Flag of convenience

Flag of convenience (FOC) is a business practice whereby a merchant ship is registered in a country other than that of the ship's owners, and the ship flies that country's civil ensign. Owners of a ship may register the ship under a flag of convenience to reduce operating costs or avoid the regulations of the owner's country. The closely related term open registry, which describes a ship register that will register foreign-owned ships, also exists.

The term "flag of convenience" has been in use since the 1950s, and it refers to the civil ensign a ship flies in order to indicate its country of registration or flag state. A ship operates under the laws of its flag state, and these laws are used if the ship is involved in a case under admiralty law.

The modern practice of flagging ships in foreign countries began in the 1920s in the United States, when shipowners frustrated by increased regulations and rising labor costs began to register their ships to Panama. The use of open registries steadily increased, and in 1968, Liberia grew to surpass the United Kingdom as the world's largest shipping register. As of 2009^[update], more than half of the world’s merchant ships were registered with open registries, and the Panama, Liberia, and Marshall Islands flags accounted for almost 40% of the entire world fleet, in terms of deadweight tonnage. In 2006 up to 20% of high-seas fishing vessels were registered in states they were not connected to.

Flag-of-convenience registries are criticized, mostly by trade union organizations based in developed countries, especially those of Europe. On the other hand, maritime industry practitioners and seafarers from other countries contest that this is a natural product of globalisation. Seafarers from developed countries must make themselves competitive if they wish to take advantage and practice in a global environment. As of 2009^[update], thirteen flag states have been found by international shipping organizations to have substandard regulations. A basis for many criticisms is that the flag-of-convenience system allows shipowners to be legally anonymous and difficult to prosecute in civil and criminal actions. Some ships with flags of convenience have been found engaging in crime, offer substandard working conditions, and negatively impact the environment, primarily through illegal, unreported and unregulated fishing. As of 2009^[update], ships of thirteen flags of convenience are targeted for special enforcement by countries that they visit. Supporters of the practice, however, point to economic and regulatory advantages, and increased freedom in choosing employees from an international labor pool.

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