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About us Press-room Articles The necessity and legitimacy of the creation of the Ukrainian International Ship Register

The necessity and legitimacy of the creation of the Ukrainian International Ship Register

23.02.2016

The definition "registration of ships" means the establishment of a legal relationship between the property (ship) and the state. The term "State registration of ships" can be defined as a legal act - the action of the authorised state body, aimed at identifying the nationality of the vessel, resulting in establishment of the a genuine link between the State and the ship.[1]

Without official registration in any country the ship is a floating object, property, the legal status of which is determined by its location. Only after the official registration and obtaining the right to fly the flag of a country, the floating object becomes a vessel, which has the right to be a full-fledged subject of international shipping. The legislation governing the registration of ships, as well as questions of the legal regime of the use of property - a ship, including the process of certifying ownership of the ship, are bound by the regulations of the country which has granted the vessel the right to fly its flag.[2]

The granting of nationality to a ship and right to fly the flag of a state is the key moment in the ship registration. All other procedures, including the registration of ownership of the vessel, are preliminary and have much less legal and practical significance.

The space, which is occupied by the ship, is considered part of the territory of country, whose flag the ship is entitled to fly at sea. Thus, the state flag becomes sovereign rights in this space, where also the appropriate obligations of the state and its bodies apply. Since the moment of the registry of the ship the state undertakes the responsibilities to take the necessary measures to ensure the safety at sea of ships flying its flag.[3]

From the thirteenth century to the mid-twentieth century, only national law of the state contained the rules on the registration of ships, where the main ground for such registration was a mandatory flag state nationality of owner and crew.

Not until the middle of the twentieth century, did the international regulation for the registration of ships take place. In 1958, the Convention on the High Seas enshrined, for the first time, the conditions for granting nationality to ships and their registration. Later, it was also enshrined in the United Nations Convention on the Law of the Sea in 1982 (hereafter referred as UNCLOS'82). UNCLOS'82 clarifies more the content of the principle of "genuine link" between the ship and the flag state, as well as the actual measures related to the implementation of the flag state jurisdiction, defining its responsibilities in this regard. It should be noted that these measures were aimed primarily at ensuring the safety of navigation that was not typical for the early stages of development of legal regulation of registration of ships by national legislation. As a result, the importance of the provisions of the 1958 Convention and UNCLOS'82 is indisputable: the Conventions for the first time established not the right, but the duty of the flag State to determine the conditions of registration.[4]

According to the Article 91 of the UNCLOS'82, "Every State shall fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory, and for the right to fly its flag. Ships have the nationality of the State whose flag they are entitled to fly. There must exist a genuine link between the State and the ship. Every State shall issue to ships to which it has granted the right to fly its flag documents to that effect".[5]

The organisation which actually registers a ship is known as its registry. Registries may be national "closed" or the international "open". The latter gives the right to register a ship to the residents as well as non-residents of the country. There are also "flags of convenience", when the countries set the minimum requirements for the technical conditions and completeness of ship, minimal control of the maritime administrations and ensuring the data confidentiality of for both ship and its owner and carry out the registration under a simplified procedure.[6]

The shipowners began massively to choose the registration of ships under "flags of convenience" (Panama, Liberia, the Bahamas, Malta, Cyprus, Cambodia, Bermuda and others) in order to reduce operating costs or avoid the regulations of the owner's country. There is a universal tendency to assess "flags of convenience" as a negative phenomenon because of lack of genuine link between the state of registration and the ship, and low technical standards for ships and non-compliance on social rights of protection of seafarers.

At the end of the XX century the "international" (also known as "second", "open", "alternative "or" parallel") ship register with special rules of registration were created in traditional maritime countries in addition to the basic national registers. It is an alternative registry to "flags of convenience". The main idea behind this was to bring back national fleets from offshore zones.

The impetus for the creation of such registers were huge reductions in the 80's of the merchant fleets under the flag of traditional maritime states, especially in Western Europe, against the background of  cyclical crisis in global shipping and low business cycle of freight markets. One of the first countries to use this form out of the crisis was Norway, which established The Norwegian International Ship Register in 1987. As a result, the transition of Norwegian ships to foreign flags almost stopped, the deadweight of Norwegian fleet has doubled after 4 years, reaching 55 million tons, increasing revenues for the national budget.[7] 

Afterwards, the practice of creating international registry has been widely used. The most active period of their implementation was during the 1986-1997 period, when Denmark, Italy, Spain, Portugal, Brazil, Germany, France, Japan and some other countries have set up their own international registries. About half of international registries that exists today, are located offshore, created on dependent territory islands that are under the jurisdiction of the home country. Almost all European countries have their international register, thus bringing back fleet and money from offshore.[8]

Significant advantages of the registration of ships in such registers for shipowners are:
- Cheaper and faster registration procedure than national registries;
- Reduction of the tax and customs burden;
- Not belonging to the "black list" of states whose ships is the subject to priority inspection in ports.

With the ratification of UNCLOS 82 by Ukraine entering into force in the Ukrainian law, Ukraine was granted the status "State Party" in the Convention. This means, Ukraine has consented to be bound by this Convention and which clauses it has to enforce.

