A Globalized Maritime Economy: At What Price?

Une économie maritime mondialisée : à quel prix ?
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Article Index
Ocean Freight Growth 1960-2005 (in billions of…
Worldwide Fleet Growth (in millions of TONNES…
Principal Registration Countries and Principal…
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Globalization depends on ocean cargo shipping, one of the world's most globalized industries. During the twentieth century, the legal relationship between a nation and its ships changed greatly, redefining shipowners' and operators' liabilities and responsibilities to fleets, seafarers and the marine environment.

Box 1

The globalization of world trade - mostly conducted through ocean shipping - rests on improvements in navigation and logistics technologies. International maritime shipping has altered the legal relationship between ships and states, emerging as the most globalized of all economic activities, and completely redefining countries' responsibilities to their fleets, crewmembers and the ocean. This essay will explore some of the implications, examining the legal apparatus of ship registrations and its effect upon the labour market in particular.

Ocean navigation revolutionized the world: the invention of the compass, the stem-mounted rudder and the caravel - a small two- or three-masted windward-sailing ship - led to great discoveries in the sixteenth century. As seafaring expanded, debates arose about freedom on the high seas and maritime trade, as seen in the argument between Hugo Grotius, author of Mare Liberum (free sea) in 1609, and John Selden, who replied in 1635 with Mare Clausum (closed sea) (Gaurier 2005). Freedom of navigation and trade - the "Grotian principle" - eventually prevailed.

As free trade widened in the second half of the twentieth century, international seaborne trade also grew considerably: ocean freight volumes increased seven-fold in forty-five years, rising from one to seven billion tonnes (Guillotreau 2008) to account for 90% of worldwide merchandise cargo (Figs. 1 and 2).

The Relationship Between Ship and State in a Globalized World

Maritime transport originally involved a direct relationship between a nation and its ships, a link made more complex with the globalization of the maritime economy. The 1982 United Nations Convention on the Law of the Sea (UNCLOS) enshrined the principle that ships follow the nationality and laws of the "flag-state" - the country that enrols them, through a national registry, to sail under its "flag" or civil ensign. A vessel may possess only one flag. Any ship using a false flag lacks legal protection; on the high seas, it will be suspected of piracy. Each country defines the administrative, tax and employment conditions required for vessels flying its flag. The freedom of navigation underpinning maritime trade rests on a ship's connection to a state, the "genuine link" required by UNCLOS (UNCLOS 1982, Articles 91-92). We will see, however, that international maritime law has neither precisely defined nor enforced this "genuine link:" classic laws are ill-adapted for those flag-states that disregard their international obligations (see e.g. UNCLOS Article 94) and increasingly use so-called "flags of convenience".

The term "flag of convenience" describes the practice of permitting registration of ships owned by non-residents; it usually occurs in countries whose tax on the profits of trading ships is low, or whose requirements concerning manning or maintenance are not stringent (ISL 2008: 419).

 

 

Open Registry's Effects

 

 

 

 

 

 

 

"Open registry" allows shipowners to freely choose under which country's flag their ships will sail, to best exploit tax, labour and other advantages. Such flags of convenience came into use during the final years of the Atlantic slave trade, at the end of the nineteenth century. 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 labour costs began to register their ships to Panama. The practice has resurged since 1950, when newly independent countries arrived on the international maritime scene: Cyprus, Malta and Liberia join Panama as the leaders. These countries changed the world's economic order and accelerated adoption of open registry, greatly affecting ship registrations and the maritime job market (Fig. 3). They also drove adoption of complex legal and financial structures. To understand how this works, one should distinguish between the country that registers a ship and the nationality of the entities that control it. For example, large parts of the Chinese- and American-owned merchant fleets are registered in Panama and sail under its flag, while 46% of all ships registered in Panama belong to Japanese entities. A critical portion of the Greek fleet sails under the flag of Cyprus or Malta, and 25% of Liberia's registered fleet belongs to Germans (see Figure 3).

 

 

 

 

 

 

 

Weak ship registration laws give place to lex loci contractus, "the law of the place where the contract is agreed," allowing a shipowner, or a "manning" company that provides marine workers, to chose a flag based on the crew's country of origin (Monzani 2004). This results in a more international maritime job market: open registry allows shipowners and manning companies to hire in countries with low-cost labour - initially, onboard crewmembers (seamen, engineers, oilers

 

 

 

Under officers' orders, crewmembers steer the vessel, operate engines, signal to other vessels, perform maintenance and handle lines, and operate towing or dredging gear. Seamen work on deck, engineers operate engines and machinery and oilers work below deck maintaining the engines and machinery.

 

 

 

) and more recently, merchant marine officers (see Box 1).

 

 

 

 

 

 

 

Diluted Responsibilities

 

 

 

 

 

 

 

Not only the labour market but the entire marine transport chain has become globalized. The Erika oil tanker that foundered off the coast of Brittany in 1999, polluting more than 400 kilometres (248 miles) of France's western coastline, perfectly illustrates the tangle of actors, companies and nationalities involved in ocean shipping. Events unfolded as follows: the French multinational oil company, Total-France, sold a cargo of heavy crude oil to Total-Bermuda, who resold it to an Italian energy company, Enel, for delivery to Livorno, Italy. Total-London chartered the Erika oil tanker through an (unnamed) London company; Tevere Shipping, a Maltese "single company" (e.g. one created to own a single vessel - often with no other assets - to limit commercial and financial risks) owned the twenty-five-year-old Maltese-registered ship. Tevere delegated nautical and technical management of the vessel to Panship, a ship-management company

 

 

 

A ship-management company handles the technical and nautical management of a vessel: it takes out insurance, recruits the crew, checks the certification documents, carries out maintenance and inspects the ship's condition.

 

 

 

registered in Ravenna, Italy; Panship managed thirty vessels, each owned by a Maltese single company. A Bahamian company had first chartered the Erika, as had various oil companies prior to the Total voyage. Several had found the Erika unsuitable for duty following vetting

 

 

 

Vetting refers to a major oil company performing an external examination of an oil tanker, carefully assessing its condition, defects, technical and commercial management, and crew, to identify risks it could pose to the chartering oil company and suitability for duty.

 

 

 

exercises, but the vessel passed Total's scrutiny (i.e. Total SA, Total Transport Corp., and Total Gas and Power Services, Ltd). The last repairs made to the ship in Croatia would ultimately be judged insufficient, although an Italian classification company,

 

 

 

A classification company classifies a vessel for the ship owner and certifies the vessel for the flag state. It verifies compliance with safety regulations and standards and delivers a Certificate of Classification regarding the ship's structural integrity, among other aspects. In the Erika case, RINA performed this task for Panship.

 

 

 

Registro Italian Navale ed Aeronautica (RINA) had surveyed and passed them prior to the ship setting sail with Total's oil cargo.

 

 

 

RINA was judged criminally liable after the Erika sank.

 

 

 

An Indian manning company, Panship Mumbai, provided the onboard crew. The Erika's Captain Mathur came onboard only fifteen days before the ship sank on 12 December 1999. Such an extremely complex structure is not unusual: it allows for separation of ownership and management, and in principle limits liability to the owner.

 

 

 

 

 

 

 

Adaptations to Open Registry: "Second Registry" and "Flags of Necessity"

 

 

 

 

 

 

 

In 1986, faced with the need to remain competitive and reduce ship defections to flags of convenience, European Union (EU) member states began registrations in their overseas territories. Presented as "flags of necessity," these "second-order" national registries aim to retain merchant marine officer posts and about 25% of onboard crew positions for European Common Market citizens, while recruiting foreign nationals through manning companies on international terms to complete crew rosters. With these arrangements, the principle of "equal work, equal pay" vanishes. Some registries are based in overseas territories with autonomous legal systems where national laws and occupational protections do not apply, such as France's Wallis and Futuna Islands and its Austral and Antarctic territories, the Portuguese island of Madeira, Spain's Canary Islands, or the United Kingdom's Isle of Man. The need to adapt to international competition "justifies" differential treatment of a ship's officers and crew according to their European or foreign origins, for vacation time, salaries and occupational benefits, among other labour costs.

 

 

 

 

 

 

 

Economically, this policy has succeeded beyond question, allowing European countries to control 42% of the world's merchant fleet in 2006, up from 38% in 1990. These adaptations also stabilize the number of ships flying European national flags, save European officers' jobs, and reserve onboard crew positions for "international" seafarers who cost notably less (especially in benefits). Beyond its economic success, this system restricts Common Market-citizen access to seaman, engineer and boiler jobs, shifting them to higher-level maritime job training. This leads to shorter sailing careers, generally followed by jobs on land in the maritime industry. The steps taken by national registries to compete internationally have not reduced the worldwide number of ships flying flags of convenience. Nor have they reduced the size of the "controlled" fleet, i.e. vessels owned by developed countries but registered under other flags. However, this process has stratified occupational rights for seafarers, with foreign nationals receiving only the benefits required by international conventions.

 

 

 

 

 

 

 

Marine Workers in a Globalized Economy

 

 

 

 

 

 

 

The globalization of ocean shipping has caused enormous upheaval in workers' onboard living conditions. Efficiency and profitability motives constrain seafarers' time spent in port: fast turnarounds mean they must concentrate exclusively on onboard operations and attend to administrative formalities. Leaving the port zone is out of the question; crewmembers rarely even find two hours to read letters from friends and family in the local Seaman's Club. At sea, hard work in difficult conditions often shortens their careers. Long shore leaves between work stints and good pay cannot compensate for fatigue accumulated over many voyages. Seamen's autonomy up and down the ranks has disappeared: onshore services monitor ships constantly. At the same time, liabilities increase: if a ship pollutes a coastline because of its maintenance or lack of it, the captain may need to defend himself from a jail cell, even if he only recently took command of the vessel.

 

 

 

 

 

 

 

This abandonment of troubled vessels represents the height of deregulation, and crews and officers bear the brunt of it. It has become common for shipowners - generally hidden behind a single-ship company - to disappear when creditors seize a vessel, when a port authority detains it, or when marine workers strike over non-payment of their wages. The Olga J. cargo ship case sheds light on such practices. Built in 1956, the vessel was purchased by a Greek shipowner after a long career at sea. In 1998, a company based in Belize managed it and a Cypriot ship owner chartered it under a Honduran flag. In February of that year, the ship left Dakar with one Cape Verdean and twelve Ghanaian seafarers and a Greek captain aboard. It sailed toward Greece, then Bulgaria, probably in search of the lowest-cost repair port. On 24 September, the ship entered the port of Burgas in Bulgaria. On 12 October, the port inspectors found the ship unsuitable for duty and ordered it detained quayside. It remained immobilized for a long time; its seafarers stayed onboard for two and a half years, until they were repatriated in April of 2001. One of them, ill with pneumonia, was allowed to leave earlier for health reasons and because he could not afford $100 for medical care; he died on 30 August in Ghana.

 

 

 

 

 

 

 

While in Burgas, the crew was first confined to the ship, and then allowed access only to the port zone and an Internet café. The International Transport Worker's Federation

 

 

 

The International Transport Workers' Federation (ITF) is an international trade union federation of transport workers' unions, established in 1896 with headquarters in London. ITF represents more than 759 unions in 155 countries and 4.6 million workers worldwide. It is one of the ten international trade union federations affiliated with the International Trade Union Confederation.

 

 

 

(ITF) made a repatriation proposal that the crew refused; they hoped to see their salaries paid from proceeds of the ship's sale at auction. On 17 December 1998, they ceded their receivable salaries to the Bulgarian marine workers union: it pursued legal action on their behalf until August 2000, without success. That same month, the ship received no bids at auction. Finally, humanitarian support and the ITF paid for the sick seafarers' return to their home countries on 11 April 2001. On February 2002, the CCFD, a Catholic development-aid group from France, sued Bulgaria for violation of trade union and fair trial laws, in the European Court of Human Rights. The court refused a hearing on 22 January 2008 because the suit had not been filed within six months of the seafarers' repatriation; it also determined that since they had ceded their salary claims to the Bulgarian trade union, it alone could file suit in the absence of other legal remedies or because of unreasonable delay in deciding the claim's merits. In addition, only the dead sailor's relatives were permitted to sue for inhumane treatment (Chaumette 2009).

