Flag of convenience (FOC) refers to a business practice whereby a ship's owners register a merchant ship in a ship register of a country other than that of the ship's owners, and the ship flies the civil ensign of that country, called the flag state.Bernaert, 2006, p. 104. The term is often used pejoratively, and although common, the practice is sometimes regarded as contentious.
Each merchant ship is required by international law to be registered in a registry created by a country,ICFTU et al., 2002, p. 7. and a ship is subject to the laws of that country, which are used also if the ship is involved in a case under admiralty law. A ship's owners may elect to register a ship in a foreign country so as to avoid the regulations of the owners' country, which may, for example, have stricter safety standards. They may also select a jurisdiction to reduce operating costs, avoiding higher taxes in the owners' country and bypassing laws that protect the wages and working conditions of mariners.Kemp, 1976. The term "flag of convenience" has been used since the 1950s. A registry which does not have a nationality or residency requirement for ship registration is often described as an open registry. Panama, for example, offers advantages such as easier registration (often online), the ability to employ cheaper foreign labour, and an exemption on income taxes.
The modern practice of registering ships in a foreign country began in the 1920s in the United States when shipowners seeking to serve alcohol to passengers during Prohibition registered their ships in Panama. Owners soon began to perceive advantages in terms of avoiding increased regulations and rising labor costs and continued to register their ships in Panama even after Prohibition ended. The use of open registries steadily increased, and in 1968, Liberia grew to surpass the United Kingdom with the world's largest ship register.
Traditional maritime nations, mainly from Europe, responded to this practice with creation of so-called "second registers": open registries, using national flags or flags of semi-sovereign offshore dependencies. That process begun in 1984 with the Isle of Man registry created as a second UK register. Soon after Norway and the Netherlands followed this practice adopting Norwegian International Ship Register (NIS) and Netherlands Antilles respectively. France established in 1989 Kerguelen Islands Register (replaced by International French Register (Registre International Français - RIF in 2005) and Germany (Federal Republic of) created German International Register (GIS) in the same year. The last two registries are still (in 2025) considered as flags of convenience.
, more than half of the world's merchant ships in terms of deadweight tonnage are registered in open registries.
Background Open registries have been criticised, mainly by trade union organisations based in developed countries, especially those in the European Union, United States, Japan, Canada, or the United Kingdom. One criticism is that shipowners who want to hide their ownership may select a flag-of-convenience jurisdiction which enables them to be legally anonymous. Some ships with flags of convenience have been found engaging in crime, offering substandard working conditions, and negatively impacting the environment, primarily through illegal, unreported and unregulated fishing. Prior to the implementation of the International Convention on Tonnage Measurement of Ships, 1969, shipowners may have selected a jurisdiction with measurement rules that reduced the certified gross register tonnage of a ship, to reduce subsequent port of call dock dues. Such was a consideration when Carnival Cruise Line changed the flag of the RMS Empress of Canada in 1972 to that of Panama. In 2011, Cunard Line registered all its ships in Bermuda, which, besides other considerations, enabled its ship captains to marry couples at sea. Weddings at sea are described as a lucrative market.
Maritime industry practitioners and seafarers from other countries contend that this is a natural product of globalisation. Supporters of the practice, however, point to economic and regulatory advantages, and increased freedom in choosing employees from an international labour pool. Publications from as early as 1962 argue that shipowners from developed countries use the practice to be competitive in a global environment.
In 2010 in a message connected to the World Maritime Day, the Secretary-General of the International Maritime Organization gave recognition to the present status of the open registries and noted that the seafarers from some developing countries are providing a major source of foreign currency to their home economies:
The development of open registries for ships has given the shipping industry the flexibility to recruit its manpower from alternate sources, with the result that developing and newly industrialized countries now provide the majority of seafarers for the entire global fleet – not just for the ships flying their own country's flag.
Legal context International law requires that every merchant ship be registered in a country. The country in which a ship is registered is its flag state, and the flag state gives the ship the right to fly its civil ensign.That the flag state gives the right to fly its flag, see United Nations, 1982, Article 91. That this flag is called a civil ensign, see De Kleer, 2007, p. 37. A ship operates under the laws of its flag state, and these laws are used if the ship is involved in an admiralty case.Hamzah, 2004, p.4. A ship's flag state exercises regulatory control over the vessel and is required to inspect it regularly, certify the ship's equipment and crew, and issue safety and pollution prevention documents. The organization which actually registers the ship is known as its registry. Registries may be governmental or private agencies.
