27 July, 2015
WHAT YOU NEED TO KNOW
- The Senate Rural and Regional Affairs and Transport References Committee is conducting a wide ranging inquiry into the increasing use of so-called "flag of convenience" shipping in Australia.
WHAT YOU NEED TO DO
- If you are interested, you can make submissions to the Senate Rural and Regional Affairs and Transport References Committee on this inquiry by Friday, 7 August 2015.
Background
On 18 June 2015, the Australian Senate called an inquiry into the increasing use of so-called "flag of convenience" shipping in Australia (the Inquiry) following a media report into the deaths of three seafarers aboard the MV Sage Sagittarius over a six week period in 2012. The Inquiry is being conducted by the Senate Rural and Regional Affairs and Transport References Committee (the Committee).
Terms of reference
The terms of reference for the Inquiry are wide- ranging and include consideration of each of the following:
- the effect on Australia's national security, fuel security, minimum employment law standards and marine environment;
- the general standard of flag of convenience vessels trading to, from and around, Australian ports, and methods of inspection of these vessels to ensure that they are seaworthy and meet required standards;
- the employment and possible exposure to exploitation and corruption of international seafarers on flag of convenience ships;
- discrepancies between legal remedies available to international seafarers in state and territory jurisdictions, opportunities for harmonisation, and the quality of shore-based welfare for seafarers working in Australian waters;
- progress made in this area since the 1992 House of Representatives Standing Committee on Transport, Communications and Infrastructure report "Ships of shame: inquiry into ship safety" (a copy of this report is available here); and
- any related matters.
What are flags of convenience?
Generally, the term "flag of convenience" is used to refer to a ship that is registered in a country different from that of its owner. This is typically done to take advantage of the more favourable regulatory regime for the ship available in that other country, as ships are certified and generally operate under the laws of their "flag state".
Panama, Liberia and the Marshall Islands operate open registries and are amongst the most popular states for obtaining a flag of convenience. In 2010, these three countries together accounted for approximately 40% of the world's registered deadweight tonnage. The world's largest fleet was also flagged in Panama (8,100 vessels of 100 GT and above), larger than the fleets of the United States (6,546 vessels), Japan (6,221 vessels) and Indonesia (5,205 vessels).
Potential impact of the Inquiry
Given its very wide-ranging terms of reference, the Inquiry has the potential to impact upon the operations of foreign registered vessels in a multitude of different ways.
The Australian maritime regulator, the Australian Maritime Safety Authority, already adopts a rigorous approach to the inspection and, if appropriate, the detention of non-compliant foreign vessels, including in respect of compliance with applicable employment standards (particularly following the Maritime Labour Convention 2006 coming into force in 2013 – For further details see our earlier alert: "Maritime Labour Convention comes into effect").
Given the tragic circumstances that have led to the Inquiry, we anticipate the Committee's recommendations are likely to include a recommendation that an even more stringent approach be adopted to the regulation of foreign flagged vessels operating within Australian waters.
Additionally, the timing of the Inquiry is significant as the Federal Government has recently proposed to open coastal trading to foreign registered vessels (for further details see our earlier alert, "A change in the waters: The Shipping Legislation Amendment Bill"). The Inquiry may well prove to be a catalyst for further changes to how foreign registered vessels are regulated, the importance of which would be amplified by the likely significant increase of foreign registered vessels operating within Australian waters should the Federal Government be successful in passing its Shipping Legislation Amendment Bill 2015.
What's next?
The Committee has called for interested parties to make submissions by Friday, 7 August 2015. Submissions can be made via the Inquiry's page on the Australian Parliament's website, available here.
The Committee is due to issue its final report on the first sitting day of 2016. Although the 2016 Parliamentary calendar has not yet been issued, based on the schedule of previous years, the first sitting day is likely to occur in mid-February 2016.
For further information, please contact:
Shane Bosma, Ashurst
shane.bosma@ashurst.com
