COLUMN | Failing flag states, abandoned crew and piffle from Palau [Offshore Accounts]

This week, I want to look at how the shipping industry can overcome some of its biggest challenges – not greenhouse gases and climate change, nor sexism and homophobia, but the problems of abandoned crews, excessively long tours of duty, and the low safety standards that bedevil the wider maritime industry, not just offshore.

Of course, this means nobody on Twitter will read the piece, unless I add the magic $TDW tag to the post, which is catnip to offshore readers.

Not only is there a major threat of pollution from the Shadow Fleet of aged tankers that carry sanctioned oil from states like Russia, Venezuela and Iran, often with inadequate insurance, but these vessels are often fatally dangerous to those who work on them.

The problem first became apparent a year ago when three crew were killed when the Gabonese-flagged Aframax tanker Pablo exploded off the coast of Johor, Malaysia. Since then, Gabon has issued no report into the tragedy, and nothing seems to have changed. The dark fleet trades in plain sight, often poorly insured and weakly regulated, as we shall examine in this piece.

It was Posidonia last week, and all the world's shipping journalists gathered in Athens to party on the tab of the industry's biggest names, bopping along to Kylie Minogue at the Marinakis party and eating canapes at events hosted by the industry's largest owners, brokers, and charterers.

Unfortunately, some of the people whose champagne they may have sipped contribute to some of the industry's worst problems.

Long tours, easy solution through MLC

The issue of excessively long tours should be an easy one. Amend the Maritime Labour Convention to forbid tours on ships that exceed six months. The classic defence is that "the seafarers want long tours," which resembles claims that Victorian children wanted to go up chimneys as sweeps, because it helped their families, and the other claim that minimum wages are an intrusive interruption of fair market principles because people earning a pittance deserve it, as they entered their employment knowingly.

Apparently, the International Maritime Organisation (IMO) can mandate the installation of ballast water treatment systems, and bridge voice and data recorders on all ships of a certain size trading internationally, but finds it impossible to prevent seafarers working in abusively long contracts on international voyages.

I don't understand why any flag state, class society, or businessperson could argue that long tours are in anyone's interests at all. Time and time again in shipping, we see that the lowest common denominator drags everyone down. A level playing field of a mandatory maximum continuous service of 183 days at sea for all seafarers, enforced by port states and flag states, would have huge benefits.

The lesson of P&O Ferries

Unfortunately, it is strange how the rich are quite happy to support conditions, like nine-month tours of duty for seafarers, which they themselves would never countenance personally. We saw this when the boss of P&O Ferries admitted in a parliamentary hearing in London that he himself couldn't live on the £4.87 (US$6.19) an hour that the company paid some of its crew on the Channel ferry routes between England and France, a pittance that includes bonuses and overtime

Unfortunately, by paying such paltry sums, not only does the DP World-owned company make its own staff poor and miserable, it also prevents its competitors from paying decent wages. It's a race to the bottom where only the "customer" wins through marginally lower prices.

Peter Hebblethwaite, the chief executive of the Dubai-owned ferry operator, earned over US$600,000 in 2023, the BBC has reported. This is probably a small compensation for the public flak he has had to endure over the notorious decision the company took in 2022 to sack 786 mostly British seafarers on his company's ferries and replace them with largely foreign crew on lower wages.

Unless the government of Britain and the European Union take measures to implement minimum wages for seafarers sailing between their ports, why wouldn't Mr Hebblethwaite continue to offer wages that fall far below the standards on both sides of the Channel? There will always be desperate people with unfortunate circumstances who can be hired for peanuts in the shipping industry (and journalism). It is up to national governments, the International Transport Workers' Federation, and the IMO to enforce a level playing field to prevent the worst excesses.

Long tours will only end when flag states say so

Same with tours of duty. Yes, some seafarers have a desperate financial need to extend their tours for months and months, but this is often because they are in debt to recruitment agents whom they paid to secure service on the ship in the first place.

If tours were restricted to a maximum of six months, crooked recruitment agents would not be able to charge their unfortunate clients so much, because both sides would be aware that six months was the maximum tour length possible, to be followed by a minimum one or even two months ashore at home. This could be enforced by a doubling of wages for each day over the 183-day maximum, perhaps increasing on an exponential basis monthly.

Amend the MLC to make seven-, eight-, and nine-month tours a thing of the past, like child chimney sweeps and slavery, neither of which were abolished by voluntary, industry-wide initiatives or vague petitions to ethics or codes of conduct.

