Flag of convenience

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It is estimated that 1600 ships fly the Liberian flag as a flag of convenience.

The Flag of Panama is used as a flag of convenience.

A flag of convenience is a flag of one country, flown by a ship owned by a citizen of another country. The ship owner can thereby often avoid taxes and make registration easier; the country providing the flag charges money for that service. The International Transport Workers' Federation (ITF) maintains a list of countries that use their flag for this purpose.

The use of a flag of convenience in order to take advantage of another nation's laxer registration standards is frowned upon for two reasons: The practice causes nations with stricter requirements to lose income and safety/work conditions of shipboard employees may suffer. However, many nations under the International Ship and Port Facility Security Code (ISPS) require minimum standards for vessels entering their national waters. In the case of the United States, the Coast Guard requires inspections on at least an annual basis and may deny entry to American waters based on defects not corrected.

Ships at sea fly a national flag called an ensign. Under conventions of international law, the flag flown by a ship determines the source of law to be applied in admiralty cases, regardless of which court has personal jurisdiction over the parties.

Cheap registration fees, low taxes, and freedom from labor laws or safety standards are motivating factors for many flags of convenience. Fishing boat owners who use a flag of convenience can also ignore their home countries' conservation agreements. To quote William Langewiesche's The Outlaw Sea:

"No one pretends that a ship comes from the home port painted on its stern, or that it has ever been anywhere near. Panama is the largest maritime nation on earth, followed by bloody Liberia, which hardly exists. No coastline is required either. There are ships that hail from La Paz, in landlocked Bolivia. There are ships that hail from the Mongolian desert. Moreover, the registries themselves are rarely based in the countries whose names they carry: Panama is considered to be an old-fashioned "flag" because its consulates handle the paperwork and collect the registration fees, but "Liberia" is run by a company in Virginia, "Cambodia" by another in South Korea, and the proud and independent "Bahamas" by a group in the City of London."

Supporters of flags of convenience argue that where a vessel is engaged in international trade it should be free to register in the jurisdiction which best suits its commercial model. Jurisdictions which are criticised as offering flags of convenience also often have relatively sophisticated maritime codes, and courts which are versed in maritime law and admiralty matters. Registering vessels in such jurisdictions where they can be mortgaged effectively and the mortgagee's property rights respected facilitates the financing of such vessels. Forcing vessels to register in jurisdictions with unsophisticated maritime laws or where mortgaging the vessel is difficult to do effectively, or worse yet, where the vessel becomes vulnerable to compulsory acquisition causes unnecessary disruption and increased expense in an already volatile international shipping market. Critics of the ITF sometimes suggest that the ITF's past militant policies (including the "blacking" of ships using non-unionised labour) has more to do with the drive to using flags of convenience than a desire for cheaper registration fees. In 2004 the ITF said that it would consider whether the ships flagged in the United Kingdom should be deemed to be flying flags of convenience on a "case-by-case" basis, a stance that is very difficult to square with the traditional criticisms of flags of convenience.^[1]

Criticisms of flags of convenience are rarely repeated with respect to registration of aircraft, to which similar considerations apply, but which employ fewer people, and form part of a less unionised industry.