OFF THE HOOK

How flags of convenience let

illegal fishing go unpunished

A report produced by the Environmental Justice Foundation

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 OUR MISSION

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OFF THE HOOK - how flags of convenience let working locally to resolve
illegal fishing go unpunished

Our Oceans Campaign

EJF’s Oceans Campaign aims to protect the marine environment,

its biodiversity and the livelihoods dependent upon it. We are
working to eradicate illegal, unreported and unregulated fishing
and to create full transparency and traceability within seafood
supply chains and markets. We conduct detailed investigations
into illegal, unsustainable and unethical practices and actively
promote improvements to policy making, corporate governance
and management of fisheries along with consumer activism and
market-driven solutions.

EJF is working to secure sustainable, legal and ethical seafood.

Our ambition is to secure truly sustainable, well-managed

fisheries and with this the conservation of marine biodiversity
and ecosystems and the protection of human rights.
 
EJF believes that there must be greater equity in global fisheries
to ensure developing countries and vulnerable communities
are given fair access and support to sustainably manage their
natural marine resources and the right to work in the seafood
industry without suffering labour and human rights abuses.

We believe in working collaboratively with all stakeholders to achieve

these goals.

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stated otherwise.

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Contents

Executive summary 4
Introduction 8
1. Flags of convenience in fisheries: the 'who', 'what' and 'why' 10
1.1 The right of flag states to register vessels, any vessels 10
1.2 What is a flag of convenience in the context of fisheries? 11
1.3 Which flags should be considered as flags of convenience in fisheries? 11
1.4 Rationale for the existence of flags of convenience 14
2. How FoCs provide a safe haven for IUU offenders 16
2.1 How corporate structures in FoC states are shielding the beneficial owner of illegal
fishing activities 16
2.2 Failing to identify and hold to account beneficial owners of IUU fishing vessels 18
3. How the FoC system lets IUU vessels off the hook through flag-hopping 20
4. How the FoC system perpetuates IUU fishing 24
Conclusion 28
Recommendations 29

Abbreviations

EEZ Exclusive Economic Zone

EITI Extractive Industry Transparency Initiative
EU European Union
FAO Food and Agriculture Organization
FOC Flag of Convenience
FONC Flag of Non-Compliance
IOTC Indian Ocean Tuna Commission
ITF International Transport Workers’ Federation
IMO International Maritime Organization
IUU Illegal, Unreported and Unregulated fishing
MCS Monitoring, Control and Surveillance
RFMO Regional Fisheries Management Organisation
UNCLOS United Nations Convention on the Law Of the Sea

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Executive summary
•  ur seas and oceans are in a state of crisis, with 34% of stocks assessed by the United
O
Nations Food and Agriculture Organization (FAO) found to be exploited at biologically
unsustainable levels (“overfished”), and a further 60% maximally sustainably fished
(formerly known as “fully fished”). Overfishing and illegal, unreported and unregulated
(IUU) fishing risk pushing ocean ecosystems towards total collapse, with devastating
consequences for the marine environment and the many millions of people who depend
on it for food and income.

•  he lack of transparency in the global fishing sector is a key enabler of IUU fishing
T
and associated crimes such as human trafficking, forced, bonded and slave labour.
In addition to the often remote nature of fishing, the opacity and complexity of
operations in the industry make it difficult to identify the “actors” involved, including
the fishing vessels themselves and their owners. The challenges in uncovering a
vessel’s illegal activities, both current and past, mean that unlawful operators are at
low risk of detection, capture and sanction by control authorities.

•  he widespread use of “flags of convenience” (FoCs) by fishing vessels exacerbates the
T
opacity of the fishing sector, hindering efforts to identify and sanction the ultimate
beneficiaries of IUU fishing activities, providing them with an easy escape route.

•  t the global level, there is no official or agreed definition or list of FoCs specifically in
A
fisheries. Some countries operate as open registers and welcome any foreign vessels
so long as they pay a fee. Other countries do not overtly operate as open registers, but
have corporate laws that are permissive, or laxly enforced, with the result that their
registered fleet may, in effect, be under foreign ownership.

• I t is not the practice of registering foreign-owned vessels that is problematic per se.
Rather, it is how FoCs facilitate secrecy in beneficial vessel ownership. In order
to register to an FoC, a company may set up “shell companies” or other corporate
arrangements that enable false registration as national entities. This serves to conceal

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 Ultimately, the use of FoCs in the fisheries sector must end.
There are achievable and realistic steps that fishing FoC states
should take now to leave the FoC system.

the identities of beneficial owners, precluding identification and sanctions where their
vessels engage in illicit activities. These same, secretive corporate structures frustrate
the investigations of tax authorities and other non-fisheries government agencies.

