Participation in International Fishery Management
Elizabeth R. DeSombre
Frost Associate Professor of Environmental Studies
And Associate Professor of Political Science
106 Central Street
Wellesley, MA 02481
Paper for presentation at the International Studies Association Annual Meeting,
March 2002, New Orleans
When the U.S. passed regulations under the Marine Mammal Protection Act requiring that U.S. tuna fishers refrain from killing dolphins in the process of tuna fishing, one response of ship owners was to reflag their vessels in states that did not regulate dolphin mortality, where they would not be bound by the costly U.S. regulations. This phenomenon is certainly not a new one; the modern idea of “Flags of Convenience” (FOC) is said to have originated in the 1920s when U.S.-owned cruise ships re-registered in Panama during prohibition on the United States, so that they could serve alcohol on board. In the intervening years the number of ships flagged in non-traditional maritime states, such as Panama, Liberia, and Honduras, and with little actual link to those countries, has grown exponentially. The problems associated with these ships have grown as well. Oil spills from Liberian-registered tankers in the 1960s and 1970s called attention to issues of inadequate training, communication, and equipment. Working conditions aboard FOC-registered ships from such states as Panama, Honduras or Romania are often abysmal and even “life-threatening.” More recently, fires aboard Liberian-registered cruise ships have exposed inadequate safety equipment, and other cruise ships have been discovered to be routinely using illegal methods to circumvent required pollution-control devices. This paper focuses on the difficulty FOC registration can cause for fishing regulation, and the implications of efforts to prevent the harm to fisheries from FOC-registered ships.
Regulation on the open ocean has long been a difficult international problem. The “high seas” were for centuries an area beyond the reach of international regulation. States have more recently been willing to create common regulations to protect the oceans from the overharvesting of resources from ships. But international agreements are only binding on those states that voluntarily join them, and in the case of regulation of ships there are some that have chosen to stay apart from much of the regulation. Some of these states actively court ship registrations, by pointing out the advantages of flagging in a state with few environmental regulations, and it is widely acknowledged that even some of those that have joined international agreements regulating maritime activities are unwilling or unable to enforce them.
The difficulty in creating and enforcing international standards to address fishery issues comes as a result of the extraterritoriality of the effects of overfishing. Because most of the resource extraction done by ships takes place outside of the territorial reach of states, it is difficult to influence shipowners’ willingness to accept or enforce agreements, even if their flag state requires action. Moreover, the states that run open registries suffer little harm from the activities undertaken by ships under their flag. The commons nature of the harm means that negative externalities (a decrease in the availability or sustainability of fish stocks) are shared by all states, and the benefits accrue only to the shipowners and flag states. And in the case of fisheries, most flag of convenience states do not themselves have major fisheries operations, and thus do not suffer the harm that comes when FOC-flagged ships overharvest ocean resources.
Success of responses to FOC-regulation (the scope of the broader project of which this paper forms one part) has varied by issue area of concern, with fisheries issues experiencing among the lowest level of success by those who attempt to prevent harm to international cooperation from FOC fishing. Nevertheless, fewer states have been able to avoid following international fishery agreements through FOC-registration than in the past. In particular, the extent to which the international community has been able to work out ways to hold fishing vessels to international standards can be explained by the ability of a set of actors to create a way to exclude FOC ships from benefits relating to the problem they are causing. In the case of fishing, this means that actors – in this instance primarily states – have been able to encourage the upholding of fisheries agreements by vessels by refusing to import fish from those vessels whose states have not agreed to international regulation, and thus decreasing the advantage to vessels from regulation-avoiding FOC registration Importantly, though, while states have been the primary source of these processes of exclusion in the fisheries issue area (different from other issue areas examined in the broader project), the disaggregation of states is nevertheless apparent in the targets of these processes of exclusion. Most sanctioning efforts begin with threatening economic restrictions on the flag state itself, but move to a focus instead on restriction based in the actions taken by specific fishing vessels, in which those vessels that uphold international standards, if they can indicate that they do so, are allowed to sell their fish.
This effort to regulate ocean vessels reflects the broader issue of creating and enforcing international standards under circumstances where there are no supranational authorities that can impose regulations on those that are reluctant to undertake them. Regulation pertaining to ocean issues is more difficult than some other regulatory issues, since there are more opportunities for states to escape regulation or detection than is the case with manufacturing or transport that takes place within territorial states. But re-registering ships to avoid being obligated by domestic or international regulations is akin in some ways to moving a manufacturing plant to an area where wages or standards of environmental protection are low, or incorporating in an area with lenient tax requirements. As such, efforts to prevent FOC registration from lowering overall levels of international protection can contribute to a broader understanding of how to avoid a regulatory “race to the bottom,” or the creation of pollution havens to draw business away from areas with tough environmental standards. More importantly, the efforts to uphold international standards in the face of FOC registrations provide examples of innovative efforts to address collective action problems, and can explain more broadly the conditions under which certain types of efforts are likely to succeed or fail.