Crew abandonment – bank deposit insurance provides a model

Crew abandonment is a harder topic, but surely requires all flag states to fund, through their registration fees, a scheme to protect the interests of seafarers when their employers go bust and they are abandoned.

Being a flag state is not just an opportunity to make money by printing certificates and turning a blind eye, strangely. Being a flag state carries responsibility – a responsibility, which, unfortunately, many appear to shirk. Flags like Gabon, Palau, and Eswatini are happy to collect fees, but often seem to do nothing to assist seafarers on their ships when problems strike.

The fact that many flag state registries are run by private companies is surely part of the problem. The flag states whom the private registries represent seem to my untrained eye to benefit much less than the managers and owners of the private businesses paying them to privatise their responsibilities as a state.

Imagine if the issuance of driving licences was sold to the company that paid the most, or had the best friends in government. Would we expect to see standards of road safety improve? Probably not, as the incentive of a private business is always to increase market share and increase revenues, even if that comes into conflict with quality.

Mandatory levy on all who want to play

Here the banking model is appropriate. In most successful banking markets, the state underwrites deposit insurance because it recognises that members of the public cannot accurately assess the credit of a bank themselves. In the same way, seafarers cannot accurately assess the solvency or otherwise of their employers, who are often privately owned.

Therefore, all banks pay a small levy to provide cover, which pays usually to a cap of around US$50,000, to reimburse account holders on their losses if the bank they are using goes bust. If you want to be licensed as a bank in a market where deposit insurance exists, you have to contribute. It's not optional.

It is only when their wages are unpaid that crewmembers suddenly realise that their employer is bust and they are stranded on a ship in the middle of nowhere, usually dependent on charity for assistance. Stella Maris and the Missions to Seafarers do wonderful work in this area, but they should not need to be aiding abandoned seafarers.

Members of IMO should pay their dues, too

A seafarer abandonment levy paid by ship owners through their registration fees could and should be implemented under the auspices of the IMO, with flags that carry worse records of abandonment paying higher fees. And if flag states don't compel their owners to contribute to the levy, they should be kicked out of the IMO altogether, and their flag blacklisted by insurers, port states, class, and charterers.

I don't see why the IMO should continue to support deadbeat members who don't pay their dues. Pay your dues or lose your recognition as a flag state. If the crew abandonment levy applied to all ship registrations, like deposit insurance levies apply to all banks, there would be a level playing field, for owners and for seafarers.

Abandoned crew replaced by more unpaid crew

Consider the shocking case of Sea Lion Shipping Co from 2023. The company was finally compelled to repatriate and pay the back wages of its crew stranded in the UAE, only to do so, and then replace the stranded crew with new crew, who immediately went unpaid for three months.

The problem continues to rise, despite the fact that the 2014 MLC amendments require shipowners to have compulsory insurance to cover abandonment of seafarers, as well as claims for death or long-term disability of seafarers.

Flag states are failing to implement this international requirement. The IMO's statistics show that in 2023, a total number of 142 new crew abandonment cases were reported, and in 62 reported cases, there was no obligatory financial guarantee. So much for obligatory if it doesn't exist.

The IMO reports that at the end of 2023, there were 849 abandonment incidents listed in the database since it was established in 2004, concerning 11,968 seafarers. Of those incidents, 348 cases were resolved, 168 cases were disputed, and 50 cases were inactive. There were still 273 unresolved cases.

"Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully," Samuel Johnson is supposed to have said. The same could apply to the effect on flag states of the threat of being kicked out of the IMO and having their vessels blacklisted.

It is not just abandonment where flag states are failing.

Explosion in Dalian raises questions about Palau

Consider the shocking death of Georgian seafarer Giorgi Tsilosani in April, when there was an explosion at a shipyard in Dalian onboard the 1999-built Eliak. This is a Palau-flagged Aframax tanker owned by Indian interests, apparently with a history of carrying sanctioned oil. The motorman died in a fireball on deck, captured in a horrific video.

The dead man's brother told journalists that the Palau flag state had done nothing to investigate the accident or hold to account those responsible. Writer Sam Chambers claims to have some further revelations to spill in the case, once his publication's lawyers have carefully vetted his words.

Panos Kirnidis: A whiter shade of pale

Whilst Sam is editing his copy, let's look back at the published words of Panos Kirnidis, the CEO of the Palau International Ship Registry, as publicly reported by the industry press in 2017. You might find it curious that the Palau registry appears to be headquartered in Athens and that the head of the registry is Greek, Palau being a Pacific island, literally as far away from Athens as possible.

