LANDLOCKED San Marino, a country of approximately 30,000 inhabitants situated in northern Italy, has joined the ranks of countries offering their flag for the registration of vessels.
San Marino is one of the wealthiest countries in the world. Its economy relies heavily on the finance industry and tourism. It joins other landlocked countries, such as Switzerland, Moldova and Luxemburg – and many other small nations such as Nauru, Tuvalu and the Marshall Islands, which have a coastline but very limited infrastructure to support ocean-going vessels – in offering open registrations of any size vessel from any nationality.
The San Marino Ship Register said it offers “convenient rates and tax regimes, without any restrictions on nationality and a registration process of only 48 hours, as well as “24-hour global support and quality customer service”.
An open register means any nationality is accepted while a closed register means that countries only accept vessels that are owned and operated in that country and abide by that country’s rules regarding employment conditions, safety, taxation and environmental regulation. A vessel operates under the rules of the country where it is registered.
The Republic of San Marino has been a member of the International Maritime Organization since 2002 and has ratified all the main international conventions. However, you’d have to ask whether there is expertise in such a small country to make sure that a robust inspection regime is in place to ensure vessels under its flag operate in a safe manner. Or is it just another jurisdiction offering a convenient registration process and a low tax regime to unscrupulous ship owners?
The IMO and its 174 member states are supposed to counteract the trend of ships registering under an open registry. However, without much success. When the IMO was established in 1958, only 13% of ships were flagged under open registries, but that figure has grown to approximately 75% today. Shipowners argue that to remain competitive they must resort to using open registries due to the lower cost structure.
Countries with open registries are also identified as so-called flag of convenience (FOC) countries. The definition of a FOC according to the Oxford Dictionary is “a flag of a country under which a ship is registered in order to avoid financial charges or restrictive regulations in the owner’s country”.
About 40% the world’s commercial ships (by tonnage) are registered in just three countries: Panama, Liberia and Marshall Islands. There are many examples of dubious flag registrations countries that have taken a lax approach to safety on vessels under their control.
A high-profile case is the MV Rhosus, which flew the Moldovan flag and was involved in the explosion last year in the port of Beirut. The vessel had suffered “technical problems” on its voyage and had docked in the port of Beirut in late 2013 and after discharging its cargo of ammonium nitrate, which was the cause of the explosion, in 2015 the vessel was abandoned. FOC countries are also renowned for having extensive delays in producing investigation reports on incidents that occur on vessels flying their flag.
It will be interesting to see if San Marino is able to attract and establish itself as a reputable flag carrier or if it will end up on the Paris MoU so-called blacklist, a list of flag sates that regularly fail vessel inspections by port state control organisations, in the company of countries such as Albania, Togo and Comoros.
Peter van Duyn, maritime logistics expert, Centre for Supply Chain and Logistics, Deakin University
