Last week, we looked at the failure of the international ship registration system, which means that hundreds of aged, badly managed, often unsafe, and uninsured tankers are plying the world’s seas, whilst the International Maritime Organisation (IMO) sits idly by. Several high-risk accidents suggest it is only a matter of time before there is a serious incident with massive pollution and/or loss of life.
The explosion on the Gabon-flagged Aframax tanker Pablo and the separate collisions involving the Panama-flagged Andromeda Star off Denmark and Sao Tome-flagged Ceres I off Malaysia are the most obvious warnings that the Dark Fleet is a danger to seafarers, to other ships, and to the environment. These vessels specialize in the smuggling of Russian, Iranian, and Venezuelan crude to avoid western sanctions.
The existence of the Dark Fleet is a problem for the entire marine industry and one that requires urgent action. We have urged the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury and the European Union to look at those private registries that administer many of the lowest grade flags operating dangerous tankers, and to consider their involvement in sanctions violations.
We also urged coastal states to consider taking action at the International Tribunal of the Law of the Sea against those flag states whose vessels cause pollution and loss.
This week, we will look at some other remedies, and how we came to be in a situation where private companies profit from the sale of sovereign flag state rights in secret.
We highlighted how Gabon is one of the worst offenders in terms of lax safety regulation – being the flag state of Pablo when it blew up, being the flag state of the doomed ferry Esther Miracle, which sank in its own domestic waters in 2023 with the deaths of over 30 people, and being the scene of a recent catastrophic explosion on a Perenco-operated offshore oil platform in Simba field, which resulted in the death of six workers in March. Governed by a military junta, Gabon is a failing flag state.
The Gabonese ship registry has been run by a private company operating out of the United Arab Emirates, Intershipping Services, as “the Sole Authorised Representative for Maritime Administration of Gabonese Republic” from its “worldwide head office in Ajman, UAE."
Of course, the owners of Intershipping are making money from the registration of low-quality vessels, but they do not disclose their revenues or profits publicly, and they do not share how much they pay to the Gabonese treasury for acquiring the right to act on behalf of the Gabonese state.
We believe that such disclosure should be mandatory, when a flag state delegates responsibility to a private company.
No sooner had our piece been published, than there was another tragedy on board a Gabonese flag vessel off the coast of the UAE last week. Three Indian sailors died in a fire in a tank onboard the 8,000DWT, 2009-built product tanker Narsimhaa (former JM Sutera 7), including the chief officer, as per Indian media.
These deaths are shocking and completely unnecessary, but we would urge the Sharjah investigators to look at not only the causes of the accident on board the ship, but also the role of the flag state, which supposedly governs the safety of the vessel, a role performed by a company conveniently located in the UAE.
The UAE authorities might consider looking at whether Intershipping fulfilled its duties as a responsible flag registry to ensure that safety standards were upheld onboard Narsimhaa, and to look at whether the directors and officers of Intershipping have upheld their obligations to administer their vessels safely under international law.
Intershipping holds approval from the Federal Transport Authority of the UAE, as per the certificate on its website. Now might be a good time to look at whether the UAE wishes to continue certifying the company in that role.
“Those that are profiting from the sale of vessel registration should be prepared to accept the consequences, if they are registering substandard ships that cause pollution or damage or violate the law,” as we said previously.
OFAC might want to consider looking again at the role Mr Hysham Akram Shaikh as the Managing Director and Head of Marketing and Finance Department of Intershipping Services LLC – Ajman, and Union Marine Classification Services, Dubai, and his colleagues play in facilitating the transport of sanctioned oil following the reflag of 18 tankers by Russian state tanker owner Sovcomflot to their administration in the last year, along with over 30 other Dark Fleet ships.
The 1982 Law of the Sea Convention (LOS Convention) and numerous other international treaties specify that flag states have obligations with respect to the safety of ships flying their flag. A UAE investigation might look into whether Gabon and Intershipping are failing in those obligations, or not.
The families of the dead seafarers from Narsimhaa deserve that. Unfortunately, as we have seen in the case of Pablo, where three crew died, and in the tragic case of Georgian seafarer Giorgi Tsilosani in April, who perished in an explosion at a shipyard in Dalian onboard the 1999-built Eliak (a Palau-flagged Aframax tanker owned by Indian interests, apparently with a history of carrying sanctioned oil), these privately-owned flag managers are not transparent in their reporting.
They often do nothing to punish the owners and managers of substandard ships, or to compensate the families of the dead.
Not only should the government of the UAE be looking into the role of the Gabonese flag state in regulating the ill-fated tanker, it could also consider whether Gabonese flag vessels should even be calling at its ports, along with other Dark Fleet flags.
Other port states should also look at whether having vessels from a failing Dark Fleet flag are desirable, if they want to reduce the risk of seafarers’ deaths, incidents, and pollution in their waters.
At the start of this month, the UAE banned ships registered under the flag of the landlocked African nation Eswatini (the former Swaziland), except those classed by IACS members, or the UAE’s own classification society.
