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Flags of Deceit could take shipping back to the bad old days

Registries that facilitate sanctions evasion are just as bad for the industry’s image as the registries that once facilitated tax dodging and seafarer exploitation

Much more of this and Narnia, Utopia, Middle Earth, Freedonia, La-La Land and Big Rock Candy Mountain will be offering their capitals as home ports

THE International Transport Workers’ Federation knew what it was doing when it devised the label “flag of convenience” and summarily attached it to any registry it happened not to like. Getting the designation into common parlance turned out to be a stroke of public relations genius.

The phrase wasn’t entirely unfair, especially when first introduced in the immediate post-war period. But even then, some of the targets were more guilty than others.

About 30 years ago, the better open registries launched a counteroffensive, in a bid to redress this image deficit. This has largely been successful, and many former pariahs now enjoy parity of esteem with national flags, certainly within shipping circles and perhaps more importantly, beyond them.

Of course there remains a layer of flags that work on a no-questions-asked, shut-up-and-pay-the-fee basis. The difference is that such a modus operandi now generates resentment rather than a desire for emulation.

But even though the overall picture is one of progress, this is now at risk, thanks to the rise of a new breed of Flags of Deceit.

Unlike the worst FoCs of old, their unique selling point is not the ability to dodge taxes, pay seafarers next to nothing or rip up the health and safety rule book, although no doubt that is still on offer too.

Instead, the conscious intent is to enable the operation of a dark fleet* of older vessels, anonymously owned by opaque corporate structures and exclusively dedicated to trade in sanctioned oil or oil products.

These ships comprise 12% — on some estimates, as much as 20% — of the internationally trading tanker fleet, which is sailing with little to no regulatory oversight.

Seven out of ten of these vessels have no known P&I provider and those that ostensibly do rely on institutions whose ability to pay out after a major casualty remains, to put it politely, untested.

They use “IMO numbers” that have never been within a thousand nautical miles of Albert Embankment. They engage in frequent spoofing and Automatic Identification System manipulation.

No entity that genuinely regards itself as a high-quality provider of registry services should be giving these ships houseroom.

Many will ask why any registry will take such business when so doing implies lack of even minimal patriotic pride in their national flag. The obvious answer is that their links to their supposed sovereign state go little further than the presentation of the annual fee for licencing the name.

Indeed, some ship registries may be entirely bogus, with criminal enterprises expropriating state powers without authorisation and selling registrations on a fraudulent basis.

At this rate, it cannot be long before Narnia, Utopia, Middle Earth, Freedonia, La-La Land and Big Rock Candy Mountain are offering their capitals as home ports.

We had hoped for better. Four years ago, Lloyd’s List argued that shipping was on the cusp of a transparency revolution, driven by a confluence of security, financial and regulatory forces.

At the high end of the industry, this revolution remains in full flow; at the bottom end, it isn’t being televised.

The hard-won rehabilitation of open registries began in earnest in the 1990s and was surely in keeping with the spirit of the age.

This was the heyday of globalisation, and the once-controversial notion that companies in any country in the world should be able to provide services to companies in any country in the world was on the way to becoming simple common sense.

The basic argument was that the supposed distinction between necessarily good national registers and supposedly second-rate others was now outmoded.

That contention was buttressed by empirical data, proving unequivocally that many open registries fared better than national counterparts on yardsticks such as port state control detentions.

An annual International Chamber of Shipping survey, published since the 2000s, accords spotless scores to Liberia, the Marshall Islands and Panama, and rightly so.

Other parts of the jigsaw also fell into place. Many national flags — not least the Red Ensign — adopted tonnage tax schemes that bought tax bills into line with the cheapest that could be had anywhere else. So no difference there, then.

Another milestone was the agreement of the Maritime Labour Convention in 2006, and its entry into force in 2013. Setting a global floor for seafarer rights hasn’t entirely eradicated shameful treatment of the industry’s workforce. But it has gone a long way towards doing so.

All of this has been accompanied by a secular rise in safety standards that has dramatically cut the annual toll of total losses, injuries and deaths.

These advances took longer than they needed to do or should have done. But for those old enough to remember then and now, they mark considerable strides forward in the span of a single career.

Nobody who has watched this story unfold will want to go back to the maritime equivalent of the Wild West.

But the danger now is that, if left unchecked, the activities of the Flags of Deceit could turn the clock back by decades.


* 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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