places, all of the shares of the ship owning company may be owned by a company located in the USA, Britain, the Netherlands or elsewhere. The main underlying point is that these companies register their ships in places which permit them lower costs of operation while maintaining profits.
When issues arise which conflict between the two concepts, they can be quite difficult for a court to determine what law to apply.
Calvin Paige Herring, 31 January 1999
The countries that are generally used for Flags of Convenience are listed on http://www.flagsofconvenience.com/follow: