Why the term “flags of convenience” is wrong

Whether of Liberia, Antigua and Barbuda, the Marshall Islands, Malta or Portugal, the foreign flags used by German shipping companies are among the top-quality flags in official rankings.

What does a flag state do?

According to the United Nations Convention on the Law of the Sea (UNCLOS), ships have the nationality of the state whose flag they fly. Thus, the flag state retains sovereignty over and its legal system applies to a ship when it is at sea. The flag state also bears primary responsibility for monitoring the ship’s compliance with international standards. This particularly pertains to safety, environmental protection and the working conditions on board, but also to the qualifications of the personnel working on the vessel. In addition, the flag state must launch investigations as soon as one of “its” ships is involved in an accident resulting in serious injury to a person or serious damage to the ship or the environment. For shipping companies, it is crucial for a flag to have an impeccable reputation and to be consistently well rated in the various pertinent statistics, this is a very important factor taken into account when choosing a flag. The fact is that so-called “black sheep” – meaning ships flying the flag of a more poorly rated flag state – are inspected much more frequently and thoroughly under the different port state control regimes. This costs time and money and can result in a poor rating of the ship and other possible disadvantages, such as higher insurance costs and lower time charter rates. What’s more, from the shipping companies’ perspective, the administration of the respective flag state should work in a manner that is as unbureaucratic, reliable and service-oriented as possible.

What are port state controls for?

Checks are also regularly carried out in the ports the vessels are calling to ensure that ships are in compliance with internationally prescribed standards. Data on this is collected in bundles and the criteria for the inspections are determined on a regional basis within the framework of the different existing port state control regimes. Europe and the North Atlantic region are governed by the Paris Memorandum of Understanding (Paris MoU), which calls for 25 European port states as well as Canada and the Russian Federation to cooperate and exchange information. The authorities carry out more than 10,000 inspections per year applying a risk-based approach, which in turn provide information on the work of flag states and classification societies. Although about half of the inspected ships in recent years have often had deficiencies, only a very small proportion – about one in every 30 ships – has had such serious violations that they have initially been prohibited from continuing their voyage. Looking at those numbers it also has to be taken into account that vessels and ship-owning companies with a bad “track record” are inspected more frequently than others.The annual ranking in this area assigns vessels to a white, grey or black list. To determine which list a ship is assigned to, a ranking is calculated by relating the number of detentions to the number of inspections over the previous three years. The “White list” includes flag states of ships that have in general given no or only very little cause for concern. In recent years, the largest flag states – Liberia, the Marshall Islands, Hong Kong, Singapore and Malta – have ranked among the top 20. Thus, at least as far as the flagging of German shipping companies is concerned, there can be no talk of “flags of convenience”.

Where are the ships of German owners registered, and which flag do they fly?

Most of the vessels of German shipping companies are registered in various German shipping registers, but only a comparatively small number of them actually fly the German flag. Instead, most of them sail under non-European quality flags – particularly those of Antigua and Barbuda and Liberia. Almost half of the ships in the German fleet now fly a European flag, especially from Portugal, Cyprus or Malta

All these flags are among those that rank particularly well internationally in port state controls and are, for example, on the “White list” of the Paris MoU. Almost half of the ships of the German merchant fleet sail under a flag of an EU member state.

You can find a detailed and up-to-date listing under the heading “Facts & Figures” on the VDR website.

Why do German shipping companies use foreign flags?

Shipping is a global business. Many ships that are managed by German shipping companies never call at German ports because they are deployed, for example, on intra-Asian routes or ones between Asia and North America e.g. For shipping companies, the crucial issue is to survive in the face of tough international competition. Some of the important determinants here are having a flexible and service-oriented flag state administration as well as reasonable personnel costs and nationality requirements for the crew. In the past, the German flag was associated with significant additional costs, such as on the personnel side. In addition, ships under German flag also had to meet certain additional requirements (some of them related to construction), and the flag state administration sometimes acted very bureaucratically. Many conditions have been significantly improved in recent years via a range of measures, such as by reducing the number of responsible bodies as well as by simplifying the design of administrative processes and making them more customer-oriented – especially by offering more effective support in order to offset the additional costs associated with employing both German and European seafarers in Germany. This has contributed to the fact that the share of tonnage under German flag has – despite the long-lasting, severe shipping crisis - recently stabilised considerably and that shipping companies have also occasionally brought vessels back under the German flag.