Discussing Lloyds Statement about Using Every Opportunity in Increasing the Wealth by the Small States - Research Paper Example

Maritime Policy Introduction ''There is no doubt that the flag of convenience era has left a deep tarnish on the image of flags and states, and there persists a wide gap between the competence and performance levels between the best and worst flag administrations'' (Lloyd's List 03/09/02). If our world were perfect, the flag States would be able to wash their hands of the affair, and rely on their ship-owners, norms of manufacture, protection and procedures, which guarantee the security in the waters. Coastal States in their turn would have any reasons to care about with the preservation of this security. The current system of flag state management is not perfect. Unfortunately, it is a well-known fact, that some flag States do not act up to their accountability. A gradual shift of state marine regulation from the 19th century through two-sided and many-sided contracts to final contract concluded and agreed internationally was happening in first half of the 20th century. In correspondence with the revolution that took place in the 1950s, the ILC issued clauses to systematize the regulation for subjects involving the nationality of sea transport and its management. These clauses, approved with little amendments by the International Code Of Safety For High-Speed Craft, created norms for Flag States which were proper that time. However, the globalization brought new changes and now it is not clear enough what flag administration is appropriate. Notwithstanding that flags of convenience have always been actively criticized they gained a great popularity during the last decades. According to the available data, by 1980s their quantity amounted to ¼ of the world trade fleet. By the 2001 the number of flags of convenience already amounted to more than a half of the total. Poor management of seas can lead to disorder and would have bad consequences. One of the important additions to the law of autonomy of the waters is that a vessel should have the flag of a definite country and therefore should be controlled by this country. With reference to the UN Convention on the Law of the Sea 1982, the given paper will discuss the validity of Lloyd's statement and evaluate the attempts by the International Maritime Organization, the European Union and the shipping industry to improve flag state accountability and performance. The question under consideration is the improvement of the global regulation concerning the nationality of sea transport, and its management. A comparative research is made of the systematization of flag State accountability through the International Code Of Safety For High-Speed Craft, and alterations to the Law of the Sea Convention. Flags of convenience A great number of small states have to use every opportunity in order to increase their wealth. Notwithstanding that they may use legal ways, they usually help unprincipled people and authorities implement their unlawful actions. One of the well-liked techniques of making more money is flags of convenience (FOC). Different states, even those surrounded by land, allow other countries to register vessels under their flags for a definite price. It represents a gainful business that never suffers from the lack of clients. The owners of vessels want to obtain the registration under the flags of other countries for many different reasons, such as tax benefits, lack of correspondence to the standards, political interests, etc. A lot of such vessels like to change not only their flags but also names, therefore it appears to be very hard to find them. Such secrecy allow them continue their unlawful activity. David Cockroft states: Arms smuggling, the ability to conceal large sums of money, trafficking in goods and people and other illegal activities can also thrive in the unregulated havens which the flag of convenience system provides. Notwithstanding that flags of convenience have always been actively criticized they gained a great popularity during the last decades. According to the available data, by 1980s their quantity amounted to ¼ of the world trade fleet. By the 2001 the number of flags of convenience already amounted to more than a half of the total.      The connection between the globalization and the growing amount of flags of convenience is clearly identifiable. According to Ahmad (1997), FOC represents “the flags of comparative advantage”, the use of which is highly appreciated today (Ahmad, 1997). The general idea of the incredible current expansion in Flags of convenience is that some states develop the environment of comparative advantage giving the permission to register foreign ships under their flag. It may have many negative consequences however it still remains profitable for the both sides (Cafruny, 1987). The Law of the Sea Convention Poor management of seas can lead to disorder and would have bad consequences. One of the important additions to the law of autonomy of the waters is that a vessel should have the flag of a definite country and therefore should be controlled by this country. In 1958 it was enacted by the States Parties to the International Code Of Safety For High-Speed Craft that every State can dictate its own conditions for registration of vessels and for flying its flag. The decisions were also made on the actions needed to guarantee the security of vessels with the flag of the country over which the flag State should fulfil the control. These accountabilities were re-asserted and adopted through the Law of Sea Convention in 1982. Inter-Governmental Maritime Consultative Organization actively participated in the creation of the Law of Sea Convention to guarantee that the tools it was making would be made in correspondence with the LOSC. The global law approved by the countries is realized through the state regulation of these countries changing these generally established aims and set of laws into a compulsory lawful responsibility. This right includes the right to implement actions but also the right not to implement actions. Alderton explains: Where the nation State is the bulwark of international regulation, sovereignty is for sale in the context of ship registration, and the State enjoys privilege (Alderton, 2002).        On the one hand the LOSC created by of the Third United Nations Conference after long discussions is considered to be improving the independence of the countries in the waters they have coasts to and regulating the use of marine resources. On the other hand the UNLOSC III has definitely and significantly limited the independence of coastal countries, by imposing serious restrictions.       