A major row has broken out between one of the world's smallest maritime nations and the International Transport Workers Federation (ITF) who are a major maritime trade union.
The row has developed over the ITF's declaration last week of the Faroes' Maritime Register as a Flag of Convenience (FOC).
This started after the ITF released a statement of the FOC declaration which puts the Faroe Islands on a par with nations such as Panama and Liberia where unscrupulous ship owners try to evade major controls over ship safety, crew conditions & pay and tax liabilities.
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Torshavn, capital of the Faroe Islands is now at the center of a war of words over a Flag of Convenience declaration. Photo Credit: Erik Christensen, Porkeri
The press release from the ITF (reproduced below) was issued on 25 November. Balita Pinoy contacted the Faroe Maritime Authority (FMA) for their reaction who clearly showed their displeasure at the ITF's move. The reaction from the FMA is also reproduced below.
The row seems to have been sparked off by some Swedish and Norwegian vessels being transferred to the Faroe flag. What seems to have upset the ITF is that Swedish & Norwegian seafarers are being replaced by Filipinos and others, obviously at a lower cost basis.
The FMA hotly dispute that the lower cost basis of staff is the reason, stating their history as respecting workers rights.
Flags of Convenience countries are subject to many criticisms, which is why the FMA are stung by the ITF declaration.
There are a number of common threads found in criticisms of the flag of convenience system. One is that these flag states have insufficient regulations and that those regulations they do have are poorly enforced. Another is that, in many cases, the flag state cannot identify a shipowner, much less hold the owner civilly or criminally responsible for a ship's actions. As a result of this lack of flag state control, flags of convenience are criticized on grounds of providing an environment for conducting criminal activities, supporting terrorism, providing poor working conditions for seafarers, and for having an adverse effect on the environment.
David Cockroft, general secretary of the ITF says: Arms smuggling, the ability to conceal large sums of money, trafficking in goods and people and other illegal activities can also thrive in the unregulated havens which the flag of convenience system provides.
Shipowners often establish shell corporations to be the legal owners of their ships. To distinguish between the actual shipowner and the shell corporations, the terms beneficial owner or ultimate owner are often used. Webster's defines a beneficial owner as "one who enjoys the benefit of a property of which another is the legal owner." A ship's beneficial owner is legally and financially responsible for the ship and its activities.
Tommy Peterson, Director General of the Faroese Maritime Authority (FAM) responded to the ITF's action with the following words:
"With dismay and some astonishment we have noted the decision made by the ITF’s Fair Practice Committee. To the very last we would have expected it possible to settle the dispute amongst neighbouring nations with similar interests and very comparable conditions of work for their seafarers.
The reason being that the allegations are in our opinion based on incorrect information and claims. The most surprising aspect of the matter is the fact that it has not been possible to persuade the Fair Practice Committee to give sufficient weight to a) the importance of the shipping activities to the vulnerable Faroese economy, and b) the fact that the Faroese register is structurally and legally a copy of the NIS and DIS registers."
The FAM's full official statement is reproduced below along with the ITF declaration.
Flag of convenience ships have long been linked to crime on the high seas.
In the accompanying material of the ILO's Maritime Labour Convention of 2006, the International Labour Organization estimated that at that time there were approximately 1,200,000 working seafarers across the world. This document goes on to say that when working aboard ships flagged to states that do not "exercise effective jurisdiction and control" over their ships that "seafarers often have to work under unacceptable conditions, to the detriment of their well-being, health and safety and the safety of the ships on which they work."
The ITF goes further, stating that flags of convenience "provide a means of avoiding labor regulation in the country of ownership, and become a vehicle for paying low wages and forcing long hours of work and unsafe working conditions. Since FOC ships have no real nationality, they are beyond the reach of any single national seafarers' trade union."
They also say that these ships have low safety standards and no construction requirements, that they "do not enforce safety standards, minimum social standards or trade union rights for seafarers", that they frequently fail to pay their crews, have poor safety records, and engage in practices such as abandoning crewmen in distant ports.
