Admiralty and Maritime Law Committee Newsletter Spring 2015 KNOW THE ROPES WHEN FLAGGING YOUR VESSEL: A COMPARISON OF THREE OF THE WORLD’S DU JOUR VESSEL REGISTRIES 1 By: Heather C. Devine and Stephanie S. Penninger 2 owners and crew, increases in vessel market value, easy I. Introduction: Choosing a Flag – More Than a currency conversion, allowing vessel repairs abroad, Matter of Convenience lower operating costs due to lower wages (due to the Advising a client of the appropriate fmag state for ability to hire non-union employees), more lenient labor his or her vessel is a challenging retainer requiring and safety standards, obtaining facile vessel tonnage, consideration of almost every commercial issue: vessel and avoiding Coast Guard regulations. 4 ownership, labor and manning issues, to the reputation With the increased popularity in open registries of the fmag state. The only certainty is that a vessel must for vessel registration, it is important to understand sail under a fmag: United Nations Convention on the the advantages and disadvantages of the different Law of the Sea (“UNCLOGS”) Article 91 provides: available registries and the factors to consider when Ships have the nationality of the State selecting a particular registry. Choosing where a vessel whose fmag they are entitled to fmy. should be “fmagged” is a complex process that requires … [Moreover] ships shall sail under the consideration of a multitude of factors. This article fmag of one State only and … shall be considers some of the key factors in the context of the subject to its exclusive jurisdiction on three of the most popular fmag states: the Republic of the high seas. Marshall Islands (“RMI”), Mongolia and Panama. When considering which fmag state to choose, one A. Taking the Right Tack – Flying the Marshall encounters several different registration regimes: Islands Flag traditional, open, and a hybrid of the two. While The RMI Registry, governed by the RMI Maritime traditional registries usually require the vessel’s owner Act of 1990 (“RMI Maritime Act”), is the third largest or operator and a certain percentage of the crew to be vessel registry in the world, reaching 100 million gross citizens of the registration state, open registries typically tons in February 2014. 5 Headquartered in Reston, Va., impose more lenient registration requirements by not the International Registries, Inc. and its affjliates (“IRI”) requiring the vessel owners, operators, and crew to have is the world’s oldest and one of the most experienced the same nationality as the country where the ship is privately administered Maritime and Corporate Registry registered or the disclosure of ownership information. 3 provider; it operates 26 full-service offjces in major Today, “fmag of convenience” refers to vessel shipping and fjnancial centers around the world, and registration in a country with an “open registry” for provides worldwide, around-the-clock duty offjcer predominantly economic reasons, including: few to system and real time support to vessels fmying its fmag. 6 no local taxes on vessel income, acceptance of foreign Continued on page 22 1 Editor’s Note: This article was fjrst published in February 2015 by the Transportation Lawyers Association in The Transportation Lawyer, and reproduced herein with the permission of the Transportation Lawyers Association. 2 Heather C. Devine is a Partner at Gowlings Lafmeur Henderson LLP (Hamilton, Ontario, Canada), and may be contacted at heather.devine@gowlings.com and Stephanie S. Penninger is an Associate at Benesch, Friedlander, Coplan & Aronoff LLP (Indianapolis, Indiana), and may be contacted at spenninger@beneschlaw.com. We gratefully acknowledge Summer Associates, Sarah Wouters and Brittany Shaw, for their contributions to the drafting of this article. 3 Alexander J. Marcopoulos Flags of Terror: An Argument for Rethinking Maritime Security Policy Regarding Flags of Convenience, Tulane maritime Law Journal, 32 Tul. Mar. L.J. 277, at * 280-281 (Winter 2007). 4 Comment: Vessel Registration in Selected Open Registries, Tulane Maritime Law Journal, 6 Tul. Mar. L.J. 221 (Fall 1981). 5 About IRI, International Registries, Inc. available at https://www.register-iri.com/index.cfm?action=about, (last viewed Oct. 7, 2014). 6 Id. ; The Republic of the Marshall Islands, Offjcial Guide to Ship and Yacht Registries, GSR, available at http://www.guidetoshipregistries.com/shipregistries-country/marshall- islands, (last viewed Oct. 7, 2014). 12 12
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