Registration of ships: growing responsibility amongst ship owning companies

October 31, 2018
| Belgium

image of workman wearing a high vis vest and hard hat at the boat docks

Historically, maritime nations required a link between the vessel and the State in which the ship was registered, but in the 1950s we saw a significant decline in the traditional ship registries, as many ship owners opted to register their vessels in the so-called “Flag of Convenience” States (hereafter: FOCs), which do no not require a link between the State and the ship whatsoever.

In FOCs ship owners register their vessels in registries offering them advantages such as the possibility to avoid taxes, free choice of crew’ nationality and fewer regulation restriction. However, over the years FOCs came under much criticism as the advantages that led to reflagging also led to three major issues: economic distortion, safety concerns on board of FOCs’ and exploitation of non-unionized labour.

Despite considerable diplomatic efforts over the years, one-ship post box companies often stay the only link to the flags under which a large percentage of the world’s fleet is registered. Nonetheless, as a result of a longstanding opposition against the FOCs some States have set themselves up as “Quasi-FOCs”

Quasi-FOCs, in contrast to FOCs, not only require a link between the beneficial owners or management of the ship and the national flag, but they also have strict maritime laws and the administrative machinery to effectively impose and enforce those laws. Generally, Quasi-FOCs offer most of the advantages of FOCs, because they do not impose taxes on corporate profits or seamen’s incomes and assess only nominal registration and tonnage taxes. However, they differ from normal FOCs as they do administer and enforce strict regulations pertaining to ship management, manning, and safety, and that all owner be clearly identifiable and be held accountable for liabilities.

A good example of a FOC, which evolved into a Quasi-FOC, is Singapore. Singapore, one of world’s busiest port in terms of visiting shipping tonnage, opened its registry in 1969 to create employment opportunities. Initially, Singapore was qualified as a FOC, since it provided its typical benefits. Nevertheless, being tired of stigma, Singapore set up regulations trying to convert the State into a quasi-FOC. Nowadays, Singapore requires not only a link between the ships and Singapore by means of partly ownership of Singaporeans or incorporation of companies, but they also require a modern fleet (new vessels cannot be older than 15 years and have to prove that they are seaworthy every year). Moreover, since they also ratified international Conventions such as SOLAS, MARPOL and UNCLOS, they foresee strict enforcement of international regulations.