 

 

 

 

 

 

 

In response to the marine workers' exclusion from legal redress in the Olga J. case, the International Organization for Migration (IOM) and the International Labour Organization (ILO) designed a mandatory salary and repatriation guarantee for crewmembers: both organizations validated the principle in 2001. When the rule takes effect, the guarantee will be the first amendment to the 2006 ILO Maritime Labour Convention (Chaumette 2007; Chaumette 2008; Fotinopoulou-Basurko (2009). It avoids making good shipowners pay for bad ones, and instead requires guarantees from each operator; this ensures, first of all, that no owner or management failure punishes workers, and that no one, even in international operations, can declare bankruptcy voluntarily.

 

 

 

 

 

 

 

Countries that supply maritime workers to the ocean shipping industry are flagrantly absent from such supervisory efforts, even though the certificates they grant must meet the requirements of the IMO's Convention on Standards of Training, Certification and Watchkeeping for Seafarers. The labour-supplying countries also issue identification cards, facilitating crew travel before embarkation and after disembarkation. This lack of oversight should not, however, deter labour-supplying countries from strengthening protections for their nationals, rather than prioritizing the cash such workers send home to their families.

 

 

 

 

 

 

 

The Port State as New Inspector

 

 

 

 

 

 

 

The "genuine link" required by UNCLOS vanishes when the flag state shirks its international duties: maritime law loses one of its major pillars, seriously weakening its balance of power. Coastal states' regulations and decisions on navigation laws cannot compensate for the inertia of many flag states, which hinders improved safety and anti-pollution measures; neither can the emergence of port state control and ship inspection during loading and unloading operations. Such port controls attempt to rebalance the equation in favour of international maritime laws by requiring that vessels obey international regulations, regardless of registration flag (Ozcayir 2004; Christodoulou-Varotsi 2003).

 

 

 

 

 

 

 

The ILO's 1976 Convention number 147 concerning Minimum Standards in Merchant Ships requires that ratifying states apply it to all ships registered in their territories (ILO 1976). The Convention also grants port states the right to "take measures [against any non-conforming ship] necessary to rectify any conditions on board which are clearly hazardous to safety or health" (ILO 1976, Article 4); this ensures that ships registered to non-ratifying countries will not be treated more favourably. The 1982 Paris Memorandum of Understanding on Port State Control constitutes an agreement between state authorities to enforce the ILO conventions

 

 

 

The ILO produces international rules, but has no inspectors or enforcement power over states, nor any sanction powers with regard to ship operators.

 

 

 

(ParisMOU 1982). While the Paris Memorandum refers to the ILO's Convention No. 147, the inspections it foresees primarily cover technical issues and few occupational ones; they focus first and foremost on enforcing "safety of life at sea" (SOLAS) conventions, and those aimed at preventing marine pollution, e.g. the MARPOL Convention. However, crewmember qualifications must also pass inspection under the Convention on Standards of Training Certification and Watchkeeping (Boisson 1998).

 

 

 

 

 

 

 

The European Union adopted this maritime safety process via its Directive 95/21 (19 June 1995, Council on State Port Control). This directive applies the Paris Memorandum and other conventions regionally, setting up common databases and strengthening safety regulations without taking unilateral measures (Ndende and Vende 2000; EC 2009). The European Maritime Safety Agency is responsible for coordinating port inspections conducted by member-state authorities, thereby ensuring ship monitoring from port to port.

 

 

 

 

 

 

 

A New Maritime Convention

 

 

 

 

 

 

 

On 23 February 2006, the UN adopted the New Consolidated Maritime Labour Convention in Geneva, anticipated to take effect in 2011, with at least 30 ratifications representing 33% of the world's fleet. This Labour Convention will open a new era in the history of maritime labour, formalizing occupational welfare as well as complaint and inspection procedures (Doumbia-Henry 2004; Fotinopoulou-Basurko 2006). The flag state must certify that the ship owner follows the Convention, facilitating state port control. The 2006 Convention constitutes the fourth pillar of international maritime law, alongside SOLAS, MARPOL and Standards of Training, Certification and Watchkeeping for Seafarers.