Reasons for adopting a flag of convenience The reasons for choosing an open register are varied and include tax avoidance, the ability to avoid national labor and environmental regulations,Dempsey and Helling, 1980. and the ability to hire crews from lower-wage countries.Working, 1999. or National or closed registries typically require a ship be owned and constructed by national interests, and at least partially crewed by its citizens. Conversely, open registries frequently offer on-line registration with few questions asked.Richardson, 2003.Neff, 2007. The use of flags of convenience lowers registration and maintenance costs, which in turn reduces overall transportation costs. The accumulated advantages can be significant, for example in 1999, 28 of the American company SeaLand's fleet of 63 ships were foreign-flagged, saving the company up to US$3.5 million per ship every year.
Accidents and reform
The environmental disaster caused by the 1978 sinking of the , which flew the Liberian flag, spurred the creation of a new type of maritime enforcement. Resulting from strong political and public outcry over the Amoco Cadiz sinking, fourteen European nations signed the 1982 Paris Memorandum of Understanding on Port State Control or Paris MOU. Under port state control, ships in international trade became subject to inspection by the states they visit. In addition to shipboard living and working conditions, these inspections cover items concerning the safety of life at sea and the prevention of pollution by ships. In cases when a port state inspection uncovers problems with a ship, the port state may take actions including detaining the ship.Secretariat of the Paris Memorandum of Understanding, 2009. In 2015, member states of the Paris MOU conducted 17,858 inspections with deficiencies, which resulted in 595 detained vessels and 11 banned. Member states of the Tokyo Memorandum of Understanding conducted 17,269 ship inspections in 2015, recording 83,606 deficiencies which resulted in 1,153 detentions.
The principle that there be a genuine link between a ship's owners and its flag state dates back to 1958, when Article 5(1) of the Geneva Convention on the High Seas also required that "the state must effectively exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag."D'Andrea 2006, p.2. The principle was repeated in Article 91 of the 1982 treaty called the United Nations Convention on the Law of the Sea and often referred to as UNCLOS. In 1986, the United Nations Conference on Trade and Development attempted to solidify the genuine link concept in the United Nations Convention on Conditions for Registration of Ships.D'Andrea 2006, p. 6. The Convention for Registration of Ships would require that a flag state be linked to its ships either by having an economic stake in the ownership of its ships or by providing mariners to crew the ships. To come into force, the 1986 treaty requires 40 signatories whose combined tonnage exceeds 25% of the world total. Between 1986 and 2012, 24 countries signed or ratified the treaty. , it has not entered into force.
History Merchant ships have used false flags as a tactic to evade enemy warships since antiquity, and examples can be found from as early as the Roman era through to the Middle Ages.Wiswall 1996, p. 113. Following the American Revolutionary War, merchantmen flying the flag of the fledgling United States quickly found it offered little protection against attack by Barbary pirates – many responded by seeking to transfer their registry back to Great Britain. The use of false flags was frequently used as a ruse de guerre by the British during the Napoleonic Wars and the United States during the War of 1812. During the mid-19th century, slave ships flew various flags to avoid being searched by British anti-slavery fleets. In the American Civil War, it was reported that the combined effect of the simultaneous Taiping Rebellion and the raids of CSS Alabama in the Pacific had increased shipping insurance prices to the point that nearly all American ships in China resorted to sail under the flags of Portugal, Prussia, or Peru.Larkin, T. M. (2023). The Global American Civil War and Anglo-American Relations in China's Treaty Ports. The Historical Journal, 66(2), 325-347.
The Belen Quezada, in August 1919, was the first foreign ship to be re-registered in the Panamanian registry, and was employed in running illegal alcohol between Canada and the United States during Prohibition.DeSombre 2006, p. 76. The modern practice of registering ships in foreign countries to gain economic advantage originated in the United States in the era of World War I, though the term "flag of convenience" did not come into use until the 1950s.Merriam-Webster Incorporated, 2003, p.474.