Origin and History of Flags of Convenience
Occasional ship owners have strategically chosen to fly another state’s flag for almost as long as there have been shipping records. U.S. merchant vessels flew Portuguese flags during the War of 1812 to avoid difficulties with the British. Slave-trading ships owned by citizens of both the U.S. and various Latin American countries flagged elsewhere to avoid detection in the 19th century when international agreements prohibited the slave trade. Even earlier, British ships flew flags of obscure German principalities during Napoleon’s shipping blockade.
Widespread use of such flags, however, came only with the decision by certain states beginning around the 1920s to create open registries, where ships were not required to have onerous ties to a state in order to register. Open registries are generally characterized as those that do not require citizenship of shipowners or operators, levy no or minimal taxes, allow ships to be worked by non-nationals, and have neither the will nor capability to impose domestic or international regulations on registered ships. The first state to create such a registry was Panama, followed shortly thereafter by Honduras and later Liberia. These three were the primary FOC states until recently when they have been joined by such states as Cyprus, Greece, Malta, Singapore, and the Bahamas. Some of the original FOCs are still among the most important, however. As of 1993 more ships are registered in Panama, as measured both by number of ships and by gross tonnage, than anywhere else in the world. Second in both categories is Liberia.
From the beginning, the modern flag of convenience phenomenon was largely driven by the desire of shipowners to avoid the costs and restrictions associated with ships registered in the major maritime states. An officer of the first shipping company to transfer a U.S.-flagged ship to Panamanian registry explained the appeal: “The chief advantage of Panamanian registry is that the owner is relived of the continual . . . boiler and hull inspections and the regulations as to crew’s quarters and subsistence,” pointing out that as long as the ships pay the registry fee and yearly (low) tax, “we are under absolutely no restrictions.”
There are advantages to the states that run open registries and few disadvantages. In Panama, for instance, the fees charged for the registry contribute five percent of the national budget. In Liberia, where revenue from the registry accounted for approximately ten percent of the national budget before the civil war, it now contributes up to thirty percent.
Flag of Convenience Problems
Resource conservation, particularly fishery regulation, is an activity that is made more difficult by the opportunity for ships to fly flags of convenience. When faced with either domestic or international fishery regulations, some fishing vessels choose to flag in states that do not belong to the international agreements in question or are unlikely to uphold them. They can thereby harvest as much of the resource in question as they are able to. In doing so, they make conservation potentially impossible for other states, and undermine the advantages to those who have agreed to limit their resource extraction. In particular, FOC fishing has taken place using highly efficient driftnets when others have agreed to eliminate their use, and FOC registered ships have caught tuna and whales outside of the regulatory frameworks to conserve those stocks. Although this paper focuses on these three fishing issues in particular, it should be noted that there is practically no international fisheries commission that has not been faced with the problem of FOC fishing in its regulatory area. The Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR) has struggled with this issue, as has the Northwest Atlantic Fisheries Organization (NAFO).
One of the earliest instances of this problem with respect to ocean resources came in the 1950s from the Olympic Whaling Company, run by Aristotle Onassis. The company's main whaling vessel, the Olympic Challenger, was registered in Panama; other whaling vessels run by the company registered in Honduras. The company itself was incorporated in Uruguay. Since none of these states were International Whaling Commission (IWC) members, the vessels were not bound by IWC regulations. In the early 1950s the Olympic Challenger and its associated whale catchers caught whales contravening nearly every IWC rule, while at the same time trying to negotiate deals with some of the major whaling vessels.
Issues of overfishing on the open ocean are generally addressed by international conservation agreements. There are too many to name individually; they are generally negotiated based on a species, a geographic region, or both. Fishing activity is regulated by imposing fishing seasons, fishing catch limits, or equipment standards (often prohibiting certain types of equipment, such as driftnets) . Every effort is made to ensure that all the states whose vessels are likely to be fishing in the area participate in the negotiations of an agreement or are encouraged to join, but there are certainly some that prefer not to join.
