GLOBALISATION AND REGULATION IN THE MARITIME INDUSTRY.
ABSTRACT
The gradual domination of the ‘Flag of Convenience’(FOC) system in World shipping over the last fifty years, with the concomitant emphasis upon deregulation, has seen the transformation of this sector from a nationally-based industry trading internationally to the World’s first example of a wholly global industry. The development of the FOC system has had serious repercussions for labour as ship owners in the continual search for cheaper crews, and thus lower operating costs, have recruited ever smaller ‘crews of convenience’ from the developing nations of the World. The raison d’être of many of these FOCs is purely profit, and they explicitly offer a deregulated environment for the shipowner which often translates to intensified work loads and increased stress for the seafarer. This paper examines the record of FOCs in order to analyse the effects of globalisation, and the concomitant changes in the maritime industry, upon the working lives of seafarers. The method used will be to compare the regulatory regimes of selected FOCs with a benchmark of best practice as exemplified by two ‘traditional’ maritime states: Norway and the United Kingdom. This will be done by the analysis of a flag state conformance index (FLASCI) created by the authors, which utilises a large number of measures of a state’s capacity to maintain and enforce a regulatory regime for the vessels flying its flag.
- INTRODUCTION
The intellectual debate on globalisation continues to grow apace but remains at a high level of generality largely, perhaps, because of the lack of any grounded studies. The familiar themes of de-regulation, the power of multi-national corporations and the erosion of national sovereignty are regularly reiterated but, apart from Henderson (1989) and Frőbel et al (1980), have not been explored in the context of developments in a single industry. The world’s shipping industry, once a paradigm of voluntaristic national tripartite regulation (Lane, 1998) has, in just two decades, become, arguably, the most global of all industries and, therefore, offers an opportunity for precisely the kind of case study needed for better-informed geopolitical debate.
The shipping industry is central to world trade, carrying, as it does, some ninety per cent of internationally traded produce. It also has a lengthy experience of both national and international regulation. In recent decades, and despite the attempts by some shipping companies to move beyond the reach of regulatory-efficient nations by resorting to Flags of Convenience (FOC) (Lane, 1997), a powerful countervailing trend towards world-regional and global regulation has occurred, partly because of a long and still continuing sequence of much-publicised environmental disasters attributable to shipwreck. This trend towards regulation has been reinforced by a series of critical reports on both the social and operational practices of the ship-owning community. In the wake of these reports the regulatory roles of the International Maritime Organisation (IMO) and the International Labour Organisation (ILO) have been simultaneously enlarged and deepened.
Seafarers literally live at the point of convergence of the decisions and procedures emanating from the interlaced network of national and international organisations and institutions which define, and then attempt to enforce, the regulatory framework of the maritime industry. Although most international conventions and regulations are, of course, aimed at ship owners, the very fact that few ships ever spend more than 20% of their operating time in ports and that very few owners ever sail on the ships that they own, means that seafarers are the only actors within the industry who have practical day-to-day experience of the outcomes of these attempts at regulation. However, the facts of mixed nationality crews; the absence of consultation and negotiation procedures; tours of duty that vary with both nationality and rank; and fragile trade union organisation effectively mean that the knowledge and experience of the seafarer is scarcely entered into the information networks which inform the rule-making process. This paper represents the first coherent attempt to compare the records of flag states in this globalised arena and seeks to define the extent to which attempts at global regulation percolate down to the level of the state and thus affect the everyday working conditions for the seafarer.
- THE EMERGING FORCES OF GLOBALISATION – THE ADVENT OF FLAGS OF CONVENIENCE.
There has long been a tradition that the law of the sea has been grounded in the notion of the freedom of the sea. This freedom has, historically, three underlying principles: a ship of any nation can navigate the oceans freely; the ship’s national state has exclusive dominion over the ship; and no other nation can exercise dominion over that ship. Freedom is thus the guiding principle of the law of the sea, but it is a principle strongly mediated by nationality.
There has been a very long history of shipowners flagging their vessels to states other than their own country of origin. The earliest examples of such a phenomenon were usually for political or military reasons, whilst the more recent examples are much more likely to be on economic grounds. It is only in the period between the two World wars, however, that certain nations were specifically developed as ‘open’ registers, i.e. states that will accept the registration of vessels from any other nation with virtually no restrictions (IMA, 1979).
In this inter-war period, a number of United States owned passenger ships were transferred to the Panamanian registry in order to avoid the prohibition laws. In the early 1920s a treaty between the US and Panama exempted shipping profits from taxation and this, in conjunction with laws that had raised labour costs in the US, gave further incentives to US owners to flag to Panama. The first European ships were also re-flagged to Panama in this period, when some Spanish owners felt that social reforms in their own country had increased their operating costs to unacceptable levels (Carlisle, 1981). The US Ship Sales Act of 1946 gave an additional boost to the Panamanian registry through the sale of 1,113 US ‘Liberty’ ships to owners operating under foreign flags, whilst Liberia entered the open register scene in 1948 with the drafting of the Liberian Maritime Law. This piece of legislation established a system for recording mortgages that was acceptable to lending institutions (IMA, 1979).
