Why Is That Ship Registered in a Landlocked Country? Choosing Which Law Applies

A ship on the high seas is outside any state's territory, so something must determine which law applies aboard, and the answer is the law of the state where the vessel is registered. That state is responsible for inspecting the ship, certifying its safety, licensing its crew, enforcing labour standards and investigating accidents. The arrangement makes sense in principle and depends entirely on the registering state actually doing those things. Because an owner may register anywhere that will accept the vessel, and states compete for the fees, the effective standard is set by whichever registries owners choose, which is the whole of the problem. International law requires a genuine link between ship and state, a phrase never satisfactorily defined and generally treated as unenforceable.

Registries differ on things that matter to the economics of operating a ship:

• •Corporate and income taxation on the vessel and its earnings
• •Crew nationality requirements, which many traditional registries impose and open ones do not
• •Wage floors and labour conditions applicable to the crew
• •Safety inspection regimes and how rigorously they are applied
• •Registration fees and annual tonnage charges
• •Confidentiality about beneficial ownership, which some registries protect

The modern arrangement dates from the interwar period and expanded rapidly afterwards. American owners registered vessels in Panama from the 1920s, initially to avoid prohibition-era restrictions on serving alcohol and later for labour and tax reasons, and Liberia established a registry in 1948 administered from the United States that grew to be one of the largest in the world. The pattern spread, and today the largest registries by tonnage are held by small states that own almost no ships themselves, with Panama, Liberia and the Marshall Islands between them accounting for a very large share of world tonnage. Several landlocked countries maintain registries, which sounds absurd and is entirely lawful. Traditional maritime nations responded by creating second registers with relaxed conditions to retain owners who would otherwise leave.

The people affected most by these arrangements are the seafarers, and their situation is worth stating. Crews are drawn overwhelmingly from a small number of supplying countries, with the Philippines, Indonesia, China, India and several eastern European states providing a very large share of the global workforce, and they are recruited through agencies on fixed-term contracts rather than employed by the shipowner directly. That structure means a seafarer with a complaint faces an employer in one country, a registry in another, an owner in a third and a vessel that may never return to any of them. Abandonment, where a crew is left aboard unpaid in a foreign port after an owner walks away, is a documented and recurring problem with a database maintained to track cases. Mandatory financial security for abandonment was added to the labour convention in 2017 and has improved matters without ending them.

The objections are substantial and the responses are partial. Critics point to poor enforcement of safety and labour standards, difficulty for seafarers in pursuing claims, opacity about who actually owns a vessel, which matters for sanctions enforcement and for pursuing responsibility after a disaster, and a race to the bottom in which any state raising its standards loses registrations. The counterweight that actually works is port state control, under which any country a ship visits may inspect it and detain it regardless of its flag, which shifts enforcement from the registry to the destination and has measurably improved compliance. Regional agreements coordinate those inspections and publish lists of registries by detention rate. A maritime labour convention in force since 2013 sets minimum conditions enforceable in port. None of this removes the underlying incentive.

A ship at sea is governed by the law of the state it is registered with, which is also responsible for inspecting it and licensing its crew. Owners may register anywhere that accepts them and states compete for fees, so the effective standard is set by whichever registries owners choose. Port state control works because any country a ship visits can inspect and detain it regardless of flag.