The 1995 agreement on how to implement the UNCLOS provisions on straddling fish stocks indicates that a state not party to fisheries management organizations is not allowed “to authorize vessels flying its flag to engage in fishing operations for the straddling fish stocks or highly migratory fish stocks” that are the subject of those organizations; similar provisions apply to ocean fishing more generally. But it has been difficult to guarantee that FOC vessels will not fish outside the regulations. The bigger question is how, once an agreement is created, to make sure that all relevant states are involved, and how to hold states, or individual ships, to international standards.
Flag State Referral
Traditionally the main enforcement tool for international shipping standards has been to refer whatever problems are discovered with vessels to their flag state. Since flag states are responsible under customary international law for the actions and conditions of vessels registered to them, they should act on any notification that ships flying their flag have failed to live up to international obligations. The Convention on the Conditions for Registration of Ships (which has not entered into force) requires that flag states have a maritime authority to ensure that their ships comply with safety and environmental regulations and that they address any concerns referred to them.
But it is precisely because these states are unwilling or unable to act on such referrals that they are considered flags of convenience. Referrals of problems with environmental standards have seldom resulted in penalties for the ships or a remedy for their shortcomings. A U.S. government study showed that of 111 referrals the U.S. made to foreign flag states identifying environmental malfeasance by ships, the flag states took action in only two of them. It is for these reasons that other types of enforcement mechanisms have been developed.
The most obvious way to deal with the threat of ships flagged in a state that is not a member of an international fisheries agreement or organization is to convince it to join. Most fisheries commissions have a long history of efforts to gain membership by states whose flag-vessels are fishing in a given regulatory area or for a protected fish stock. In the 1950s, for example, the International Whaling Commission repeatedly discussed how to prevent what the organization called “pirate whaling,” with specific reference to the Olympic Challenger. Most efforts were aimed at convincing Panama, the state under which it was flagged, to join the Commission, or to at least enforce IWC provisions. The IWC had little success, however, and it is likely that had it joined at the time Onassis would simply have registered his operations elsewhere. In 1956 the Peruvian Navy seized the vessel for fishing in Peruvian waters and sold it to the Japanese, ending most serious case of FOC whaling. While this particular situation may have been solved in an unusual way, two underlying observations are useful. First, fisheries commissions in general seem to have little success in persuading FOC states to join fishery conservation agreements. Second, if vessels have flagged in one state to avoid regulation, they are likely, as the example at the beginning of this paper suggests, to re-flag elsewhere if their flag-state takes on the regulations they are trying to avoid. Only if all potential flag states are held to international standards will FOC registration cease to be a problem via this type of approach.
Inspectors and Observers
States have been reluctant to allow inspectors on board their fishing vessels as a part of regular agreements, though it has become more accepted as practice in recent times. Even when an inspections or observer scheme is negotiated for a fishery agreement, however (as was true for whaling in Antarctica beginning decades ago or fishing under the Northwest Atlantic Fisheries Organization in the 1990s (to give two examples), these requirements will not automatically apply to non-member states; to the contrary, it is assumed that states will not be held to obligations they have not chosen to undertake.
The threat or imposition of trade restrictions has been used in efforts to convince states to join international agreements relating to ocean resources. In the cases where ships have reflagged in order to avoid these restrictions they may find that their new state of registry decides to take on these international regulations, or that they may be prohibited from trading with their primary markets if they do not accept them. This strategy has been used primarily with respect to fishery issues.
The United States had been the biggest practitioner of this method; it has refused to import tuna or from states that do not protect dolphins in the process of tuna fishing, or do not uphold the major tuna fishing conventions. The U.S. has also threatened not to accept fish exports from states that do not uphold international standards on driftnet fishing or do not participate in the regulation of whaling. Japan has also restricted the import of tuna from fishing vessels that are not registered in states that uphold the International Convention for the Conservation of Atlantic Tunas. Many of the states that are targets of these sanctions adopt the environmental agreements in question. In the case of Atlantic tuna, some of the main FOC offenders have expressed a willingness to uphold international tuna regulations.
Exclusion as Incentive
Part of the difficulty inducing states to create or enforce international regulation comes in cases where states can receive much of the benefit from actions taken by others without having to uphold the agreement; another part comes from the benefit that states can gain by not adhering to an international standard. Both of these problems can be seen in the case of fishery regulations. To the extent that FOC states may suffer from oil depleted fishery resources, the negative utility from these problems is shared by all actors while the positive utility of undertaking actions that contribute to these problems goes entirely to the FOC state. To the extent these states are even affected by the issues at hand, the difficulty of excluding them from the benefits of an international agreement they do not uphold makes them unlikely to participate.