Right from the start of the United Nations Convention on the Law of the Sea, the authorities declared about an absolute right to pass through seas. Mainly because of its geographical position, the Soviet Union readily accepted this position. The declarations different flag states made at the conference show their problems and purposes, however the disagreement demonstrated by some of them ultimately led to the start discussing important restrictions (Ngantcha, 1990).       At the same time as the LOSC provides the countries with the rights to manage and supervise transport in seas near their territories on ecological and safety basis, it makes states situated on the see coast factually unable to defend the most fundamental ecological safety rights of people. Such states have practically no right to control the ships that go past its territory. Smith explains: the maritime states at the Conference sought and achieved a straits regime of diminished coastal authority far more protective of military and economic navigational interests than the rules of innocent passage. The capacity of the coastal state to interfere with navigation in exercise of jurisdiction over environmental matters was specifically targeted for and subjected to reduction. ... In short, the coastal state’s jurisdiction over the condition and character of vessels in straits’ transit is non-existent; jurisdiction over affirmative conduct affecting the environment is much diminished (Smith 1988).  The main issue the authorities of the flag states should take care of is not the decreasing volume of trade. It is an issue of the effective regulation able to reduce the possibility of violation including dangerous cargoes. Surely, this can’t be reached without the participation of flag states, just by imposing restrictions on them (Dow, 1999).       Modern global regulation of the sea efficiently authorizes and defends the right to pass the seas. Moreover, the only reason given in protection of the violence is the opportunity of another kind of violence, especially due to the fact that if flag states are given rights of management and control they may use them improperly. The importance of the problem. The initiatives to improve Flag State performance In 1995, having got to know that the half of the ships owned by the European Union members are registered under the flags of the states which are not EU members, the European Union conducted the thorough investigation of European shipping industry. It was revealed that the countries’ profit from sea trade was much lower that its expenses on shipping maintenance, taxes etc. so they simply had no choice but to use flags of convenience: without flagging out, the EU shipping industry as a whole would have barely broken even. Pressure to reduce costs forces EU shipping companies to either flag out, reduce manning levels or get out of (selected) business(es) (Neff, 2007).        Notwithstanding that main marine countries expressed opposition to flags of convenience system, they continue to use it. It appeared that the United States, Japan and some developed European states actually are the main financial supporters of flags of convenience system. It was mainly because of the general extraction of this system that the serious attempts made in order to eliminate it in the period from 1970 until 1990 were unsuccessful. And in the conditions of globalization flags of convenience became the ‘norm’. Aspinwall (1995) states: it is a difficult and misleading proposition to discuss nationality when a ship may be built in Japan, owned by a Greek bank, crewed by Italians, Indonesians, and Filipinos, managed by an American firm, and underwritten by a British firm. This hypothetical but typical example is further complicated by assuming it is carrying Saudi oil to Chile for an Australian merchant, and flying the flag of Liberia. What state claims this ship? Under international law, it is a vessel of Liberia, and Liberia is responsible for codifying and enforcing the maritime rules under which it operates. Yet many states have an interest in it, not least those past which it sails, who might suffer in the event of an accident (Aspinwall pp.7-8). At the same time some of such registries had very good security record. It made the commission think that some of the documents contain wrong data. These data do not clearly show how serious threat flags of convenience system represents. For example, according to the available data, in 1999 flags of convenience became the reason of about 70% of accidents at sea. The European Commission investigation revealed that the ships owned by European Union members but flagged as the other countries vessels very often disappeared while properly registered EU ships can be easily traced. An investigation presented by Lloyd’s tells us about the details of the worst oil leak from ships in 1963-1996. It is interesting that approximately half of these ships had flags of convenience. That time the FOC ships amounted to ¼ of the world commercial fleet, thus, the risk rate of ships with flags of convenience was three times higher that the risk of properly registered ships.       Taking much care about getting more profit and having high competitive advantage not just provides for the rapid development of flags of convenience, however, also influences negatively the set principles of the world commercial shipping. A lot of flag States also fail to act in correspondence with internationally approved principles, mainly due to the fact that fleet is an international industry and it often appears to be a serious problem to act legally and maintain the competitive advantage at the global market at the same time.       With quickly growing international fleet and with flag states, which usually do not want or can’t act in correspondence with severe security principles and with lacking management tools, the control of flags of convenience system, particularly in the conditions of growing environmental problems, has had to be implemented simply through port regulation (Broadus, 1994).        The importance of making people understand the environmental problems and take an active part in environmental protection should not be underestimated. A rising public understanding beginning from the late 1960s in European and North American countries together with decreasing negligence towards environmental issues helps establish the control at seas.       