According to the Maritime Trades Department of the AFL-CIO, "These floating sweatshops are the building blocks of the notorious "Flag-of-Convenience" (FOC) system. It exists for one reason and one reason only: to allow companies to avoid paying taxes and escape the minimum health, safety and environmental standards of their home countries."
International regulations for the maritime industry are promulgated by agencies of the United Nations, particularly the International Maritime Organization and International Labour Organization. Flag states adopt these regulations for their ships by ratifying individual treaties. One common criticism against flag of convenience countries is that they allow shipowners to avoid these regulations by not ratifying important treaties or by failing to enforce them.
The United Nations Conference on Trade and Development, in its 2009 Report on Maritime Trade, states that shipowners often register their ships under a foreign flag in order to employ "seafarers from developing countries with lower wages."
The Philippines and the People's Republic of China supply a large percentage of maritime labor in general, and major flags of convenience in particular. In 2009, the flag-states employing the highest number of expatriate-Filipino seafarers were Panama, the Bahamas, Liberia and the Marshall Islands. That year, more than 150,000 Filipino sailors were employed by these four flags of convenience.
In a 2006 study by the United States Maritime Administration (MARAD), sailors from the People's Republic of China comprised over 40% of the crews on surveyed ships flying the Panamanian flag, and around 10% of those flying the Liberian flag. The MARAD report referred to both China and the Philippines as "low cost" crewing sources.
The seafaring industry is often divided into two employment groups: licensed mariners including deck officers and marine engineers, and mariners that are not required to have licenses, such as able seamen and cooks. The latter group is collectively known as unlicensed mariners or ratings. Differences in wages can be seen in both groups, between "high cost" crewing sources such as the United States, and "low cost" sources such as China and The Philippines.
For unlicensed mariners, 2009 statistics from the American Bureau of Labor Statistics give median earnings for able and ordinary seamen as US$35,810, varying from $21,640 (at the 10th percentile) to $55,360 (at the 90th percentile). This can be compared with 2006 statistics from the International Labour Organization, giving average yearly earnings for Filipino and Chinese able seamen around $2,000 to $3,000 per year (PHP9,900 per month and CNY3,071 per year). Among licensed mariners, American chief engineers earned a median $63,630, varying from $35,030 to $109,310 while their Filipino counterparts averaged $5,500 per year (PHP21,342 per month).
Below is a list of Flag of Covenience countries singled out as the worst; interesting is that two of them, Mongolia and Bolivia have no direct access to the oceans and have never been known as maritime nations.
THE ITF STATEMENT
The ITF has declared the Faroe Islands National & International Ship Register (FAS) a flag of convenience (FOC).
The decision, taken by the ITF's fair practices committee steering group, follows a lengthy process of investigation and negotiations designed to address the problems identified with the register and avert the need for the declaration.
Problems were first identified when Norlines, whose fleet was almost wholly Norwegian-flagged, reflagged to the FAS and began laying off Norwegian crew, who were replaced with Philippine and Polish nationals. Only two of the Norwegian beneficially owned vessels were fully manned by Faroese crew. A similar pattern was identified with Swedish-owned vessels. Eight Swedish companies were found to be flagging to FAS, with the replacement of their Swedish crews imminent.
ITF maritime coordinator Steve Cotton commented: "This is a move we take reluctantly, and only after a lengthy search for a solution, in which we involved the Faroese Maritime Unions. However, it has proved unavoidable if the ITF's Mexico City Policy (which reviewed the ITF's whole FOC campaign) is to be applied fairly."
"For the Faroese second register this is likely to mean a new age of scrutiny of their vessels and workings. We stress that the Faroes flag, rather than this newer operation, remains unaffected and free to play its part in ensuring that the seagoing histories of the Faroes is respected and its crews continue to find the work they deserve."
The FAS will now join the 32 other countries on the list of FOCs (see http://www.itfglobal.org/flags-convenience/flags-convenien-183.cfm)
For more on the Mexico City Policy see www.itfglobal.org/flags-convenience/mexico-city-policy.cfm
THE FAROE ISLANDS MARITIME AUTHORITY RESPONSE
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