The registration of a ship in Ukraine consists of entering information about a ship in the State Ships Registry of Ukraine or the Vessel Register of Ukraine,[9] and obtaining a license or a vessel's certificate. This registry is a traditional "closed" registry. There are certain restrictions, in particular, limitations of person who can exercise the right to register their ships. Pursuant to the Clause 32 of the Merchant Shipping Code of Ukraine, the right of navigation under the state flag of Ukraine is given to a vessel being the state property or in the ownership of a natural person - citizen of Ukraine, as well as a legal person in Ukraine founded exclusively by Ukrainian owners, or a vessel belonging to these persons under a bare boat charter contract. Consequently, the ships owned by sole entrepreneur (also is business entity under Ukrainian law)[10] or legal entities registered in accordance with Ukrainian legislation, but the founders of which is a foreign citizen or company, cannot be entitled to fly the national flag of Ukraine. Such restrictions, of course, are a barrier to attracting foreign investment in the development of domestic shipping.

It is important to stress that the Merchant Shipping Code was adopted in 1995 and was almost not amended since that time, while the development of the maritime industry had significant global changes.

There were various discussions among shipping specialists and experts concerning options for potentially reviving the national merchant fleet, including through the establishment of an international register of ships. Since 2001, Ukraine has developed several versions of the draft law "On the international register of ships", nevertheless, unfortunately, it has not yet been adopted. In early 2013, the Cabinet of Ministers sent their draft law "On the International Shipping Register of Ukraine" to parliament, which was forwarded to the Ministry of Infrastructure for revision.[11]

However, many Ukrainian academics such as Kuznetsov S.A., Averochkina T.V., Niktiuk M.V. etc express negative thoughts about the creation of such a registry in Ukraine in their academic writings. They argued their position that the main purpose for the establishment of such "second registry" was only the commercial interest of the state, contrary to the main goal of the provisions of UNCLOS "82 - ensuring the safety of navigation. Moreover, they think that there would not be safety guaranteed.

We cannot agree with this position and consider that the creation of alternative registry in Ukraine does not equate to the rejection of Ukraine from its obligations to the international community concerning safety guarantee. Completing of the registration of the a vessel means that the national authority of the Maritime Administration has checked the legal aspects and the technical condition of the vessel, and its compliance with the national legislation based on international standards, and demonstrates this fact to third parties.

Besides, the issues related to obtaining profit from the registration of ships or other activities are not mentioned in UNCLOS'82 and the Convention does not prohibit the existence of several register of ships in the state.

In order to provide the existence of "genuine link" between the state and the ship, the following requirements are proposed to be prescribed in the law on the international register of ships of Ukraine:

1.     A person entitled to register a ship shall be legal entities or sole entrepreneur, located on the territory of Ukraine, which operate under the laws of Ukraine or the company, the founders of which have at least 51% Ukrainian owners.

2.     Set a minimum number of seamen - citizens of Ukraine as a part of the crew.

3.     Set the minimum registration period of 5 years, and sanctions for violations, such as loss of privileges from the moment of the registration.

According to the Ministry of Foreign Affairs of Ukraine, about 60-70 thousand of Ukrainian seamen are working on ships under foreign, including "convenient", flags, which are not always adhering to minimum social standards and are violating the labour rights of seafarers[12] Consequently, a further important argument in favour of opening the international registry is the prospect to incite ship owners to hire Ukrainian sailors and possibility in this case for Ukraine to monitor compliance with labour standards, rules of health and safety and social security of its citizens.

In conclusion, in order to prevent the drain of its national fleet abroad and attract foreign tonnage under its flag, as well as improving the competitiveness of its ships on the global freight market, Ukraine should take imitate more developed countries and create a Ukrainian International Ship Register as an alternative to its national registry. Such a registry would not be in breach of any international rules, which Ukraine has agreed to.

 

 

 

 

 


[1] Klyuyev N.E  'Legal regime of Maritime merchant ship as object of ownership: ship registration' (2014), 4 The bulletin of Admiral Makarov State University of Maritime and Inland Shipping, at p. 19.

[2] Gorchakov S.V. 'Legal aspects of ship registration. A ship as an object of ownership and registration of the action' (2007) 6 (476) Legal practice teak, at p. 17.

[3] Lebedev V. 'The meaning of "flags of convenience" (2005) 9(113) Shipping, at p.50-51.

 

[4] Nykytyuk M. 'Legal Grounds and Procedures of the Ships' Registration in the Territory of Ukraine' (M.Sc. Thesis, The National University of Life and Environmental Sciences of Ukraine, 2009), at p. 11-12.

[5] United Nations Convention on the Law of the Sea of 10 December 1982.

[6] Greiner R. 'The tax on the gross tonnage and registers of ships' (2005) 1-2 Shipping, at p.16-17.

[7] Kuznetsov S.A., Averochkina T.V. 'Registration of ships in alternative registers: Legal Analysis' (2015) 4 (100) ustoms business, at p. 85-86.

[8] Nykytyuk M. 'Legal Grounds and Procedures of the Ships' Registration in the Territory of Ukraine' (M.Sc. Thesis, The National University of Life and Environmental Sciences of Ukraine, 2009), at p. 8-9.

[9] The Resolution of the Cabinet of Ministers of Ukraine 'On Approving the Procedure for the State Ships Registry of Ukraine and the Vessel Register of Ukraine' dd. 26.09.1997,   1069.

[10] The Clause 55 of the Commercial Code of Ukraine and the Clause 50 of the Civil Code of Ukraine.

[11] Nikisha D.O., Levchenko S.G. 'International legal registries as a step to revive the merchant fleet under the Ukrainian flag,' (2014) 6 (96)  ustoms business, at p. 83-84.

[12] Byelohubova A. 'Some aspects of international legal regulation of labour rights of seamen' (2010) 45 Actual problems of state and law: Coll. Science. Papers, at p. 56.

 

 

 

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