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A birds eye view of a coast guard dressde in camoflauge climbing a ladder to board a ship with the blue ocean below.
Some countries operate as so-called flag of convenience states, offering ship owners lenient regulations, low taxes, or little legal enforcement. Flag of convenience states’ lax approach to deterring illegal fishing puts the burden on other countries. Agencies such as the United States Coast Guard, Australian Fisheries and Customs, and others can spend vast sums surveilling and inspecting foreign fishing vessels and enforcing international law. Photo by AB Forces News Collection/Alamy Stock Photo

Flags of Convenience: Could the Threat of Lawsuits Put an End to the Practice?

Some countries are hands-off in policing their fishing fleets, forcing other countries to step in. Researchers think shifting the costs back to flag states could force them to reform their laissez-faire attitudes.

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by Greg Noone

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It took 21 days before the Australian coast guard could catch up with the Viarsa 1. It was August 2003 and officers from the coast guard’s Southern Supporter had asked to board the Uruguayan-flagged vessel to check that its crew wasn’t fishing for Patagonian toothfish, a protected species. Instead, the crew fled. Heading southward out of Australia’s territorial waters, they covered up to 400 kilometers a day, skirting Antarctica’s dangerous pack ice in a desperate attempt to elude their pursuers. They failed. The Southern Supporter eventually intercepted its quarry off South Africa, towing the Viarsa 1—with almost 150 tonnes of toothfish in its hold—to the port in Fremantle, Australia.

It wasn’t until 2016, however, when authorities in Spain arrested six members of the Vidal Armadores organization, that those ultimately responsible for the illegal fishing activity faced justice. The company was fined US $17.7-million—a figure that sounds substantial, until one considers the $10-million Australian authorities spent hunting down the ship.

How the company eluded repercussions for 13 years owed in part to its deft manipulation of the shipping registry system. According to international law, every ocean-going commercial vessel has to fly the flag of the country in which it is registered. And while the law demands that these nations are responsible for the conduct of their fleets, many countries shirk their duty. These countries, known as flag of convenience states, often have lax rules on fishing oversight, loose regulations, or are uninterested in pursuing illegal actors. These flags of convenience states also operate what’s known as an open register—a legal structure that allows a shell company to be the legal owner of a vessel, even if it has little or no connection to the country in question. By shifting the owner of a ship through multiple shell companies, and paying to register their ship in different countries, unscrupulous criminal organizations can elude punishment. It’s why, earlier in its life, the Viarsa 1 had been flagged to Belize before finally being apprehended under the sun and stripes of Uruguay.

The existence of flag of convenience states and open registers helps to enable illegal fishing. But in a new report, Jessica H. Ford, an expert on illegal fishing at the Australian Commonwealth Scientific and Industrial Research Organisation, and a team of international colleagues have laid out a scheme that they think could be the key to ending the problem once and for all. At the core of their plan is giving countries a way to recoup at least some of the costs of law enforcement from a ship’s flag state.

The study proposes that instead of spending millions to apprehend boats like the Viarsa 1, and then trying desperately to identify their owners through a morass of corporate secrecy, coastal states should instead seek compensation from the ship’s flag state for failing to ensure that its fleet is abiding by international maritime law. The hope is that by putting the sometimes-exorbitant costs back on the flag state, they can make taking such a lax approach to illegal fishing uneconomical.

The proposal already has some legal grounding. In 2015, the International Tribunal for the Law of the Sea issued an advisory opinion that flag states must exercise due diligence to prevent or police acts of illegal fishing among their fleets under the United Nations Convention on the Law of the Sea (UNCLOS). Coastal states, therefore, have the right to sue flag states (assuming both are signatories to UNCLOS) when this due diligence is not exercised under the settlement provisions outlined in Part XV of UNCLOS—a power that, remarkably, has not yet been exercised in the context of illegal fishing.

Ford and her colleagues hope that the specter of being sued by a coastal state would be enough of an incentive for flag of convenience states to finally implement meaningful oversight over their shipping registers. “If you can improve the administrative oversight of these flag states, and actually put the financial liability back onto them, then that is our hope that that is one way of improving the records of beneficial ownership,” she says.

More stringent registers would, in turn, expedite legal action by coastal states against the owners of vessels that have been caught fishing illegally.

The proposal, says Vanya Vulperhorst, the European campaign director for illegal fishing and transparency at the nonprofit Oceana, is welcome and thought-provoking. However, Vulperhorst thinks this approach might be slow in yielding positive results. For one, it would still be relatively easy for illegal fishing vessels to hop from one flag state to another. If a country comes under significant legal pressure to reform its register, the fishermen will just change to another one, says Vulperhorst. “Today, it’s Saint Vincent and the Grenadines. Tomorrow, it’s Cameroon. The day after, it’s Georgia.”

There’s also the possibility that certain flag states might consider it easier to pay fines for illegal fishing than reform their registers. Many open registers, after all, include not just fishing vessels, but cargo vessels of all descriptions. These shippers are attracted to the flag state’s low tax rates or lax attitude toward enforcing its legal responsibilities in maritime law. “For some [countries], it’s really a business model,” says Vulperhorst. The occasional fine in the millions of dollars might be a small price to pay for continuing to operate as a flag of convenience state.

Other flag of convenience states may be hit disproportionately by the proposal. As Ford and her colleagues note in their paper, a country like Togo, whose fleet has been previously associated with illegal fishing activities, would likely be sued repeatedly under such a system. A single fine for $10-million, for example, would constitute half of what the Togolese economy accrues from fisheries, a devastating result for a country in which half the population lives below the poverty line.

It’s reasonable, therefore, to question whether nations beset by high levels of poverty would be faced with an impossible choice: either spend significant sums building a new administrative framework for their registers, or abandon selling their flag entirely and lose that source of passive income. Ford concedes that there’s much more work to be done on the details before the paper’s proposals can become reality.

“There are multiple years of work required to work out the legal side of things, the policy side of things, the data due diligence side of things,” she says. Even so, the proposal could be the beginning of an international framework capable of ending the scourge of illegal fishing. “Consider it the start of winding up the rest of the pieces.”

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Cite this Article:

Cite this Article: Greg Noone “Flags of Convenience: Could the Threat of Lawsuits Put an End to the Practice?,” Hakai Magazine, Jul 25, 2022, accessed June 15th, 2024, https://hakaimagazine.com/news/flags-of-convenience-could-the-threat-of-lawsuits-put-an-end-to-the-practice/.

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