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The pandemic has demonstrated the fragility of the global supply chain, a significant proportion of which is dependent on ships and shipping. An inherently international sector, shipping and ship safety are regulated by various agencies including the International Maritime Organization (IMO). Interestingly, a number of outdated practices, which have ceased in other sectors, are still widely practised in shipping. With technology facilitating ever more adventurous vessel design and innovation, shipping law, regulation and policy struggle to keep up. Dr Gauci argues that there are a number of pressing issues which need to be addressed but cautions that the powerful shipping lobby is a force to be reckoned with.
Flying the flag
One area of interest in my teaching and research is the issue of flags of convenience. International law requires every ship to sail under the flag of one State only (the ship’s ‘flag state’). Many countries provide a system of registering ships, administering the related data and documentation and the payment of fees. In essence, there is now a consumer marketplace for registering ships. With the emergence of flags of convenience, shipowners can pick and choose from a variety of countries of registration, even one with which they or their vessel’s crew have little or no connection. This flexibility allows shipowners to save money, reduce their tax liability and, in some cases, operate ships under less stringent regulations.
The most popular flag states, e.g. Panama, Liberia and the Marshall Islands, are small in terms of population but significant in the shipping industry. Sailing a ship under flags of convenience or open registry systems has become a growing practice amongst ship owners. With an applicable regulatory system reliant primarily on the jurisdiction of the state providing the registration, flags of convenience have an incentive to offer very favourable terms to shipowners.
This model is outdated and needs to change. There should be a genuine link between the ship or shipowner and flag state. Ironically, at least one registration system is managed in a country other than the ‘flag state’ with the Liberian registration system headquartered in the US. For an industry that seeks to position itself as committed to operating safely, and minimising its environmental impact, the model is no longer ‘shipshape’. Even though there are instances where a coastal state’s port control can step in by checking that a vessel registered anywhere across the globe is safe and seaworthy, it is unacceptable for ships to be registered in states with which neither the crew, nor the shipowner, have any connection.
Another outdated practice of concern, backed by international conventions, is that of shipowners having limited liability. If a vessel causes and/or is involved in an accident, normally the shipowner does not have to pay the full amount to rectify the damage caused, even if their vessel’s crew is at fault. If such an accident involves cargo being damaged or lost in transit, the shipowner does not normally have to compensate the cargo’s owner fully, thereby increasing the latter’s insurance costs. As shipowners are frequently not fully liable for the damage their vessels cause, this can lead to crews (and shipowners) engaging in riskier, or even reckless behaviour as the consequences for both are limited. In instances where shipowners are sued, parties to the litigation are not on an even keel, because the shipowner’s liability is limited. In most legal systems, it is very rare for a shipowner to lose this right to limited liability, yet it is time for a sea change in the rules around liability.
To be or not to be a vessel
As technology and innovation lead to the design and manufacture of different types of seagoing craft, the law is constantly playing catch up to define what regulation should apply to such vessels. It is becoming increasingly difficult to define legally what a ship is: jet skis, barges, oil rigs, seaplanes and flying boats have all prompted litigation. In fact, it was decided in one English judgment dealing with a specific statute that a jet ski used for fun was not a ship but a personal watercraft! Now, with the advent of autonomous vessels, there needs to be more discussion and agreement as to how these will be reflected in the law, regulated and insured.
All at sea
There is increasing regulation of the air pollution caused by seagoing vessels. The International Convention for the Prevention of Pollution from Ships (MARPOL 73/78) is the main international convention regulating the prevention of pollution of the marine environment by ships. With increased societal focus on climate change and environmental damage, the shipping and salvage industry also needs to adapt.
In the decades after the Torrey Canyon disaster in 1967, an exception was created to the ‘no cure no pay’ rule in salvage law. This rule had disincentivised salvage companies from getting involved in more risky salvage scenarios. A fundamental concept of marine salvage is that the salvor should be encouraged by a potential, appropriate salvage award to intervene in any casualty situation to salve the ship and prevent marine pollution. In return for salvage services, the salvor receives a proportion of the ship’s ‘salved value’, including the value of its cargo and freight. Traditionally, reward depends upon success and the recovery of property. In the past, if there was no recovery, there was no payment, whatever the expense of the operation.
In recent years this has changed in response to public interest in prevention of damage to the environment. In terms of the 1989 Salvage Convention, salvors are generally shielded from loss when responding to casualties threatening the environment. Members of the International Salvage Union have performed around 1,000 operations since the year 2000 with a total salved value of just under US$20 billion. It is likely that this area of international maritime law will develop further in the future.
Any port in a storm
Another area which needs to be addressed concerns ports of refuge. The broad international understanding, backed by customary international law, has been that ships in distress should be helped out by the neighbouring coastal state. There have been cases where ships have been refused refuge by coastal states on the grounds of environmental protection
One such incident in 2002 involved the oil tanker Prestige where a request was made for permission to bring the damaged vessel closer to the shore to protect her from the winter weather and to tranship her cargo of heavy fuel oil. This request was denied by the coastal authorities who ordered the stricken vessel back out to sea. The Prestige subsequently broke apart and sank some 240 kilometres off the Spanish coast. Whilst some pollution occurred when the vessel suffered initial damage before any salvage assistance commenced, significant pollution occurred once the vessel was sent back out to sea, broke up and sank. The wreck continued to leak oil months later, some of which found its way on to the French coast. No one can say for sure if the vessel would have broken apart and sunk had the salvors been allowed to bring the vessel close into shore. Some argue that the decision of the coastal authorities to send her back out to sea resulted in the vessel ultimately breaking up.
Following this and other disasters, the International Maritime Organisation developed a set of guidelines on places of refuge for ships to help clarify the situation. There is an emerging law on ports of refuge which has, in part, been driven by more environmentally-conscious policymaking and public opinion. For now, it is hoped that the guidelines will change behaviour. I am less convinced. This area of shipping law is also intertwined with humanitarian law of the sea. So far it has been a struggle to find a solution to the almost intractable legal problems associated with asylum claimants travelling by sea, particularly in areas such as the Mediterranean.
I am sceptical whether these issues relating to shipping law, regulation and policy will be addressed in a timely fashion. Shipowners’ lobbying groups are very powerful. They exert considerable influence at the International Maritime Organisation. The time has come for governments to stand up to them; otherwise we could justifiably argue that worse things could happen at sea!