In some instances of international regulation, however, the benefits created are excludable, and can be kept from those who do not participate. These type of issues create added incentives for states to adopt the international standards in question. This type of issue is sometimes known as a club good, because the benefits of membership belong to those in the “club” and not to others. Some refer to this type of good as a toll good. Free trade agreements are the quintessential example of agreements that accomplish their goals in part through the creation of a set of advantages that accrue to members and are not available to those who do not join the agreement.
There are some issues that have characteristics of club goods on their own. In other cases, however, it may be possible to create elements of a club good within an international agreement. Any time you can exclude actors from some benefit they desire if they do not undertake the action you want you are creating club-aspects to a good. In some ways the creation of a club can be similar to the idea of side payments, where actors can gain benefits from taking certain actions. But in its purest form a club good is non-rival; in other words, club goods are not diminished by the number of people that partake of the club, which is not the case with side payments. In addition, it may be the club itself that creates the good. Free trade, for example, does not exist without states removing trade barriers. The good provided, then, is an essential element of the cooperation.
Clubs are rarely free. The creation of some type of exclusion mechanism where it does not naturally exist is likely to have some degree of cost, though the cost will of necessity be less than the benefit that accrues to members or the good is unlikely to be provided. The ability to create a club, therefore, can depend on the costliness of the method of exclusion, and the benefits of the ability to exclude to those who bear that cost. In the case of fisheries, the fact that those that create the exclusionary mechanism (fishers already regulated) are likely to benefit, increases the likelihood that such a mechanism will be successfully created.
In the efforts to respond to FOC issues most of the actions that have enjoyed the most success at gaining adherence to international standards have done so by creating the elements of some kind of club. The success of economic sanctions at gaining adherence to fishery agreements comes from the creation of a trading club. Those that want to sell fish to the large American or Japanese markets must live up to certain fishery agreements or regulations in order to be able to do so. This requirement has caused some open registry states to join fishery conservation agreements and other individual fishing vessels to lose their incentive to flag in states that do not uphold the regulations. Since with the trading club created around fishing regulations it is the state rather than the individual vessel that is held to the standard, it is even more difficult for individual vessels to gain admission to the club if they are flagged in FOC states.
Exclusion of fish from a market also requires a willingness to undertake fairly intrusive action, since it would not be apparent from the shipment of fish itself whether it had been caught in compliance with fishery regulations. The states that are willing to require of others that they document their compliance with fishery agreements in order to be able to export fish do so frequently because their domestic fishers compete internationally with FOC fishers, and would gain directly from raised standards. More recently, in part due to rulings by international trade bodies, sanctions have been more carefully targeted to allow individual vessels that can prove they meet standards to export fish to the states that otherwise would exclude fishery imports from a given state.
Perhaps the most effective efforts at exclusion are now being practiced by one of the most influential clubs on the international scene: the European Union. The European Commission recently warned Cyprus that its shipping policies could have an impact on the willingness of the EU to accept its membership. For a number of states, EU membership is a sufficient advantage that they are willing to increase environmental requirements across a number of issues to be able to join. And although there is little to guarantee that Cypriot ships would not re-flag elsewhere, the general efforts to raise standards are limiting the number of opportunities to fly a true flag of convenience. In the specific realm of fishing, it is interesting to note that the European Union specifically disallowed Spain and Portugal from fishing in EU waters for a number of years as a condition of membership, because of the poor record of international fishery conservation these states had demonstrated.
Flags of convenience are manifestations of international free riding in a way that is particularly obvious. As long as the flag states gain from running open registries and shipowners can benefit from avoiding international standards, the phenomenon is not going to disappear. The improvements we can expect to see in addressing FOC issues may therefore be modest. But we have seen a general increased adherence to fisheries agreements by vessels, even those that fly flags of convenience.
The changes come largely through increasing the cost to FOC vessels of not adhering to international standards. A combination of international pressure and individual incentives may therefore be what is needed to hold ships to international standards. Most frequently that international pressure has led to increased standards when actors have been able to create some a way to deny access to a benefit to those that do not accept the standards in question. Ironically, then, it is through creating mechanisms of exclusion that the ability to include the widest number of actors in international regulatory efforts is most likely to succeed.
 Between 1981 and 1985 thirty-four U.S. tuna boats transferred to other flags to continue to fish for tuna. Alessandro Bonanno and Douglas Constance, Caught in the Net: The Global Tuna Industry, Environmentalism, and the State. (Lawrence: University Press of Kansas, 1996), pp. 156, 183.