At the same time as there were many measures taken in order to establish appropriate port state management like the 1982 Paris Memorandum of Understanding on Port State Control (MOU) accepted by some European Union members, on the whole it remained the independent regional management that had bad consequences. Therefore, a lot of restrictions were imposed on flag states during the last decades.       The Donaldson Report in the UK clearly explained the connection of environmental protection and port state management: Port State Control will be the United Kingdom’s first line of defense against the pollution of its coastline. Safer ships mean safer seas. Safer seas mean less pollution. It is as simple as that. Port State Control as practiced at present undoubtedly has some effect in maintaining standards of safety, but it is a very long way from being fully effective. This idea was readily accepted by the government: the UK will resist any attempt to amend, or interpret, the international Conventions to limit the effectiveness of Port State Control. Port State Control will continue to act as a major defense against the substandard ship until all Flag States effectively meet their responsibilities (ITF, 1999). William Lovett, the marine policies editor, is more direct: Strict enforcement of safety, security, and environmental standards is a legitimate national interest for all coastal and port areas. These can and should be imposed on all vessels entering these waters, whatever their registry, ownership, or operator. ... Too many countries are now lax, and allow needless and excessive freedom for irresponsible shipping activities. This nonsense need not be tolerated” (Lovett, 1996).        The last available information on the control of the world merchant fleet reflects this stress made on port and coastal management. During the past two decades serious measures has been taken particularly in the Western states in order to improve flag state performance. The French Government introduced strict regulation in seas near its territory. The new laws do not allow tankers approach the coasts. Italy imposed the similar regulation on tankers over 50,000 tons. The USA issued the Oil Pollution Act allowing only double hull tankers to approach the coasts. Today the EU is creating a scheme to prohibit all vessels older than 15 years as well as single-hulled ships. Conclusion The conclusion can be made that Lloyd’s statement is valid, because a great number of small states use every opportunity in order to increase their wealth. And notwithstanding that they may apply legal ways, they usually help unprincipled people and authorities implement their unlawful actions. One of the well-liked techniques of making more money is flags of convenience (FOC). Different states, even those surrounded by land, allow other countries to register vessels under their flags for a definite price. The flags of convenience have always been actively criticized, however, they gained a great popularity during the last decades. According to the available data, by 1980s their quantity amounted to ¼ of the world trade fleet. By the 2001 the number of flags of convenience already amounted to more than a half of the total.     The globalization brought new statistics and increased the amount of vessels registered under the flags of other countries. According to Ahmad (1997), FOC represents “the flags of comparative advantage”, the use of which is highly appreciated today (Ahmad, 1997). The general idea of the incredible current expansion in Flags of convenience is that some states develop the environment of comparative advantage giving the permission to register foreign ships under their flag. It may have many negative consequences however it still remains profitable for the both sides. The global law approved by the countries is realized through the state regulation of these countries changing these generally established aims and set of laws into a compulsory lawful responsibility. This right includes the right to implement actions but also the right not to implement actions. The main issue the authorities of the flag states should take care of is not the decreasing volume of trade. It is an issue of the effective regulation able to reduce the possibility of violation including dangerous cargoes. Certainly, this can’t be reached without the participation of flag states, just by imposing restrictions on them.        Modern global regulation of the sea efficiently authorizes and defends the right to pass the seas. Moreover, the only reason given in protection of the violence is the opportunity of another kind of violence, especially due to the fact that if flag states are given rights of management and control they may use them improperly. During the past two decades serious measures has been taken particularly in the Western states in order to improve flag state performance. The French Government introduced strict regulation in seas near its territory. The new laws do not allow tankers approach the coasts. Italy imposed the similar regulation on tankers over 50,000 tons. The USA issued the Oil Pollution Act allowing only double hull tankers to approach the coasts. Today the EU is creating a scheme to prohibit all vessels older than 15 years as well as single-hulled ships.  Works Cited 1. Ahman, Hamza (ed.)(1997). The Straits of Malacca: International Co-operation in Trade, Funding and Navigational Safety. Kuala Lumpur: Maritime Institute of Malaysia; 2. Aspinwall, Mark (1995). Moveable Feast: Pressure Group Conflict and the European Community Shipping Policy. Aldershot: Avebury; 3. Broadus, James M. et al. (1994). The Oceans and Environmental Security: Shared U.S. and Russian Perspectives. Washington, DC: Island Press. 4. Neff, Robert (2007). Flags That Hide the Dirty Truth. Asia Times; 5. Lowett, William A. (ed.)(1996a). United States Shipping Policies and the World Market. Westport: Quorum Books; 6. ITF (1999). Troubled Waters: Fishing, Pollution, and Flags of Convenience. International Transport Workers’ Federation, available at http://www.itf.org.uk/SECTIONS/fisheries/troubled waters/twindex.htm; 7. Ngantcha, Francis (1990). The Right of Innocent Passage and the Evolution of the International Law of the Sea. London: Pinter Publishers. 8. Smith, Brian D. (1988). State Responsibility and the Marine Environment: The Rules of Decision. Oxford: Clarendon Press. 9. Cafruny, Alan W. (1987). Ruling the Waves: The Political Economy of International Shipping. Berkeley: University of California Press. 10. Dow, Kirstin (1999). The Extraordinary and the Everyday in Explanations of Vulnerability to an Oil Spill. The Geographical Review 89(1). 11. Read More