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March 29, 2018

International shipping: the dichotomies within


March 29, 2018

The shipping industry is cyclical in nature and has, over the past few decades, witnessed immense changes. The role of the International Maritime Organization (IMO) has become all the more significant, especially with regard to port state control.

Shipping is a complex and capital-intensive business. As a result, private entrepreneurs are reluctant to engage in Pakistan as most of them have lost confidence in the country after nationalisation policies were introduced in 1973. The Pakistan National Shipping Corporation (PNSC), a public-sector body, is the only shipping line that is making profit through teamwork. The PNSC has strived to meet the strategic national requirements for fuel oil.

A major chunk of international shipping was once owned and operated by the Western world. After the end of the Second World War, Britain had the largest merchant fleet. There were also large operators in Norway, Greece, Germany, Japan, Russia and the US. Back then, a close link existed among ship-owners, the crew and the ‘flag’. For instance, there was a strong likelihood that a ship from Greece would have a Greek owner and crew members who also belonged to the country.

Over the years, this has gradually changed. British ships started to employing crew members from former colonies like India, Pakistan, Nigeria and Jamaica at cheaper rates. A number of ship-owners from other countries also went down the same economic path. When the flag administration insisted that the owners should employ their own seafarers, they opted for a ‘flag’ that gave them flexibility. Ship-owners started changing flags to obtain the benefit of cheaper costs of operation. Some countries ended up with more ships in their registry and, thereby, exceeded their trade requirements. This was the first stage of open registries.

Not all the newly-independent countries of Asia and Africa had the means to buy and operate ships. All they had to do was to turn their flags into open registers. Ship-owners from other parts of the world consequently filled in the gaps. Competition grew among the open registers. It was no longer confined to registering ships owned by other nationals.

Some of the ‘open registers’ reduced taxes to attract more ships. Most of them even introduced a tonnage tax and removed the need for a corporate audit and tax return. Ship-owners had more ease, convenience and flexibility. Most of these new open registers allowed recognised organisations to conduct statutory surveys and certification.

Another element was tied in with this new development: labour-supplying or crew-supplying countries. By then, air travel had become more frequent, making it possible for crew members to join or leave ships. There was also stiff competition for training crew members. When the UN Convention on the Law of the Seas 1982 came into being, many landlocked countries took the opportunity to develop their own shipping industry. All these phases of change eventually made international shipping what it is today. At this critical juncture, it has become a global international business.

Recently, some countries have been placing their flag and register with the highest bidder. They have isolated the registry from the rest of the administration’s duties and functions. This is unlawful. We must remember that the IMO and ILO are not international governments. They are UN agencies that develop international standards through conventions and protocols. It is the member-states that accept and implement the standards. As soon as the ship is registered, it comes under the jurisdiction of the flag administration. As a result, a flag state must ensure that the vessel complies with the convention’s requirements and maintains standards.

How can a state do away with its sovereign rights? These rights cannot be sold. It is not a business. National airlines and airports may be privatised, but the department of civil aviation remains an integral part of the government and cannot be privatised. Those who have tried to do so live in a fool’s paradise.

No wonder during the previous IMO Assembly session, delegates from Mongolia, Cambodia, Comoros and Palau asked each other about the number of ships they have in their registers. They had no clue about this because they had sold their ships to the highest bidder. Some businessmen from abroad are playing around with their name and fame. These operators aren’t signatories to any international treaties. They have no obligation and responsibility. Their only function is to register ships and make money. They have to make money because they have given enough of their funds to corrupt politicians to obtain licences. This is what we call the flag of convenience.

Good ship-owners and operators never register their ships in such registers. Those who engage in illegal trade and carry contraband items are mostly involved in these activities. Innocent seafarers often become victims of circumstance when ships are abandoned. They remain without salary and food. Church institutes and other voluntary organisations come forward to lend a helping hand. This has been happening because of the existence of such registers that often provide shelter to crooks.

The world community must find some legal and procedural means to stop this “sale of flag[s] to the highest bidder”. The administration of a flag state must be located within the country. It must be operated by a department or agency of the government with due consideration for treaties and conventions signed by the country. The registry of ships is just one of many functions of the administration and it cannot be separated from it.

The process of registration establishes jurisdiction. The administration must exercise its full jurisdiction and control to ensure compliance with internationally-agreed standards. It is time that experts in the IMO and ILO concentrate on finding a way forward by drafting a comprehensive convention. As an interim measure, banks, insurance and other financial institutions should stop providing services to ships operating under fraudulent flags.

It is for individual states and governments to decide whether to operate a closed registry or an open one for ships. States that do not have the relevant expertise may hire the services of experts to work for them. But the practice of putting their own flag on auction must stop. This practice is adversely affecting the shipping sector and creating more miseries for seafarers. Various organisations should join hands to stop businessmen from operating registers from outside the country.

Global and international organisations created by global maritime nations appear to have allowed the process of registering ships to operate without due protocols and governance conventions.

There is a pressing need to take this debate beyond national jurisdictions. Concerted action needs to be taken by key players. National governments can assist this process while international institutions and organisations can ensure peoples safety at high seas.

There is understandably a dichotomy between financial interests and politics – just as it exists between nations and their game of power and external display of prestige. Those people whose bread and butter are at stake are invariably caught in between. It is time to take stock of the roles, responsibilities and farsightedness of organisations like the IMO and ILO, which are ensure the people’s safety at high seas.

It remains to be seen whether there is an appetite for another convention in this regard. However, this should not stop stalwarts to push the envelope and remain open to introspection.

The writer is a maritime adviser to the Karachi Chamber of Commerce and Industry.

Email: [email protected]

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