Ghana per its operations in the maritime industry has favoured the closed ship registry system since the post-independence era. In view of this, the Black Star Line (BSL) was duly established to symbolise Ghana’s independence through international transportation modes.
The BSL strictly adhered to the closed registry system with substantial legislative support from the Merchant Shipping Act, 1963 (Act 183) as amended by N.L.C.D. 372 and P.N.D.C.L 248. With the intent of imposing regulations governing Ghana’s marine activities in adherence to the globally accepted standards enacted by the International Labour Organisation (ILO) and the International Maritime Organization (IMO), the Ghana Shipping Act, 2003 (Act 645) replaced the Merchant Shipping Act, 1963 (Act 183).
In a bid to liberalise and boost foreign investment in Ghana’s shipping industry, as the Ghana Shipping Act, 2003 (Act 645) allowed Ghanaians in joint venture relationship with foreign nationals in shipping to register ships in Ghana; hitherto, the erstwhile Merchant Shipping Act, 1963 (Act 183) permitted only Ghanaian citizens and companies which align their operations under the Companies Code of Ghana.
The Ghana Maritime Authority, per its activities, is permitted to supervise the ships registry in accordance with Ghana’s flag-state obligations. Peculiar among its mandate is ensuring that ships flying the Ghana flag are seaworthy and operate in accordance with regulations on safety, security and protection and preservation of the marine environment.
However, surprisingly, the Centre for International Maritime Affairs-Ghana (CIMAG) can conclude that ship vessels plying through our coastal shores do not necessarily conform to any stringent safety protocols pertaining to design structures and equipment installations. Hence, resulting in far greater damage if local safety regulations are not proposed and/or adhered to.
Irrespective of the non-adherence to local safety regulations, many stakeholders in the maritime industry are calling on the government of Ghana (GoG) to adopt the open registry; thus, prompting the need to hypothesise if the adoption of the open registry system will be more economically and structurally advantageous than the current system in which we operate. To analytically conclude on the aforementioned hypothesis, it is prudent to understand the open registry system to qualitatively assess the pros and cons of this system.
Although all merchant vessels that sail on the high seas are required to do so under a national flag – which symbolises the legal jurisdiction under which the vessel operates – flags were traditionally assigned on the basis of vessel owners and operators’ nationality. However, from the mid-20th century, vessels increasingly sailed under the flags of ‘open registries’ – which connotes the registration of foreign ships in national ship registries.
With such a registry system, the control and beneficial ownership predominantly resides with nationals of the foreign ships, thus evading domestic fiscal regimes and other national regulation controls. Many countries adopt the open registry system as an income generation tool – and they compete with one another for international clients through reduced regulatory burdens, lowered registration costs, and expedited certification.
These services make open registries an essential enabler of cheap and fast maritime shipping, with upward of 70% of global deadweight tonnage (DWT) sailing under such flags. For the flag-state, the open registry system results in high income generation from registration fees, international recognition and an increase in employment.
However, the lax regulatory frameworks of open registries have been associated with poor records on environmental safety, vessel safety, seafarer safety; and illegal, unreported and unregulated (IUU) fishing, therefore leading to criticism of the open registry system and the pejorative label ‘flags of convenience’.
Despite the aforementioned challenges, one implication of the open registry system yet to be fully determined is that of sanctions evasion. Sanctions are economic instruments deployed by various national and international authorities that bar certain entities (ranging from individuals to firms to entire countries) from trading in certain prohibited goods.
A United Nations (UN) Security Council resolution, for example, bars all UN member-states from importing wood, seafood, machinery, agricultural products or electrical equipment from North Korea or its nationals. Entities wishing to skirt these sanctions through maritime trade duly adopt various deceptive practices to prevent authorities from identifying that sanctions are not adhered to.
For instance, open registries may have a facilitative role in maritime sanctions evasion by concealing or mislabelling cargo contents, forging bills of lading, obscuring port calls to sanctioned jurisdictions, or exchanging goods on the high seas (ship-to-ship transfers) to avoid Customs scrutiny.
Despite the challenges associated with the open registry system, there’s no doubt that such a system has the tendency to boost income generation and provide numerous job opportunities for citizens of the flag-state. In the pandemic-adjusted era wherein most countries are experiencing economic difficulties, adopting the open registry system can be considered a viable boost for marine activities and the economy at large.
However, to properly implement the open registry on our coastal shores, several institutional mechanisms need to be formulated and/or amended on a commercial and legal perspective. From a commercial and legal perspective, the Ghana Maritime Authority must be mandated to review all administrative structures [transposing some unratified conventions into law] in conformity to the operational structures of countries which have successfully practiced the open registry system.
The writer is the Executive Director at the Centre for International Maritime Affairs, Ghana (CIMAG), an Advocacy and a Research Policy Think-Tank, with focus on the Maritime Industry (Blue Economy) and general Ocean Governance.
He is also a Director in charge of Business Development and HR, Logical Maritime Services Limited, a privately-held global logistics company.