By 1939, the Panamanian register was already being thought of as ‘convenient’ in shipping circles, but the actual term ‘Flag of Convenience’ was not utilised until the early 1950s, and followed on from the Campaign Against Flags of Convenience inaugurated by the International Transport Workers’ Federation (ITF) at its 1948 World Congress in Oslo. In 1974 the ITF defined an FOC quite simply as being: ‘where beneficial ownership and control of a vessel is found to be elsewhere than in the country of the flag the vessel is flying’ (ITF, 1999, 13:1). In 1982, the United Nations Convention on the Law of the Sea (UNCLOS) was established, and article 91 also gives great weight to the idea of a ‘genuine link’ between the ship and the flag of the vessel and states that:
Every State shall fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory, and for the right to fly its flag. Ships have the nationality of the State whose flag they are entitled to fly. There must exist a genuine link between the State and the ship. (UN, 2001)
The last fifty years or so has seen the evolution of the FOC system to the extent that, by 1998, 51.3% of the world’s total gross tonnage Gross Tonnage (GT) was registered to FOC fleets (ITF, 1998). This development has generally been viewed in a somewhat negative way by various players within the global maritime industry, in that there is an assumption that owners who flag to open registers do so, mainly, in order to make savings in operational costs (Bergantino and Marlow, 1997; Couper et al, 1999; Donn, 1994; Northrup and Scrase, 1996). The perceived wisdom is that such moves have, therefore, led to inferior safety records for FOC vessels in comparison with ships flagged to national registers Bergantino and Marlow, 1997; ITF, 1998, 1998; Johnnson, 1996; OECD, 1996; Toh and Phang, 1993). One of the few dissenting voices to this view is that of Gaunt (1998) who suggests that:
it seems inappropriate to equate flags of convenience with sub-standard operations. Many of the ships detained in European ports because of their condition have in fact been operated under national flags of countries with which the shipowners have had a genuine link but whose authorities are unable to or unwilling to enforce their international treaty obligations in relation to ships registered under their flag (p4).
In 1998 the ITF held its World Congress in Delhi, at which a new policy on FOCs was unveiled. In recognition of the fact that pay and conditions on nationally flagged vessels can, as Gaunt suggests, be worse than on some FOC vessels, the ITF included non-FOC sub-standard ships within the campaign. There has, therefore, been a move away from the simple definition given above, towards a more all-embracing notion of regulation, standards and enforcement. This is, perhaps, in recognition of some of the reasons why owners may now flag to open registers, which are often complex and not necessarily equated to labour issues of pay or conditions.
In the period from the 1950s onwards, more and more open registers have come into being with twenty-nine registers now being classed as being FOCs by the ITF and, partly as a response to this, some ‘traditional’ maritime countries have set up second registers offering more beneficial environments for ship owners than in the state itself. This has been partly successful in slowing the re-flagging of ships from such flags to FOCs, although by 1998 the majority (51.3%) of the world fleet was flagged to FOCs (ITF, 1998). The maritime industry is thus not only pivotal to world trade, but is also the only example of a fully globalised industry. The ship and the seafarers aboard, are at the centre of a complex constellation of multiple interests which situates ship owners and seafarers in fluid and, sometimes, volatile legal, political, and social circumstances.
FOCS AND WORKING CONDITIONS
The evidence presented against FOCs in terms of vessel safety appears overwhelmingly deleterious. Taking for example, the International Transport Workers’ Federation (ITF) they indicate in their ‘Flag of Convenience Campaign Report’ for 1998 (ITF, 1998) that of the worst twenty flags both in terms of absolute numbers of vessels and absolute tonnage lost in 1998, ten are FOCs. They also point out that whilst these flags only account for 20% of the number of vessels and 47% of the world’s tonnage, they account for 55% and 66% of the number of losses and total tonnage lost respectively (p 38). The International Underwriting Association (IUA) data add weight to the ITF’s argument. Their figures show those states with losses above the world average based upon a five year average for the years 1994 to 1998. The figures reveal that, in terms of vessels numbers, 8 of the 33 nations exceeding the world average are FOCs, whilst, in terms of tonnage, 9 of the 28 states are FOCs (IUA, 1999).
An international system of vessel inspection and control has been developed since the mid 1980s, with the emergence of the Port State Control system. The system is designed to ensure that at least 25% of all vessels calling at ports around the world will be inspected and, if any faults are found, will be detained until such time as the faults are rectified. The ITF suggest that FOCs account for: 8 of the top ten flags in terms of absolute numbers of vessels detained; 9 of the 39 countries who exceeded the average 6% detention rate; and 1,526 (59.2%) of the total number of ships detained (ITF, 1998).
