Rules of the Road: More to choosing flag than its color

Oct 3, 2020 by Capt. Jake DesVergers

Rules of the Road: by Capt. Jake DesVergers

Registration of a yacht is an important function toward the overall safety and security of maritime transport. While seen as a paperwork process, it significantly contributes to the protection and preservation of the marine environment.

The general mechanism for establishing a yacht’s nationality is registration of the vessel in a particular Flag State. By linking a yacht to a Flag State, the system of yacht registration indicates that that Flag State has the right to protect that yacht under international law.

A core principle of international law is the freedom of the high seas. This principle is outlined in Article 87 of the U.N. Convention for the Law of the Sea (UNCLOS). To balance this freedom with the need to avoid disorder and misuse, international law provides a framework for the regulation of shipping. While most yachts are not engaged in trade like merchant ships, they are included within this framework. It composes two core rules:

  1. Each State shall fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory, and for the right to fly its flag (Article 91 of UNCLOS); and
  2. The State must effectively exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag (Article 94 of UNCLOS).

Article 91(1) of UNCLOS acknowledges the right of every State to “fix the conditions for the grant of nationality and for the right to fly its flag.” The same article provides that there “must exist a genuine link between the State and the ship.” The purpose of the “genuine link” requirement in UNCLOS is to secure more effective implementation of the duties of the Flag State. However, there is currently no binding international framework to regulate the registration process itself. 

Each country sets its own laws and regulations on the registration of ships. Some countries, such as the United States and Australia, only register vessels with ties to the country through ownership or crewing. These countries are considered “national registries.” They can also be labelled as “closed registries.” Other countries allow foreign-owned or -controlled vessels to use their flag through an “open registry” system. In these systems, a yacht may be owned by someone who is not a national of that particular country. Examples of these flags most used in yachting are the Cayman Islands, Marshall Islands, Jamaica, St. Vincent & the Grenadines, and Malta. Other countries just choose not to allow the use of their flag for international trade at all.

The reasons for choosing an open register are varied. It depends upon the owner’s needs and use of the yacht. These can include tax avoidance, the ability to avoid national labor restrictions, and the ability to hire crew from foreign countries. The use of open registries can provide lower registration and maintenance costs, which in turn reduce overall operating costs. While initial costs may be high, the accumulated advantages over time can be significant.

In an article published by the shipping group Clarksons in 2016, they provided an objective and factual explanation of the maritime industry’s embracement of international integration and the drain from the “nation state.” The article stated, “As globalization got started in the early 1950s, shipowners took a decisive step which, over the years, has played a crucial part in making it the international carrier of choice. In a nutshell, they traded in nationality for open registries. In 1959, these flags were legally recognized by the International Maritime Organization (IMO) and soon other states started offering a “flagging-out service.” It is important to note that in mid-2011, open registers reached a key landmark. Two-thirds of the world’s gross tonnage was flagged under an open registry.

Recalling the history and purpose of open registries, we can now address one of the largest misconceptions used to describe them and the reason for this month’s column. Commonly, open registries are referred to as “flags of convenience.” This significantly outdated term is usually used when describing an exceptional situation such as an accident or crew dispute. The term invokes images of dishonest captains getting away with criminal behavior by forcing crews to work like slaves without adequate pay or rest under appalling conditions. While this may sound like the typical 10-day charter routine, it is not realistic.

As we know, history repeats itself. It can teach us a lot about how to react to situations presented to us in the current day. For this particular subject, we have to remember that the world changes. Business and leisure — including yachting — change with it. Yes, in years past ships and yachts used to fly the flags of their nations. Everyone kept to his or her home flag. Very true; and Americans used to only drive cars made by Ford and Chevrolet. 

For the most part, things do change for the better. Open registries emerged and developed largely because national registers were not doing their jobs properly, nor providing the service that owners needed. In many cases, they are still not doing their jobs. If they were, we would see a reversal in these roles. And please, to keep the broiling nationalism at bay, please note that the author is a solid supporter and decades-long member of the US merchant marine. 

It is often claimed that negligence is ignored by open registries, where owners can slip away, unpunished and unaccountable. This is a horrible delusion. Conscientious open registries are just as attentive as their national registry counterparts in eliminating substandard yachts. In the same way, poor national registers are equally susceptible to accusations of turning a blind eye.

Any captain looking for a quality flag for the boss’ next boat has many choices. When reviewing the ever-expanding list of yacht registries, focus on those countries that offer great customer service in conjunction with excellent results on the world’s port state control websites. It’s not a guarantee, but it’s a place to start, and certainly better than simply choosing one by the color.

Capt. Jake DesVergers currently serves as chief surveyor for International Yacht Bureau (IYB), a recognized organization that provides flag-state inspection services to private and commercial yachts on behalf of several flag-state administrations. A deck officer graduate of the U.S. Merchant Marine Academy at Kings Point, he previously sailed as master on merchant ships, acted as Designated Person for a shipping company, and served as regional manager for an international classification society. Contact him at 954-596-2728 or Comments on this column are welcome below.