Shipping Flags-of-convenience

Dale D. Murphy

in The Structure of Regulatory Competition

Published in print September 2006 | ISBN: 9780199216512
Published online March 2012 | e-ISBN: 9780191696008 | DOI:

Series: International Economic Law Series

Shipping Flags-of-convenience

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Lower common denominator (LCD) outcomes exhibit movement downward, as a result of either co-ordinated action or a competition-in-laxity among competing states. Shipping registration may be particularly amenable to competition-in-laxity, because of the extreme ease and low cost of relocation. Flags-of-convenience (FOCs) are open ship registration systems, outside the beneficial owners' country. The raisons d'être of FOCs are low taxes, lax domestic regulations, and little enforcement of international regulations. FOCs save shipowners' costs in the process of shipping by reducing the number of conventions, regulations, and taxes with which they must comply. These conventions include various environmental conventions, safety, and navigational standards, crew requirements, and labour standards. The FOC system is an example of conflicts that result from location decisions based on comparative regulatory advantage. This chapter discusses the FOC case which demonstrates a pattern of widespread industrial flight to lax countries, where regulations are often nonexistent and certainly enforced less stringently than in national registries. The outcome shifts from heterogeneity to LCD (among competing FOC states) in a classic competition-in-laxity.

Keywords: lower common denominator; shipping registration; flags-of-convenience; competition-in-laxity

Chapter.  11225 words.  Illustrated.

Subjects: Public International Law

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