 Jane Marc Wells, “Vessel Registration in Selected Open Registries,” The Maritime Lawyer 6 (1981), p. 226; Rodney Carlisle, Sovereignty for Sale: The Origins and Evolution of the Panamanian and Liberian Flags of Convenience. (Annapolis: Naval Institute Press, 1981), pp. 14-18.
 H. Edwin Anderson III, “The Nationality of Ships and Flags of Convenience: Economics, Politics, and Alternatives,” The Maritime Lawyer 21, p. 162; Carlisle, p. 175
 Jim Morris and Kevin Moran, “Lost at Sea: Uneven Regulation and a Ready Supply of Cheap Labor Have Added a Harsh Modern Reality to the Romance of Going to Sea,” Houston Chronicle 18 August 1996, p. A1 (Lexis/Nexis); Jim Morris, “Lost at Sea: Accident Underscores Potential Hazards of Foreign Vessels,” Houston Chronicle December 16, 1996, p. A12 (Lexis/Nexis).
 Betsy Wade, “Practical Traveler: Fire Safety for Ships at Sea,” New York Times August 2, 1998, Section 5, p. 4 (Lexis/Nexis).
 Douglas Frantz, “Gaps in Sea Laws Shield Pollution by Cruise Lines,” New York Times January 3, 1999, pp. 1, 20.
 Carlisle, p. viii.
 Boleslaw Adam Boczek, Flags of Convenience: An International Legal Study. Cambridge: Harvard University Press, 1962), p. 8.
 Wells, p. 222; Frank L. Wiswall, Jr., “Flags of Convenience,” in William A. Lovett, ed., United States Shipping Policies and the World Market (Westport, CT and London: Quorum Books, 1996), p. 116; Jim Morris, “Lost at Sea: ‘Flags of Convenience’ Give Owners a Paper Refuge,” Houston Chronicle, August 22, 1996, p. 15 (Lexis/Nexis) [cited hereafter as Morris 8/22/96].
 Boczek, pp. 9-13.
 Morris 8/22/96.
 “Panama Increases Lead as Merchant Fleet Reaches Record Tonnage,” Llyods Register News Release, http:// www.lr.org.news/pr/41wfs.html, date visited: 21 July 1998.
 W.L. Comyn, of Pacific Freighters, quoted in Carlisle, pp. 10-11.
 Morris 8/22/96.
 Aviva Freudmann, “Liberia Taps DC Lawyers to Handle Registry,” Journal of Commerce, December 21, 1998, p. 2B.
 Some states with large fishing fleets stay out of fishery agreements so their ships will not be bound by them; although this phenomenon is not identical to the problems posed by FOC registration the overall problem of gaining adherence to international standards is similar.
 J. N. Tønnessen and A. O. Johnsen, The History of Modern Whaling (Berkeley: University of California Press, 1982), pp. 534-538.
 Article 17(2)
 See, for example, United Nations Convention on the Law of the Sea, Article 94.
 Frantz, p. 20.
Mitchell, p. 19.
 ‘Japan to Ban Tuna Imports from Panama, Honduras, Belize,’ AP Worldstream, December 3, 1996 (Lexis/Nexis).
 L. Grant, ‘Panama to Clamp Down on Tuna Fish Violators,’ Reuters Financial Service, December 2 1996 (Lexis/Nexis); M. Tighe, ‘Tuna Commission Approves Sanctions Against Three Countries,’ AP Worldstream 29 November 1996 (Lexis/Nexis).
 This is Hardin’s classic “tragedy of the commons” formulation. Garrett Hardin, “The Tragedy of the Commons,” Science 162 (December 13, 1968), pp. 1243-1248.
 J. M. Buchanan, ‘An Economic Theory of Clubs,’ Economica 32 (1965), 1-14.
 Elinor Ostrom, et, al., Rules, Games, and Common-Pool Resources (Ann Arbor: University of Michigan Press, 1994), p. 7.
 R. Cornes and T. Sander, The Theory of Externalities, Public Goods and Club Goods (Cambridge: Cambridge University Press, 1996), p. 349.
 It is precisely for this reason that these types of sanctions have frequently been found to be in violation of international trade law.
 Elizabeth R. DeSombre, “Baptists and Bootleggers for the Environment: The Origins of United States Unilateral Sanctions,” Journal of Environment and Development 4 (Winter 1995), pp. 53-75
 Janet Porter, “The Sorry State of Cyprus Ships”, Journal of Commerce June 11, 1997, p. 7A.