If you live in a country where something like gambling is against the law, you might find there are ships willing to take you out to international waters instead. It’s not some hypothetical scenario, it really does happen granted not so much dedicated gambling ships anymore but we are talking about vessels like cruise ships which have a casino on board. The exact same thing applies to the stuff like the minimum drinking age, in the U.S. for example it’s 21 yet if you go on a cruise you might find that once the ship leaves U.S. waters, 18 year olds are suddenly allowed to have a drink. So what’s going on? Does this mean that in international waters there are no laws? Well, actually no but it’s not as simple as it is on land. Let us understand how the law works in international waters.
On land you know that if you are in one country, you follow their laws, if you then travel to another country, you need to follow their laws instead. Well, the same thing applies to ships. When a ship is in the territory of one country, for the most part it must comply with the laws of that country. This introduces us to the concept of the Port State which is just the country with legal jurisdiction over the territory the ship is in.
A country’s territory extends 12 Nautical Miles (NM) from its baseline. Baselines are normally the low water line along a coast, although it does cross things like mountains, rivers and stuff like that. You used to only get 3 NM of territorial waters because any further than that was out of the range of your cannons. Nowadays, we use 12 NM because of the United Nations. Specifically the United Nations convention on the law of the sea or UNCLOS. Basically, it says that in territorial waters coastal states can apply their own laws as long as they are compatible with international treaties. Outside of territorial waters, the next 12 NM, so we’re talking 24 NM from the coast is called the Contiguous Zone. In this zone, the coastal state still has some limited power to exercise its laws but only if they relate to either customs, fiscal policy, immigration or sanitation. Outside of the contiguous zone you enter the Exclusive Economic Zone, this extends upto 200 NM from the country’s coastline and gives the coastal states sovereign rights over the natural resources within the zone, this means the things like fishing rights and oil exploration and extraction. For the purpose of most laws on board ship however the exclusive economic zone is basically classed as international waters.
So we now know that a ship located within the territory of a state must comply with the laws of that state and we know that the territory of the state extends 12 NM from the coast line, but what law applies outside of that in international waters?
Well, this is where we introduce the concept of the flag state. The flag state is just the nationality of the ship, no matter where a ship is, the laws of its flag state apply. So a UK-registered ship located in the middle of the Pacific ocean would still need to comply with UK law, and we are not just talking about the shipping laws which quite well standardize, thanks to UN but we are also talking about domestic law, things like whether gambling is legal, the minimum age for the consumption of alcohol, whether a ship can be registered as a wedding venue or a minimum wage that all employees are legally entitled to.
You are probable starting to get an idea of the implication of this. To understand better, take two identical ships in international waters, both are registered in fictional countries, Yankee and Zulu. Now, Yankee is a rich country with domestic laws giving its citizens a minimum wage of $20 per hour, Zulu on the other hand doesn’t have minimum wage legislation. So our two identical ships are having to comply with very different standards. The Yankee registered ship complying with its flag state laws on minimum wage has much higher operating costs which it has to pass on to its customers through higher shipping costs. As the ships are identical, obviously the customers are going to choose the one that can move the cargo for the lowest price. The ship registered in Zulu will get all the cargo, so what can the owners of the ship registered in Yankee do? They can’t lower their costs any further and all their customers have now gone with cheaper ships, they have no choice but to re-register their ships in Zulu instead, so they no longer need to pay their crew $20 per hour. Registering in Zulu means now they can now compete and get their customers back again.
This is what happens in real life, our fictional country Zulu is known as a flag of convenience. They’ve developed domestic law which makes them particularly friendly to shipping companies. Not only they do have no minimum wage but they may also have very flexible laws regarding gambling, alcohol consumption, and environmental protections. Their goal is to attract as many ships as possible onto their shipping register to gain some taxation income and revenue from annual surveys and things like that.
But what happens when flag state and port state collide? When a Zulu registered ship enters the territorial waters of Yankee, Yankee is the port state and can exercise some control over the ship. However as long as the Zulu registered ship is complying with the minimum standards derived from the international law, they are entitled to pass through as it is an innocent passage. By this we mean that they cannot make threats, use weapons and things like that. Submarines, for example must only navigate on the surface.
It does get a little more complicated when the ship is docking in the country in question. It might be subject to a port state inspection and things but they should only be held to the same standard as any other foreign going ship on an international voyage. Of course some countries do have different rules in place for locally operating ships. For example, in the United States, the Jones Act requires that ships operating only between U.S. ports be registered in the U.S. and built, owned, operated, and crewed by U.S. citizens. The result is that the Pride of America is the only cruise ship registered in the U.S. and the only one complying with the labor laws, she’s the only ship that’s allowed to operate cruises around the Hawaiian islands without visiting a foreign port on every cruise. Almost every other cruise ship is registered with a flag of convenience instead. While they can visit Hawaii, they must have a port of call in a country outside the U.S. This is why ships offering a Hawaii cruise from San Diego will make a random stop in Mexico as well.
Flags of convenience are a result of the international nature of the shipping industry. Ships literally choose the most convenient flag for their own business purposes. In international waters it’s not a case that there are no laws but it is the case that you can choose which country’s laws you are going to comply with!
Here is a very informative video by Casual Navigation on this interesting topic: