International Registration of Ships
Until a ship is registered, it is no different from an ordinary object. What gives legal identity to this otherwise unidentified object is ship registration, which is regarded as a legal act.
International instruments, including the 1958 and 1982 conventions, have established rules governing ship registration. In practice, it is generally accepted that a ship seeking registration must have a certain connection with the state in which it is registered. In other words, registration should be based on a genuine link between the ship and the state whose flag it is entitled to fly.
Any state that permits a ship to fly its flag must maintain a register of ships containing the names and particulars of ships authorized to do so, and must issue documentation confirming that authorization.
Why Should a Ship Be Registered Internationally?
In most countries, a designated authority is responsible for registration. This authority may be a ministry or an organization operating under a ministry’s supervision. For example, Croatia has a ministry responsible for maritime transport, and Canada also has a ministerial structure. In Iran, the Ports and Maritime Organization is the competent body.
Pursuant to Article 8 of the Iranian Maritime Law, the Central Ship Registration Office has been established in Tehran, and shipowners may refer to it for registration of their vessels.
Open Registry or International Ship Registration
According to some views, an open registry refers to a system in which a state, in exchange for payment, permits registration of a ship and grants it nationality and the right to fly its flag, without taking into account matters such as the nationality of the owner, the crew, or the country of construction.
This form of registration is often used to avoid obligations or requirements that the shipowner considers contrary to their interests.
Some states grant their nationality to ships without requiring a real connection between the ship and the state, and allow those ships to use their flag. In other words, they grant nationality to foreign ships under exceptionally simple conditions.
Flags of Convenience in International Registration
The term flag of convenience has long been widely used in international shipping. The emergence of this phenomenon has been associated with issues such as unregulated, widespread capitalist practices, insufficient protection of workers’ rights, non-compliance with safety and environmental protection standards, and the pursuit of higher profits.
Flags of convenience have become a significant phenomenon, involving substantial financial activity and extensive labor. Although certain authors have proposed definitions of this concept, there is no universally accepted standard definition in the international law of the sea. This practice is also described as open registration. These flag states, for commercial expediency and to increase profits, readily allow foreign ships to register under their flags rather than supporting domestic and national fleets.
The Concept of Flags of Convenience According to Boczek
According to Boczek, from a practical standpoint, a flag of convenience may be defined as the flag of any state that permits the registration of ships owned by, or controlled by, foreign persons under conditions that are attractive and convenient for applicants. The following discussion sets out characteristics of international or open registration from the perspective of shipowners.
Characteristics of Open Registration from the Perspective of Shipowners
In general, it is easier to identify flags of convenience than to define them. From the perspective of a shipowner, the characteristics of an open registry include the following:
- Avoidance of taxation in the state of registration.
- Lower crew costs, because open registration generally entails unrestricted access to the international labor market, and because the registry is not governed by strict domestic labor standards applicable to nationals of the flag state.
- Reduced regulatory oversight. However, this factor has been diminishing as flag states increasingly join international safety and inspection conventions.
- Anonymity. The corporate capital of the shipowning company may consist solely of the ship itself, with no other assets, and this may remain concealed in the home country of the shareholders. Additionally, the true beneficial owner of the ship may be persons other than the company’s directors and employees, who appear to have no role in corporate management or vessel operations but, in practice, make key decisions.
On the other hand, a 1970 report by the Government of the United Kingdom identified six common features of flags of convenience. These features include:
- The registering state permits non-nationals to own or control its merchant ships.
- Registration is easy. A ship may often be registered at a consular office abroad. Transfer from one registry to another is generally permitted at the shipowner’s discretion.
- Taxation on the income of ships is relatively low. Registration fees and annual charges are generally calculated based on cargo capacity and are typically limited to administrative costs.
- The registering state is a small power, and it does not intend, under foreseeable conditions, to impose specific national rules on registered ships. Nevertheless, modest charges imposed on large tonnage may have a significant effect on national income and the balance of payments.
- Crews and ship personnel are fully permitted to be non-nationals.
- The state of registration has neither the authority nor an effective enforcement system for imposing governmental or international regulations, nor is it a state that seeks, or is able, to exercise effective control over companies.
Frequently Asked Questions Regarding International Ship Registration
International ship registration is the process by which a ship is registered under the laws of a state and gains the right to fly that state’s flag. It is important because it confers legal identity, access to legal protections, and the capacity to operate internationally.
Open or international registration is typically granted without requiring a genuine link with the registering state, allowing ships to obtain nationality and a flag without regard to the owner’s nationality or other connections. In contrast, national registration commonly requires stronger ties between the ship, its ownership, and the registering state.
A flag of convenience, also referred to as open registration, is a flag granted by a state that allows foreign ships to register and use its flag, often for commercial purposes and profit, without full application of domestic standards or consideration of the owner’s nationality.
Key characteristics include reduced tax exposure, lower crewing costs, reduced regulatory oversight, the ability to conceal beneficial ownership, and broad discretion in recruiting international personnel.
The report identified features such as allowing non-national ownership or control, simplified registration including through consular offices abroad, low taxation and fees based on tonnage, limited regulatory power of the registering state, allowance of non-national crews, and weak enforcement mechanisms for effective control.
Advantages may include cost reduction, flexibility in management and crewing, faster registration, and easier transfer between registries, access to an internationally recognized flag, and fewer regulatory restrictions. What is international registration of ships, and why is it important?
How does open registration differ from national registration?
What is a flag of convenience?
What are the characteristics of flags of convenience from a shipowner’s perspective?
What were the common characteristics identified by the United Kingdom government report in 1970?
What are the advantages of international registration for ships?
