Ever since their inception back in the 1920s, Flags of Convenience (FoC) have been a subject of no small amount of controversy. The practice originally began during prohibition, when American cruise ships would fly under the Panamanian flag in order to be able to serve alcohol to passengers and thus escape the stringent US regulations at the time.
Nowadays, the ability to change your ship’s register while avoiding nationality and/or residency requirements still remains as contentious as ever.
Currently, more than half of the world’s maritime fleet operates under an open registry (approximately 55%, according to the latest data). A report written back in 2009 shows that over 40% of the world’s merchant fleet is currently registered with Panama, Liberia and the Marshall Islands.1
There’s a multitude of reasons why a shipping company might choose to fly an FoC. And granted, while all of them may vary, most are financial in nature. Prominent flag states usually sport very limited regulations when it comes to labour and environmental protections.
Furthermore, open registries usually require lower registration and maintenance costs while providing shipping companies with the ability to hire seafarers from lower-wage countries.
There’s also the much-criticized practice of flag-hopping when it comes to end-of-life vessels, all in an effort to bypass international environmental regulations.