How Illegal Business Practice is Anonymously Justified by Legal Means

How Illegal Business Practice is Anonymously Justified by Legal Means

Author: Shristi Singh, Amity University


This article studies about “ Flag of Convenience and its repercussion on seafarers”, following that this article will include brief introduction with historical view of it , how its convenience are very much inconvenience for labor or common people and for welfare of state . Its impact on seafarer and what are the laws for the preventions, proponent and consequences of the process with a clear conclusion .


We are going to understand ,how these illegal business practice is anonymously justified by legal means .

“ Flag of Convenience” ; isn’t it the term itself describe the meaning of it , it is basically a business practice where a flag of a country under which ship is registered , in order to avoid financial charges or restrictive regulation in owner’s country .

The history of this practice of sailing under flag of convenience began in 1920’s after end of World War . This practice in United states increases regulation and rising labor costs began to register their ship to Panama . 

Panama has been targeted every now and then for charges of corruption . One of the main concern it ability of ship owner to remain anonymous and mostly it is impossible to identify the owner ,due to this it create hurdle when legal issue arise , there is no way to identify and take legal action against guilty part  and as a result these vessels are used for many criminal activity or illegal activities .


 Proponent :

  • Foreign corporations can register a ship without being established in territory .
  • Where a company is required to be formed in the , state , there are low formation costs .

The beneficial ownership of the ship may remain anonymous .

  • Low taxation and other fiscal incentives .
  • No special crews nationality or employment requirements .
  • No minimum ship tonnage requirement . Dual registry is allowed in some cases .
  • Speedy and simple registration process . [1]

Consequences :

  • The consequences are basically faced by sea farers because of very few security are guaranteed by law when working on board a ship which is registered in flag of convenience jurisdiction .
  • Workers protection laws and regulation are rarely enforced in open registries .
  • Less qualified workers are also allowed that is beneficial for ship owners to  exerscise their power easily and fulfill their ill desire through it .


Maritime  laws is set of rules and regulation which govern matter related to sea and ship popularly known as admiralty law . In India The Admiralty (jurisdiction and settlement of maritime claims ) Act ,2017 was  enacted on 9th August 2017 to consolidate the laws relating to Admiralty .

Ship arrest is a process by which ship is prevented from further trading until the matter in question is decided by court. The process of arrest may exercised for reason such as:

  • Salvage
  • Collision
  • Execution of Decree
  • Violation of custom , usage , regulations of norms . 
  •    Section 4 reads  that High Court can question on maritime claims or any kind of dispute ownership of vessel , mortgage or a charge   of the same nature of vessel , loss or damage caused by vessel and many more .
  •  Section 5 of this act reads that High Court may order for arrest of any vessel within its jurisdiction , where there is  a reason to believe  :
  • The owner of the vessel is liable for  claim .
  • The demise character of the vessel is liable for the claim
  • The claim is based on a mortgage or similar charge.
  • The claim is against the owner , demise character , manager or operator of the vessel


  • Working conditions are not good as compare to other vessel due to less regulation of such vessel they always face dispute of nation and rules that apply . Seafarers always have high risk of working under extreme conditions  without any proper insurances , safety and compensations for the same .  
  • Their basic rights got infringed such as right to form or join trade unions , demand suitable pay and so on .
  • Seafarer may unknowingly dragged into such business where legal document make easy to do  illegal trade such as human trafficking . This is one of the important concern that make flag of convenience  crucial in this industry .
  • These include things like pay scale of ship’s  crew . In the name of rules of nation of flag of ship, the owners can dupe their employees for their rightful salary or at the required time .
  • Case of mariners having been gravely injured while on board of such ship and not having received due compensation have come forth . It is important to guard mariner against such drawbacks of flag of convenience .Also mariner are not allowed necessary rest period between consecutive shipping these guideline can drastically effect the health of mariner and in spite of fact that health should be our first priority .
  • Flag of convenience not necessarily a bad thing but invariably leads to not so good implications .Being aware of such danger of working on such a vessel is the only way mariner can comprehend the real risk they face .


Although these registries came into existence for genuine reason , but instead of good  reason they turned into the flag of convenience and create so much inconvenience and various kind of threat  in maritime industry. Due to this it effect seafarers drastically  and  owners are anonymously fulfilling their ill desire for making money from illegal means.                                                                                                                                                                                              


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