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The good, the bad and the ugly: the flagging standards of flag states

Eswatini’s nascent flagging business is no mere curiosity of international law — it is indicative of the disintegrating standards at the bottom of the global flag state blacklist

Flag states have a legal and moral duty to enforce the hard won safety standards that underpin global maritime trade, but the rise of the dark fleet supported by a growing list of opaque, outsourced flag administrations is undermining the rules-based order of global shipping

THE FACT that a landlocked African state with no maritime administration, no links to the International Maritime Organization and no commitment to the basic canon of international maritime law, can take it upon itself to start flagging ships, is of course entirely legal.

The fact that it outsources such business to a private company purporting to offer services via a non-existent port and happily welcomes sanctioned vessels as part of its initial intake, is entirely the business of a sovereign state.

But is it in any way a good, or safe idea? We would argue strongly that it is not.

Eswatini’s nascent flagging business shows all the hallmarks of yet another shipping register destined to become a holding pen for sanctioned, substandard and subterfuge vessels seeking refuge from Western restrictions and regulatory oversight.

The operators behind Eswatini Maritime Affairs may have deflagged the three Syrian sanctioned vessels being used to export cargo from Russian occupied Crimea, but the fact that the most basic of due diligence was not applied to the first ships it flagged should have risk alerts flashing red across the industry.

But this is not an Eswatini problem. This is an international derogation of duty and a timely example of how the rules-based order of shipping is threatening basic safety standards and environmental disaster.

Last week the International Chamber of Shipping lauded the positive progress made by top flag states in improving standards across the board. But the results in this year’s Flag State Performance Table reveal a growing gulf between the best and poorest performers.

And such assessments don’t even capture the worst of it.

According to the International Maritime Organization’s own statistics there are currently 108 vessels known to be trading under flag registries established by fraudulent companies. These administrations do not exist, therefore they do not get counted in such appraisals and there is no regulatory oversight of them.

And those 108 cases are just the ones we know about — it is well understood by everyone that the real problem is much larger.

The IMO was tricked into wrongly issuing numbers for vessels that did not exist, as part of a North Korean vessel identity laundering scheme and other scams linked to the dark fleet* of tankers have been uncovered in recent years.

But many of the legitimately outsourced operations are not much better.

Eswatini is only following the model established by a growing list of flag states operated by remote private companies that now populate the blacklists of international port state control.

Five months on from a military coup, Gabon has largely returned to business as usual. But it seems the junta that overthrew the former funk singer and erstwhile dynastic leader Ali Bongo has found that flagging ships is the business to be in — and the greyer the better.

While others are doing their best to rid themselves of the reputational risk of Russian clients (see Liberia’s pre-Christmas move to expel Sovcomflot), dark fleet entrants and general subterfuge skulduggery, others are viewing the growing list of expulsions as a shopping list.

Such practices, pioneered by the likes of Panama which has happily taken in ships expunged by its growing competitors, are now being turbocharged by ambitious newcomers to the dodgy flag game.

Whether the junta in Libreville have much direct oversight of their growing fleet of Russian tankers and dark fleet ships is not clear, because, as is so often the case when it comes to sanctions dodging, all roads lead to the UAE.

Gabon-flagged tankers in sanctioned oil trades now account for the vast majority of the 140 plus ships that Gabon now flags. But the Gabonese registry is not operated out of Gabon — it is controlled from Dubai.

The dark fleet and those structures and flags that support it may be a legal risk for lawyers and a political risk for governments, but the bigger risk for all countries and business is that it represents a threat to maritime safety.

We have found ourselves in a position where over 12% of the internationally trading tanker fleet is effectively operating outside of the rules-based order and the hard-won safety standards that have been built over the past 50 years in shipping.

Nearly 70% of the dark fleet has no known P&I and those that do are relying on institutions that have never been tested in international law. Fake recognised organisations, fraudulent insurance entities, sham company registrations and vessel numbering, widespread vessel spoofing and Automatic Identification System manipulation — these are all on the rise. The industry is getting less safe as a result.

Ultimately all standards come back to the flag state in shipping. The fact that there is a growing gulf between the good, the bad and the ugly should be worrying everyone right now.


* Lloyd’s List defines a tanker as part of the dark fleet if it is aged 15 years or over, anonymously owned and/or has a corporate structure designed to obfuscate beneficial ownership discovery, solely deployed in sanctioned oil trades, and engaged in one or more of the deceptive shipping practices outlined in US State Department guidance issued in May 2020. The figures exclude tankers tracked to government-controlled shipping entities such as Russia’s Sovcomflot, or Iran’s National Iranian Tanker Co, and those already sanctioned.

Download our explainer on the different risk profiles of the dark fleet here


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