Choice of Flag State

Abstract

The flag is an enduring symbol of the nationality of a ship but although this nationality is conferred upon a ship under international law as the sovereign right of a State, in many cases it has very little relevance, significance, or association from a nationality or patriotic perspective to the owners and crew of the ship. There is, in today’s global shipping world, very often no contact at all between the flag State, the shipowner, and polyglot crews of modern merchant ships, and their ship will normally never trade to that State. This discussion on choice of flag State commences with an examination of the motives of shipowners in making the decision to flag out. The history of the pejorative term “flag of convenience” is then recalled and is supported by a case study of the economic and political factors that played a leading role in the development of Panama as a flag State. The beneficial ownership of ships and linkages to flags of convenience, both in definition of the term and in practice, is identified and analysed to demonstrate that the majority of ships registered under flags of convenience are owned by residents of OECD countries that are themselves flag States. In order to provide a framework for analysis of flag State responsibility issues, flag States are identified and are categorised into four main groups: National, Quasi-National, International, and Pseudo-National flag States. All active flag States are identified and grouped into these four categories. A case study of the influence of the Singapore Government in the nature and category of that flag State is presented. The different types of Classification Society (Recognized Organization) are also identified and categorised into Conventional and Convenient. The starting point in the discussion on choice of flag State is an examination of the motives of shipowners for “flagging out”.