 

 

 

 

 

 

 

Occupational issues (salaries and employee welfare) are addressed by international trade unions: since 1948, they have campaigned against flags of convenience and have brought more than half of the world's fleet under Total Crew Cost (TTC) agreements (i.e. work contracts for seafarers, regulated by the International Transport Workers Federation [ITF]), without waiting for worldwide conventions to take effect. The collective agreement of the International Bargaining Forum affects 700,000 sailors, seamen, engineers, oilers and officers working on more than 3,500 ships; it was negotiated by the ITF, European shipowner members of the International Maritime Employer's Committee, and Japanese shipowners in 2003. A revised agreement at the end of 2008 doubled salaries in light of war risks, particularly increased pirate activity in the Gulf of Aden off the Somalia coast.

 

 

 

 

 

 

 

Thus the market and labour relations in the international maritime industry have evolved in recent years, and may lead to new standards. Even though no worldwide collective bargaining agreement exists, a regional framework - especially the European one - could assist transnational negotiations, and ensure free trade unions and collective bargaining. These are fundamental ILO principles, recognized by the European Convention on Human Rights (formerly the Convention for the Protection of Human Rights and Fundamental Freedoms) and protected by law through the European Court of Human Rights.

 

 

 

 

 

 

 

Conclusion

 

 

 

 

 

 

 

Maritime transport emerged from its national frameworks, born at the end of the seventeenth century, to take its place in a globalized market, characterized by open ship registration, in the middle of the twentieth. Traditional legal relationships between ships and maritime workers changed with the growth of services companies for ship management and manning. Since then, ocean shipping has sought a new legal order, involving both coastal states and port states. Private inspections, e.g. those conducted by classification societies or vetting by oil companies, cannot replace state controls; each operator within the industry must assume its responsibilities and liability.

 

 

 

 

 

 

 

The industry is a kind of laboratory, creating an experimental framework for relationships adapted to a globalized world: it must link international, regional and national rules, state and private inspections, open registration and coastal state or port state intervention. Within this experiment, labour-supplying countries have lagged, failing to ensure even minimum protections for their citizens - who after all go to sea to earn their living, not lose it. Too many seafarers still liken embarkation to prison, recalling the words of oilers below deck as steam engines developed at the turn of the twentieth century:

 

 

 

 

 

 

 

"Going to sea meant enclosure between plates of black metal, in front of a hearth, facing burning coals, flames furiously whistling against their chests. When they stuck their noses outside, on deck, their watch ended, the free air suffocated them, their eyes blinked in the daylight; they returned to their domain, waiting for the ship to be loaded, able to forget their boiler room for a few hours" (Peisson 1932: 16).

 

 

 

 

 

 

 

Marine Workers

 

 

 

In 2005, the worldwide merchant marine workforce counted 721,000 crewmembers and 466,000 officers. By 2020, a shortfall of nearly 60,000 officers is predicted. Approximately 140,000 officers - often near retirement age - and 191,000 seafarers come from the thirty-four member-countries of the OECD (Organization for Economic Cooperation and Development). After the dissolution of the USSR, ex-Soviet republics in Central Asia invested in maritime shipping; today they account for 62,000 officers, including 21,000 Russians and 14,000 Ukrainians, as well as 107,000 seafarers, comprising 23,000 Russians and 23,000 Ukrainians. East Asia represents the largest job market, with 160,000 officers and 436,000 seafarers (in 2003), including 230,000 Filipinos, approximately 83,000 Indonesians and an equal number of Chinese, and 55,000 Indians. The number of officers from Central and East Asia should grow in the coming years, notably due to German, Danish and Greek shipowner investments in merchant marine academies (Lacoste 2008).

 

 

 

 

 

 

 

Ocean Freight Growth 1960-2005 (in billions of tonnes)

Source: UNCTAD (2007)
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Worldwide Fleet Growth (in millions of TONNES LOADED)

Source: UNCTAD (2007)
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Principal Registration Countries and Principal Maritime Countries by Controlled Fleet (in millions of deadweight tonnage [dwt])

Source : ISL (2007)

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