The UAE already restricts a number of shoddy flag states from calling at its ports – including Albania, Tanzania, North Korea, and Gabon’s neighbours the Republic of the Congo, Sao Tome and Principe, and Cameroon, which was blacklisted earlier this year.
Given the recent incidents on the Gabon-flagged fleet, is it time for the UAE to add this dead-beat flag to its exclusion list?
But the Gabon flag is not some outlier or unusual pariah. It is just a symptom of a failing system of flag state registration and the profiteering of private companies from what should be a sovereign responsibility.
As I commented to our publisher, “there is some weird stuff with these private registries,” and most marine community members are unaware of just how so many obscure jurisdictions came to dominate ship registration.
Panama began to take on international ships under its flag during the era of Prohibition in the US in the 1920s. Americans wanting to drink alcohol at the time realised that it could be served on foreign-flagged passenger vessels, and with its, er, close ties to America, Panama provided a convenient jurisdiction. Cheers!
The historian Rodney Carlisle has noted that the transfer of American-owned ships to foreign registries was quite limited when Prohibition was repealed, until late 1939 when the Second World War began. Standard Oil and other tanker companies registered their ships in Panama to avoid the effect of US neutrality laws, which prevented the transport of war materiel on American-flagged vessels.
Under the Panamanian flag, however, the oil companies could continue to supply fuel to Great Britain, even after President Franklin D. Roosevelt banned American-flagged merchant shipping from entering the North Atlantic war zone.
Today, the two biggest open registries managed by private companies are those of Liberia and the Marshall Islands, which were were set up after the Second World War under the auspices of what is now International Registries (IRI).
The precursor to IRI was founded in 1948 by Edward R. Stettinius Jr., a former General Motors manager, who was also the United States Secretary of State from 1944 to 1945 and then US Ambassador to the United Nations in 1946.
Whilst visiting Liberia to officiate at the opening of the Port of Monrovia, built with the support of the US Navy, Stettinius had noted the contrast between the poverty of the Liberian people and the nation's rich natural resources.
Stettinius was friends with William Tubman, the president of Liberia from 1944 to 1971, and in 1947, he formed Stettinius Associates Liberia,. This was a private enterprise to work in partnership with the Liberian government “to provide funds for the development of the African nation,” as per Wikipedia, and conveniently also to provide funds to Stettinius and the American financiers who owned the company. Stettinius himself held 20 per cent of the company’s capital, and he also personally owned five tankers flagged to Panama through a separate company.
Stettinius Associates signed a profit-sharing arrangement with the Liberian government. Under the agreement, 65 per cent of any profits were to be returned to Stettinius Associates, with 25 per cent to go directly to the Liberian government, and 10 per cent to be turned over to Liberia Foundation, a non-profit organisation devoted to Liberian educational, health, and welfare programs. Stettinius then assisted Tubman to write and pass a Liberian Maritime Code, which offered foreign ship owners even more generous terms than Panama.
Another of Stettinius’ companies would deduct 32.50 cents of each US$1.20 per ton (about 27 per cent) on new tonnage registered in Liberia, which it claimed was a fair and legal service charge for acting as a "quasi-official agent" of the Liberian government. Because of that status, the company would be free of any Liberian tax. The first vessel to join the register was owned by Stavros Niarchos of Greece and was under charter to Gulf Oil.
Freed of the tiresome requirements of national unions, national crew, and developed country wages, Liberia profited from its open registry, where shipowners of any nation could register their vessels and pay only tonnage taxes and registration fees to the Liberian state, which the private registry conveniently collected on behalf of the government.
At the time of Tubman’s death three decades later, Liberia had the largest mercantile fleet in the world.
But by the early 1990s, competitors in Hong Kong, Singapore, and elsewhere were catching up with Liberia. In 1990, the Republic of the Marshall Islands adopted its own Maritime Act, and IRI began to administer in addition to registering. At this time, only 39 vessels totalling approximately two million GT were under the RMI Maritime Registry.
However, this was this decade that saw the Liberian register leave the management of IRI. The then president of Liberia, Charles Taylor – also a warlord, convicted war criminal and acquaintance of supermodel Naomi Campbell – decided to ditch IRI. Taylor was fighting a bitter, bloody, and brutal civil war at the time.
Apparently, he wanted a greater cut of the flag revenues than IRI was willing to provide, and American entrepreneur Yoram Cohen set up a new Liberian registry known as LISCR. LISCR won the contract to manage the flag from IRI in 1999.
Predictably, there is a whole contested history of how and why the split from IRI occurred, and how Mr Cohen and the Liberian government’s then US lawyer managed to win the Liberian registry business for themselves, which the Washington Post has admirably covered.
That left the largest two open registries owned by different privately owned American companies. Neither has been implicated in the Dark Fleet, presumably because of the close oversight the US government has over their affairs.
