flagging out

Steve Todd is National Secretary in charge of shipping and offshore at the Rail, Maritime & Transport Workers’ Union (RMT). A former merchant seaman, he has been involved in the industry since 1972, sailing as a seafarer in general cargo, tankers, passenger, and supply and diving vessels. Previously, Todd spent 20 years as a full-time officer within the former National Union of Seamen (NUS).

JT: Please define ‘flagging out’ and ‘social dumping’ in the context of the maritime industry.

ST: Flagging out is when shipping companies register vessels in another country where they are not beneficially owned or operated. They do this in order to avoid certain regulations laid down by the flag state to which they belong. For example, if I’m a ship owner and I don’t want to comply with every aspect of UK legislation, I can register my vessels in, say, Bermuda, Panama or Liberia.

Flagging out also allows ship owners to employ labour from poorer countries, where wage expectations are considerably lower than in the UK and this is where the social dumping aspect comes in. They are allowed to get away with not paying seafarers the national minimum wage – you can employ a seafarer at $2.50 an hour whereas in the UK you’d probably be paying them £10-£15 an hour – and without applying standards.

“Flagging out also allows ship owners to employ labour from poorer countries, where wage expectations are considerably lower than in the UK.”

Some flag states are not as stringent as, say, the UK ones in how they apply regulations and carry out ship inspections. Manning levels and safety regimes, for example, are determined differently.

JT: Why are increasing numbers of European shipping companies choosing to flag out their fleets?

ST: Largely because they can flag out vessels and still qualify for concessions under tonnage tax schemes operated by European governments like those in the UK and Germany. The general lack of links to jobs or training for domestic officers and ratings in these schemes also increases their appeal, as these state aid programmes increase tonnage registered in Europe but do not disturb the exploitative crewing practices employed by companies that cut labour costs and maximise the effectiveness of tonnage tax concessions.

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It is a fact that European seafarers are paid more than their colleagues in, say, the Philippines, but that is relative to living costs and it is a source of immense frustration to seafarer unions across Europe that the industry is permitted to effectively shop around the world for the cheapest crew, particularly among ratings but increasingly among officers.

This has led the UK Government, for example, to effectively compete with FoCs by slashing registration costs and even marketing the Red Ensign on the grounds that it is cheaper. Other European governments also engage in what is an irresponsible race to the bottom – in our view one that can’t be won – that threatens the UK and other European countries’ merchant fleets.

Losing the merchant seafaring capacity would not only be a tragedy for seafaring communities; it would undoubtedly have extremely problematic economic and security implications.

JT: What specific legal and legislative loopholes are being exploited by shipping companies?

ST: In the UK, the National Minimum Wage Act 1998 and Part 5 of the Equality Act 2010 are being avoided by ship owners in order to employ non-UK seafarers and pay them well below the legal and collectively bargained rate of pay.

There are also issues around the process for establishing the safe manning levels on ships. This is undertaken between the ship owner and the safety regulator, the Maritime & Coastguard Agency, on a vessel by vessel basis, rather than establishing safe manning levels by class and size of vessel, which would be more efficient. This case by case assessment not only excludes trade unions from a crucial stage of these safety-critical discussions but also enables the employer to chip away at what constitutes safe manning levels. We believe that this accommodates employer concerns related to costs and profit margins to the detriment of seafarer and, potentially, passenger safety.

“The number of UK seafarer ratings has plummeted by over 70% to just over 8,500 in the last 30 years, a trend being repeated across Europe.”

The lack of comprehensive links to training and jobs for domestic seafarers in tonnage tax schemes offered by a number of EU member states is also exploited by ship owners. The employers were certainly well represented in the UK, where the domestic Chamber of Shipping stated that there was no need for a link to seafarer ratings training in the UK tonnage tax as the very introduction of the scheme would lead to 25% year-on-year increases in the number of UK ratings being trained. Shipping companies in the UK currently train less than a quarter of the number of ratings they did in 1999.

At EU level, a ferries directive is badly needed to protect jobs, services, pay rates and conditions of employment for seafarers providing domestic ferry services from the Aegean to the Minch. That wouldn’t stipulate rates of pay but it would provide basic protections for lifeline ferry services against the greed of global shipping. And it would be a good marker for future efforts to wrest back control of this crucial industry from the undemocratic clique of financiers that make huge profits from shipping off the backs of seafarers, passengers and taxpayers across the world.

JT: What impact does flagging out or social dumping have on European maritime workers?

ST: The number of UK seafarer ratings has plummeted by over 70% to just over 8,500 in the last 30 years, a trend being repeated across Europe, and the evidence from avoidable sinkings and crew deaths continues to point toward the role of slack regulation and other shortcomings when tonnage is registered under a FoC.

The industry will have you believe that its economically vital role justifies low-cost crewing models. We would argue that allowing global capital to dictate the shipping needs of states and citizens is the sort of risk we cannot afford to take. It is time that flag state registries started making the case for a sustainable shipping industry where the risks inherent in open registries are simply not worth taking.

JT: How does the RMT respond to German operator NSB’s claims that it may have to flag out its vessels because employing German and European seafarers is no longer “economically feasible”?

ST: It would certainly not be ‘economically feasible’ for any nation with ports capacity to lose the domestic capacity to operate merchant shipping. For the RMT, the NSB episode is another example of the desperate need to impose some form of control over a shipping industry that is out of control, in regulatory, industrial, political and even moral terms.

“The NSB episode is another example of the desperate need to impose some form of control over a shipping industry that is out of control.”

JT: In your opinion, what needs to be done to mitigate the negative impacts of flagging out?

ST: As an affiliated union, RMT supports the International Transport Workers’ Federation’s long running campaign to end FoCs. The political aim of the campaign is to obtain an international governmental agreement to ensure a genuine link between the flag a ship flies and the nationality or residence of its owners, managers and seafarers.

We believe that this could be achieved through renegotiating the United Nations Convention on the Law of the Sea (UNCLOS) and such an agreement would eliminate the flag of convenience system entirely to the benefit of seafarers, passengers, taxpayers and even politicians.

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