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“All Citizens are Equal before Law and are Entitled to Equal Protection of Law”-Article 27 of the Constitution of the People’s Republic of Bangladesh

Issue No: 200
July 30, 2005

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Weak international shipping registration laws: Need urgent reforms

Barrister Harun ur Rashid

Many legal experts say that international shipping remains one of the world's least-regulated industries. Its laws regarding registry system have not been updated for a long time. And there lies the danger.

One of the greatest environmental hazards is oil spills and waste dumping on the sea including in the Bay of Bengal, near Bangladesh's coastal belt, by oil tankers or cargo ships. Inconsistent shipping registration laws make it very difficult to pinpoint legal responsibility to the owners and perpetrators of "rogue" oil tankers or cargo ships.

If oil spills occur from a tanker near Bangladesh coastline, the questions such as:
(a) Which tanker or ship is responsible? And
(b) Who should pay compensation for economic loss and massive environmental damage and clean up jobs by the Bangladesh authorities?

The current tangled web of international shipping laws, in particular shipping registry system, evades legal responsibility and hampers prosecution.

In recent times, French President Jacques Chirac voiced outrage at the complexities of evasive shipping registration laws. He reportedly said : " I am horrified by the inability of those in charge, politically, nationally and particularly at the European level, to take action to stem the laxity which permits these ships fit only for the dustbin to carry on. Now we must urgently take draconian measures, even if they harm the interests of certain companies, whose interests are not worth defending."

Flawed open shipping registry system
The open register system or otherwise known as flag of convenience registration allows companies to register cargo ships/tankers under a foreign flag. One in five of the world's ships/tankers is registered under this system.

What is the open registration or flag of convenience system? It means that a company based in Japan or the US can register ships in Liberia, Mongolia, Panama, Cyprus, Cambodia, or Malta, and fly the flag of that country, where labour standards, taxation and environmental laws are less stringent. Registration forms are now available through Internet.

For example, the Mongolian Ship Registry Office offers low registration tax, no profit tax or capital gains tax, and no restriction on crew nationality. Certificates of registration are issued within an hour after documents are faxed to registry headquarters in a third country. The country gets fees of registration in foreign currency and earns huge money.

It is the most opportunistic system that restricts legal liability of a vessel. It allows ship owners to hide behind a complex maze of paperwork and bogus offshore companies. No one knows who owns some of these ships/tankers. One can follow a paper trail that ends with a two- dollar company, say in Panama. The result the company cannot be sued or prosecuted because they have no assets or known owners.

Furthermore, the system allows companies to avoid safety inspections, obtain certificates approving faulty repairs and hire poorly paid crews from developing countries, often with basic literacy and skill. Often you find ships with cargoes of fertilizer and diesel. This is a highly explosive mix. Think what would happen if one of those ships explodes in a Bangladesh seaport. Tankers often ply on the sea with inexperienced crews because there are no strict regulations on hiring crews.

The International Transport Workers' Federation has been campaigning against the flag of convenience or open registration system since 1945. The Federation believes there should be a genuine link between the real owner of the vessel and the flag, the vessel flies, in accordance with the 1982 UN Law of the Sea Conventions.

Environmental risks associated with the flag of convenience shipping range from oil spills, illegal discharge of ballast water and dumping of toxic wastes to falsified records of engine room management practices. Generally speaking there are a couple of tons of oil waste from running a big diesel engine of a vessel and there is no strict compliance to monitor the record of its disposal. Disposal of engine wastes can be costly or delay a vessel's departure, so engine room wastes are frequently dumped at sea.

Europe's worst oil spills
On November 13, 2002, the captain of the oil tanker Prestige heard a loud metallic bang from the ship's starboard side, as 7 metres high waves battered the tanker in heavy seas off Spain's northwest coast.

The engines failed and the ship was on float. A gaping 15m hole had been ripped along the vessel's side, spilling oil from ruptured cargo tanks into the sea as the ship drifted to within 6km of the Galicia coast---Spain's richest fishing grounds. The Filipino and Romanian crews were evacuated and an experienced Spanish captain was flown in by helicopter to attempt to re-start the engines and steer the Prestige tanker out to sea in a frantic effort to avert ecological disaster.

On November 19, the tanker broke in half and finally sank, spilling 63,000 thousands of oil into the Atlantic Ocean and causing one of Europe's worst environmental disasters. The spill from the tanker was almost double the amount of the notorious tanker Exxon Valdez that spilled oil off the coast of Alaska in 1989. A thick carpet of oil washed ashore, polluting almost 600km of Spanish and French coastline, killing millions of birds and fish, causing health problems from hydrocarbon inhalation and plunging the region into economic crisis due to the forced closure of local fisheries.

Damage from the oil spills was estimated to be around US$3 billion. But who was responsible? A report by French Marine Casualty Investigation Board concluded that the damage to the oil tanker by the waves was because of poor repair work on such an old vessel. Investigators were frustrated by the complexities of an evasive system of shipping registration to establish the responsibility as to who should pay compensation.

Interestingly the oil tanker was Japanese built, Liberian owned, registered in Bahamas, operated by a Greek company, chartered by a Swiss-based subsidiary of a Russian industrial company and classified as seaworthy by an American shipping authority. In such case, where do you begin and where do you end?

The above case provides than at anytime, anywhere environmental nightmare is waiting to happen with current rules of flag of convenience registration system.

Reforms in the wing
Since 2002, meetings between maritime unions and shipping owners were held to negotiate improved safety, security and responsibility of global shipping. The last meeting was held in early June with 50% per cent of the world's shipping. The organisers of the meeting are hopeful of reforms. The next round of talks is in Mumbai (Bombay) and if negotiations proceed smoothly, a new global shipping agreement is likely to come into effect on January 1st, 2006. That will help establish the legal responsibility on owners of a ship/tanker.

The author is a former Bangladesh Ambassador to the UN, Geneva.


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