Under the maritime laws, every merchant ship has to be registered with one country. While the UN Convention on High Seas states that a vessel should have a "genuine" link with its flag state, the current rules allow ships to sail under almost any flag regardless of their ownership, as long as they pay the registration fee. This is known in the shipping industry as a "flag of convenience."
That's about 40% of the global fleet registered in Panama, Liberia and the Marshall Islands – three countries that together own just 169 ships – shows how common the practice is
"Without being too insulting, these "
Registration decisions are mostly driven by commercial reasons.
"One way to reduce costs is to choose a flag like Mongolia," Roe said. "It's got no coast, no ports, no real direct relevance to shipping, but it's a flag that is cheap and low, so it's good for shipowners."
According to the United Nations Conference on Trade and Development, 265 vessels with a total cargo capacity of 664 million tons sailing under the Mongolian flag.
It works the other way too. Greece, a shipping superpower that owns the largest fleet in the world, is sailing most of its ships under a foreign flag, because shipowners want to avoid Greece's high tax rates.
Having a large flag is prestigious but also lucrative, which is why countries compete fiercely for ships to register with them.
"It's quite common for shipping companies to shop around for a flag that suits them," said Richard Coles, senior research fellow at the Institute of Maritime Law at the University of Southampton
Coles, a long-time shipping lawyer said the term "flag of convenience" is considered to be somewhat derogatory in the shipping industry, because under international conventions, every ship has to comply with common safety, environmental and labor law standards, regardless of its flag
"Now here is the rub, "Coles said. "A British-flagged vessel or an American-flagged, these are flag states that rigorously enforce their safety rules, while if you have a small Caribbean island that does not have a large civil service and the means of enforcing the rules, obviously, the standards are not likely to be as good, "he said.
But the flag decision can have a huge impact on crews. Wall Impero, the Swedish-owned tanker that was seized in Iran last week, was almost certainly targeted because if it was flying the British flag.
It's a fairly typical makeup: India, Russia and the Philippines are among the top five countries with the highest number of seafarers.
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