Article by Marcelo Molina Villalobos,
During the six days that elapsed between the 23rd and the 29th of March 2021, the world stood in awe as the Ever Given, a container ship with a carrying capacity of 20,000 TEU, became stuck while transiting the Suez Canal.
Now that the ship has been freed, a struggle just as difficult but different in kind arises: the determination of responsibility for the financial damage the blockage caused, estimated to amount to billions of dollars.
In this regard, multiple countries have launched potentially contradictory investigations, including Egypt’s Suez Canal Authority [“SCA”] and Panama’s Maritime Authority probes. Taiwanese nationals have also initiated discussions, although not procedures, about the incident.
While vessels have been stuck in the Suez Canal before, this blockage is particularly complex because it poses challenges with respect to jurisdiction and state sovereignty. The Ever Given, a ship owned by a Japanese company, operated by a Taiwan-based conglomerate, and flying the flag of Panama was stuck in Egyptian territorial waters.
This blog will focus on the use of a Flag of Convenience and attempt to shed light on the legal implications of ships flying a flag that is diverse from the country of their owners.
Flags of Convenience Under International Law
International Law has long recognized the right of states to fix conditions for granting their nationality to ships. The right is codified in Article 91 of the United Convention of the Law of the Sea [“UNCLOS”], which is currently in force for 168 Parties; but the right has been well-established since as early as 1958, when it was incorporated in Article 5 of the Convention on the High Seas.
However, Article 91 of UNCLOS qualifies the right, providing that “there must exist a genuine link between the State and the ship.” The “genuine link” language has been a source of controversy in scholarly discussions, because, in practice, many States operate as “open registries” that place minimal or no restrictions on what ships may fly their flag, and therefore possess its nationality. The common practice has become known as the use of Flags of Convenience.
Article 91’s lack of guidance on what would constitute a “genuine link” is problematic. Moreover, as stated by professor Robin Churchill, neither the application of the rule of general interpretation contained in Article 31 of the Vienna Convention on the Law of Treaties, nor the recourse to the travaux préparatoires of UNCLOS, shed light on the meaning of “genuine link”.
Article 91’s ambiguity has led a majority of commentators to find a genuine link as long as the Flag State–that is, the State who allows certain ships to fly its flag–is able to exercise its jurisdiction. Case law of some international tribunals have mirrored the majority view on jurisdictional capacity giving rise to a genuine link. In one such case, M/V "SAIGA" (No. 2), the International Tribunal of the Law of the Sea stated:
“the purpose of the provisions of the convention on the need for a genuine
link between a ship and its flag State is to secure more effective implementation
of the duties of the flag State, and not to establish criteria by reference to
which the validity of the registration of ships in a flag State may be challenged
by other States.”
The popular view expressed in the tribunal’s holding suggests that use of Flags of Convenience is not, per se, unlawful under international law, but rather is subject to Flag State’s jurisdiction. UNCLOS defines the exercise of jurisdiction not only as a right, but also primarily as a duty. Thus, the State of Panama, which is responsible for 16% of the world’s fleet-carrying capacity, is obligated to exercise its jurisdiction upon all the vessels that fly its flag.
Flags of Convenience and the Exercise of Jurisdiction
Article 94 of UNCLOS establishes (1) the obligation of every State to “exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag,” and (2) a series of duties relating to the registration and maintenance of ships. Most importantly, it also mandates States to apply their internal law over every ship that flies their flag, as well as each relevant ship’s masters, officers, and crew. And even though one could argue that these obligations only apply in the high seas, they are nevertheless fundamental for the understanding of the concept of nationality of ships, which is extensively used elsewhere in UNCLOS.
Article 94, thus, assists in the reading of Articles 27 and 28 of the same Convention, which limit the exercise of the coastal State’s exercise of criminal and civil jurisdiction, respectively. Assuming that the case of the Ever Given relates to the latter, Article 28, paragraph 2 is relevant. The provision states that “the coastal State may not...arrest the ship for the purpose of any civil proceeding”.
However, paragraph 3 further states:
“paragraph 2 is without prejudice to the right of the coastal State, in accordance
with its laws...to arrest, for the purpose of any civil proceedings, a foreign ship
lying in the territorial sea, or passing through the territorial sea after leaving
internal waters.”
Since its refloatment on March 29–and as of April 7–the Ever Given has remained anchored in the Great Bitter Lake, alongside the Suez Canal, pending the investigation announced by the SCA. According to UNCLOS Article 28, paragraph 3, Egypt would be authorized to withhold the ship, carry out its investigation, and eventually initiate civil proceedings.
The problem is that Egypt may not have the right to withhold the Ever Given, as UNCLOS Articles 17 and 19 generate an obligation to respect the ship’s innocent passage in its territorial sea. The Article 17 and 19 obligation is especially relevant in this case, because Article 18 clarifies that “passage includes stopping and anchoring, but only insofar as the same are incidental to ordinary navigation or are rendered necessary by force majeure or distress.”
Are force majeure or distress plausible narratives for the grounding of the Ever Given? There is certainly a case for making that claim, as the ship was pulled to the Great Bitter Lake for inspection and to evaluate its seaworthiness.
With the SCA so adamant to carry out an investigation, this already delicate situation could turn into a very fragile one. However, the united effort between implicated states diminishes the likelihood of a diplomatic incident. In fact, the Panamanian authority has declared that it intends to cooperate with its Egyptian counterpart, and it has not officially complained about the detention of the Ever Given.
One might argue that Panama’s investigation is unlikely to result in an effective exercise of its jurisdiction. Flags of Convenience offer shipowners an opportunity to cut monetary and regulatory costs, resulting in problems such as sub-standard shipping and over-exhaustion of crews. Panama is not exempt from this characterization, and although it has improved its flag performance in recent years, grave incidents involving its ships are not infrequent. Indeed, it is possible that Panama, in investigating the incident, intends only to dispel doubts about the genuine link between the ship and the State in order to avoid problems regarding the flight of its flag.
Egypt apparently faces no obstacles to the exercise of its jurisdiction as a Coastal State in this matter. However, any complaint Panama–or any stakeholder interested in bringing the matter to Panamanian courts–might raise could complicate this task. Moreover, the very fact that the ship is registered in Panama could make seeking compensation from the actual owners of the vessel very difficult, as they are nationals from third states, some of which are not even parties to UNCLOS.
Conclusions: Beyond the Canal
The case of the Ever Given illustrates the complexity of the interactions that occur between Flag and Coastal States, or even more perplexing, the status of a ship flying a Flag of Convenience being the subject of an incident occurring in another state’s territorial waters.
While it is unlikely that this situation will develop into a diplomatic incident, similar events remain probable. Indeed, the proliferation of even bigger ships flying Flags of Convenience could lead to incidents which might prove to be just as complex from a jurisdictional point of view.
Author
Marcelo Molina Villalobos is a recent graduate from Universidad de Chile’s Law School. There, he collaborates in several courses of the International Law Department and is actively involved in the Jessup Moot Court Competition.
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