Unfortunately, the finances of both IRI and the Cohen family’s Liberian flag administration entity are locked boxes, as they are private and there is no financial disclosure that I can find – exactly the same as Gabon, Sao Tome, and all the cast of other open registries, which we examined last week.
Liberia and the Marshall Islands may have higher standards and better port state inspection findings than Gabon and Sao Tome, but the profits of their registry managers are also secret, even though these private countries apparently operate for and on behalf of two parliamentary democracies.
Liberia produces a state budget at a high level, but does not break out the revenues it receives from LISCR. African Intelligence noted that “the ship registry, which is Liberia's principal source of international influence and foreign currency, has always been jealously guarded by the country's leaders.”
However, the Marshall Islands does report its finances in the RMI Economic Review, and it is a fascinating read. One of the world’s biggest flag states seems to be selling its sovereign rights for peanuts!
On page 32 of 48 of this PDF report (the page printed as page 21), we learn the following:
"Under a long-standing and confidential agreement, the operation of these registries has been delegated to the Trust Company of the Marshall Islands (TCMI), which is a subsidiary of a US company, International Registries. TCMI is subject to limited oversight by the Banking Commission or other government agencies.... Under the amended compact the RMI government received US$1 million annually from the registry; US$8.2 was received in FY21 and FY22; and in FY22 had risen to US$11.4 million.
"However, there is a general lack of transparency and publicly available financial information on TCMI operations. As a result, the question arises whether or not the RMI receives its fair share of the royalties. However, it is known that in similar jurisdictions the host nations receive a far higher return. There is thus a need for a transparent evaluation of TCMI in light of perceived unfairness and possible underpayment of royalties that are due to the RMI. It is understood that the government commissioned a study some time back to evaluate this issue and to recommend a range of actions, but these are also not publicly available..."
WTF? Go back and read that again and wonder how this is possible in a democracy. “A long standing a confidential agreement,” “a general lack of transparency,” and a report that is “not publicly available.”
So, what we do know is the Marshall Islands with a population of just 44,000 people received US$11 million for flagging 186.9 million GRT with 4,231 ships under its registry in 2023 – just US$2,600 per vessel, or one hundred people per ship registered, depending on your point of view.
This seems like an insane amount of risk to a very small country for a small amount of reward. If the flag state were on the hook for pollution claims from its vessels, the Marshall Islands would struggle to pick up the tab, and IRI could always declare bankruptcy and escape any large liability as a private American company.
But at least we can track down the revenues the Marshal Islands state receives, and we know something of the owners of the company that administers the registry.
We believe that flag states should take legal responsibility for the vessels they flag and that port states and coastal states harmed by substandard shipping should be taking recourse at ITLOS against those flags that cause them harm, and at tort when a private registry manager is involved.
I also believe that the IMO should compel those flag states that contract out their flag management to private companies to publish how much in revenues each flag state receives from its ship registry franchise, and also the audited accounts of the companies that administer their flags. That would permit their citizens to understand whether the risks they are taking on to benefit the managers of private companies are acceptable.
Micro-states like the Marshall Islands and Sao Tome do not have the financial ability to underwrite the liabilities they accept when they hand over their sovereign rights to opaque private companies. A model that was suitable in 1948 is no longer fit for purpose.
Next week in our final part, we will look at the Kiwi Connection and how New Zealand and its citizens act as important facilitators of Dark Fleet activities, and also how the US is also home to some of the biggest players behind the Dark Fleet.
Even though New Zealand has extensive sanctions on Russia, you may be surprised to find that many of the substandard vessels smuggling crude have close ties to this peaceful “land of the long white cloud,“ as it is known in the Māori language.
We say again, FAFO.
Background reading
The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury defines the Dark Fleet as the following:
“Older vessels that are anonymously owned and/or have opaque corporate structures that are solely deployed in the trade of sanctioned oil or oil products and engage in various deceptive shipping practices.
"The shadow trade also involves ships that may rely on unknown, untested, sporadic, or fraudulent insurance. Without legitimate, continuous insurance coverage, these ships may be unable to pay the costs of accidents in which they are involved, including oil spills, which entail tremendous environmental damage, significant safety risks, and extensive costs.
"Some ships have also shifted away from industry standard classification societies, which play a key role in assessing and ensuring the seaworthiness of vessels, adding to environmental and safety concerns.”
We have previously highlighted the need for the IMO to update the Maritime Labour Convention to prevent seafarers spending more than six months aboard vessels, and have highlighted the problem of crew abandonment, which again is a problem typically found on the lowest performing ships from the worst open registries.
Looking back on that piece, we were not surprised to find that the trio of vessels connected to an attempted crew suicide by a desperate and destitute seafarer off (surprise) the UAE were then flagged to St Kitts and Nevis, another microstate happy to collect tonnage taxes and registration fees but unwilling or unable to instigate a proper crew repatriation scheme or to fulfil fully its obligations as a flag state.
The Times of India coverage of the Narsimhaa deaths can be read here.