Mr Kirnidis, who remains in the role today, claimed that the efforts of the Paris MoU countries to inspect and sanction substandard vessels calling at their ports and publish the results "is highly disadvantageous to new registries such as Palau, even though our services and credentials can be ranked as among the finest in the industry. To climb the rankings, we have to be seen as whiter than white and yet the very statistical formula negates our chances of progress. You can have 12 of the best vessels sailing the world's oceans but if one or two fail an inspection, then by sheer lack of numbers you end up on the blacklist. Once the new registry is placed on the blacklist it condemns it to years of struggle to prove its credentials as a diligent and efficient flag. It is almost impossible to start off anywhere other than on the blacklist, despite the enormous impact it has on your business."

The behaviour of the registry in its investigation of the accident on the 25-year-old Eliak suggests that the registry has a long, long way to go. Much evidence suggests that Palau is not ranked "as among the finest in the industry." Mr Tsilosani's family clearly do not consider it to be "a diligent and efficient flag." Clearly, Eliak is not among the "12 of the best vessels sailing the world's oceans."

Ranked 54 of 66

Under the Paris MoU inspection regime, Palau is currently "greylisted" and currently ranks 54 from the 66 flag states whose ships were inspected, the lowest quartile. This is not "whiter than white" performance. It is hard to understand why Palau needs a ship registry for vessels working outside its waters, other than as a money-making machine for the government and the ship registry owners and managers.

Mr Kirnidis and the Palau registry were quite happy to collect fees from the owners of Eliak, but where was the support to the seafarers when the proverbial s*** hit the fan? The relatives of dead sailors should not need to petition journalists to try to shame a wealthy Greek businessman to look at why their family members died on vessels registered to that flag.

The attendees at Posidonia should remember that the sources of the industry's problems often lie close to home, a lot closer than Palau, Gabon, and Eswatini.

Do we need more flag states?

There's a wider issue here too. Does the world need more flag states, competing against one another in an arbitrage of standards, offering ship owners "the most personalised service," and full discretion and confidentiality?

I would argue that governments that have outsourced their registries to private companies should be scrutinising how such registries benefit their supposedly home countries. How do the people and government of Palau exactly benefit from the registration payments that the Palau International Ship Registry collects from shipowners? What unique competitive advantage do Palau, Eswatini, Cambodia, or Gabon have as registries for international voyages, other than low fees and lower standards than the top-performing Paris MoU countries?

The world's class societies have consolidated in the last few decades precisely because there are economies of scale from having fewer, stronger societies, better able to regulate shipping, employ specialists, and manage common standards. The growth of "non-IACS" class societies worries me – the example of the International Naval Surveys Bureau (INSB) and its largest client, Perenco, concerns me. It seems to me to be an example of where standards are not always aligned with international best practice, as the recent catastrophic explosion in Gabon showed.

Two-tier system to drive up international standards

The time is right for reform, for a two tier system of flags, with most smaller flags being restricted to registering vessels servicing only their home or regional markets, probably restricted to vessels of under 5,000 GT, whilst fewer and stronger, and more transparent flags cover the international trade and larger and more complex vessels.

By all means Liberia, the Marshall Islands, and Panama with their large fleets, relatively good Paris MoU rankings, and relatively strong standards would make the cut. And by all means if states like Nigeria and Bangladesh wish to permit antiquated and demonstrably unsafe ferries to ply trade in their home markets, that is ultimately their prerogative. But that shouldn't give every state carte blanche to register large and potentially very dangerous tankers and the biggest bulkers for international voyages.

And Palau? Until Mr Kirnidis and his team can explain to the family of Mr Tsilosani's family what they are doing to make things right and to prevent a recurrence, the Palau flag and similar for-profit, private registries should probably be consigned to the dustbin of history for international voyages.

As ever, we are open to correction if we have made mistakes or if there are factual errors in the opinion column, and we welcome reader feedback on the issue of crew welfare and flag states. Kindly email editor@bairdmaritime.com with your views, rebuttals, and feedback.

I am sure there are one hundred and one ways I have misunderstood the regulation of flag states, and there will be one hundred and one reasons why nothing can change. Unfortunately, there always are excuses, justifications for the status quo, and reasons for doing nothing. It is too hard, too expensive and too disruptive. With that attitude, small children would still be climbing up chimneys as sweeps because they need to support their families, and that is always the way it has been.

Background reading

Mr Kirnidis can really talk the talk. His CEO's message on the Palau International Ship Registry website is truly inspirational. Mind you don't fall into the gaping "saying/doing gap".

Transparency International published this report into the IMO's governance in 2018.