In the ‘traditional’ maritime states there have historically been some restrictions on labour, both in terms of their nationality and pay and conditions. FOCs, by contrast, have few such restrictions and the crews aboard vessels flagged to these states are often labelled ‘crew of convenience’. This is for a number of reasons. Firstly, such seafarers tend to be from the less developed countries of the World. Secondly, and partly as a result of the former point, they tend to be less well paid than their counterparts from the more developed nations of the World. Lastly, such seafarers, partly because of lower levels of union membership and recognition, are subject to inferior working conditions. The industry has also been in the forefront of new developments in new technology, for example containerisation, and extensive computerisation of shipboard operating functions which have had significant effects upon skilling, personnel and industrial relations issues (Frenkel 1983; Morris and Donn 1997). All of these factors, taken together, have intensified work and increased stress levels for seafarers of all nationalities working aboard all vessels, but it is particularly the case for seafarers from the developing nations working aboard FOC vessels.
The most important change in shipping technology in recent years, in terms of the nature of the working lives of seafarers, has been the advent of containerisation. This has led to vastly reduced vessel turnaround times, and an intensification of work for the seafarer during port stays. This trend is revealed, very clearly, by an examination of port turnaround times between for 1970 and 1998, as shown in table 1 below.
Table 1. A comparison of port turnaround times 1970 and 1998.
Average turnaround times 1970 / Average turnaround times 1998 / Percentage decreaseHours
138 / 23 / 83
Source: Kahveci (1999).
In addition to these significant decreases in turnaround times over the last thirty years, there has also been a general, cost based, decline in crewing levels over the same period. Couper et al (1999) indicate that crew levels have decreased from an average of 40-50 to 20-30 over this period because of the introduction of multi-skilling, labour saving equipment and the advent of un-staffed engine rooms (p 11). All of these points, taken together, mean that seafarers now have few rest periods or opportunities to go ashore whilst in port.
In 1996 the ITF commissioned MORI to undertake questionnaire survey of seafarers. Over 6000 seafarers responded and answered questions on all aspects of their working lives. Table 2 below gives a number of comparisons between the answers from seafarers working aboard FOC flagged vessels and those working on board vessels flagged to, what may be termed ‘traditional’ maritime countries.[1]
Given that working conditions on board FOC flagged vessels are, in the main, more hazardous than on nationally flagged vessels; that working hours are longer; and that pay levels are lower, it might be expected that even where international or national regulation is absent or insufficient, seafarers’ trade unions might make efforts to negotiate improved conditions for their members. Such unions do, however, experience certain problems when attempting to regulate these conditions, and these will be examined in the next section.
Table 2. A comparison of working conditions (FOCs and Western European states).
Type of register / %Monthly pay is more than $1500 / Stress levels are acceptable / Working day over 18 hours / Over 12 months without proper leave / No relief system with paid leave
FOC / 27.6 / 48.7 / 3.4 / 8.7 / 42.1
Traditional maritime states / 36.8 / 53.2 / 2.8 / 5.1 / 23.9
Source: ITF/MORI (1996)
TRADE UNIONS AND COLLECTIVE BARGAINING
Clearly, trade unions will have strong views on working conditions and pay levels, but the nature of trade unionism and collective bargaining in the maritime sector is somewhat different from that of shore based industries.
The most influential organisation within the seafarers’ labour movement is the ITF. This international federation had, in 1998, 179 affiliated unions with a combined membership of 658,861, representing a density of approximately 66% amongst the global maritime labour force.[2] The number of affiliated unions increased by 10% between 1994 and 1998, although their combined membership fell by 9%. This tends to suggest a diminution in the size of national maritime unions, a phenomenon that is most apparent in the ‘traditional’ maritime countries.
The ITF has a relatively broad agenda, which includes working with the International Labour Organisation (ILO) on a review of all maritime instruments with a view to preparing common recommendations for their possible revision (ITF, 1998).
The federation also maintains an Inspectorate consisting of 105 inspectors in 39 countries. In 1998, 6187 inspections were carried out, 87% of which were on FOC vessels.
The ITF has a well-codified policy on FOCs, but this policy has seen various changes since its inception in 1948. Whilst the ITF has maintained an underlying principle that seeks the re-flagging of all FOC vessels to their national flag of beneficial ownership, such policy is now constrained by more pragmatic considerations relating to the effective regulation of the FOC fleet.
The ITF has thus sought, in recent years, to raise the effectiveness of the FOC campaign by a more militant approach to industrial action against sub-standard ships,[3] and to enter into a dialogue with all those concerned with shipping to avoid exploitation and to raise standards (ITF, 1998).
As well as being an international federation of affiliated national maritime unions, the ITF is also an international trade union in its own right, through its ‘Special Seafarers’ Department’ (SSD). The SSD also co-ordinates the industrial side of the ITF’s FOC campaign. Membership of the SSD is open, in principle, to all seafarers who sail on FOC vessels or ‘other such ships as the FPC[4] may decide’ (ITF, 1998. p.78). In 1996, there were c10,000 such members of the SSD.