•  he lack of implementation of basic flag state responsibilities, derived mostly from

T
the United Nations Convention on the Law Of the Sea, coupled with the lack of
transparency in the global fishing sector, are key weaknesses allowing fishing FoCs
to provide a safe haven for IUU fishing offenders, who are able to escape detection.
This is also compounded by the fact that "flag-hopping" allows vessels to change their
identity regularly. Re-flagging to an FoC state can also assist vessel owners to escape
sanctions for offences committed under a previous flag, particularly in cases where no
cooperation mechanisms exist, where no adequate and workable enforcement systems
are in place, or when political will lacks.

• I n the global fight against IUU fishing, the escape route provided by FoCs in fisheries
frustrates the efforts of flag states that are undertaking reforms to make their fleets more
compliant in order to have more sustainable, legal and ethical fisheries. It undermines
the deterrent effects of sanctions.

•  his report, using compelling case studies from the field, demonstrates how FoC states are
T
allowing IUU fishing to continue and are undermining global efforts to improve fisheries
management and protect threatened marine ecosystems. In recent years, many have
focused on FoCs’ poor performance as flag states and failures to comply with international
obligations. While those issues remain important, this report concentrates on how the
opaque corporate structures used in FoCs undermine efforts to combat IUU fishing.

•  ltimately, the use of FoCs in the fisheries sector must end. There are achievable and
U
realistic steps that fishing FoC states should take now to leave the FoC system. Other
states, as well as the private sector, can also adopt measures grounded in increased
transparency to close their waters, markets and supply chains to fish caught by vessels
flying fishing FoCs.

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Recommendations:

Damages caused by the FoC system and the lack of accountability that it creates for vessel owners have
been debated in the fisheries sector for decades. Ultimately, the Environmental Justice Foundation’s (EJF)
strong view is that all flags operating as FoCs should remove foreign-owned fishing vessels and
fish carriers altogether from their registry.

For many states operating as FoCs, this change will not happen overnight and in the meantime, EJF
recommends that all flag states (regardless whether or not they operate as FoCs) have systems in place
to be able to identify vessels’ beneficial owners and enable owners to be held accountable in the case
of IUU fishing or other offences that require sanctions. These should be adopted alongside measures
designed to improve control over fishing vessels and strengthen fisheries legal frameworks.

All flag states should:

adopt the following operational measures:

• Require from all vessels registered, and as part of all applications for entering the fleet register, detail
on ownership arrangements and records on the destination of profits from fishing activities. Unless
there can be a clear assurance that a vessel’s beneficial owner can be identified and held to account if
needed, the flag state should remove the vessel from their registry or refuse registration.

• Carry out background checks on any person or company forming a new, or taking over an existing,
corporate entity and that any proposed change to existing ownership arrangements is immediately
notified to the flag state.

• Ensure that agencies responsible for flagging vessels and fisheries management work in close
cooperation and that fisheries managers have substantive input on decisions on whether or not to flag
a fishing vessel.

• Ensure that fisheries authorities and ship registration authorities from the former and the applicant
flag state cooperate and exchange vessel information for any vessel before entrance into the fleet.
Refrain from issuing deletion certificates to vessels which have failed to settle all fines and liabilities.
Applicant flag states shall refuse applications of such vessels.

• Request a record of compliance with applicable laws for all vessels wishing to re-enter a flag state
registry and scrutinise vessels with a history of flag-hopping to combat abusive reflagging.

publish online the following information:

• List of vessels registered to their flag and make the relevant information available through the FAO
Global Record of Fishing Vessels, Refrigerated Transport Vessels and Supply Vessels (‘FAO Global
Record’), mandating International Maritime Organization numbers for all eligible vessels and national
unique vessel identifiers for all other vessels.

• Information on foreign-flagged vessels owned by their nationals and vessels that have de-flagged to
other nations.

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 Coastal, port and market states should:

• Coastal states should require details on the ownership systems behind vessels when reviewing
fishing licence/authorisation applications. When it cannot be established with certainty who the
beneficial owner is, these organisations should refrain from licensing those vessels. (See potential
risk criteria in box 6).

• Port states should accede to the FAO Port State Measures Agreement and, in determining which
vessels to inspect, also consider as "higher risk" vessels flying the flag of fishing FoC states or
connected to opaque ownership systems (See potential risk criteria in box 6).

• Market states should establish trade-related measures requiring that imported seafood is caught and
transported by vessels flagged to states that implement their obligations under international law; if
need be, by closing their market to products stemming from countries, including fishing FoCs, that are
not taking measures to ensure that the vessels they flag do not engage in IUU fishing.

All states should ensure that they:

• Amend domestic corporate regulations to strengthen legal provisions on beneficial ownership

through the inclusion of minimum disclosure requirements.

• Adopt policies to require nationals to disclose beneficial interests in foreign flagged vessels in order to
map where their nationals have registered the vessels they own and/or operate under FoCs.

• Adopt and implement sanctions against nationals responsible for, benefiting from, supporting or
engaging in IUU fishing under a foreign flag to circumvent the protection provided by FoCs to IUU
fishing vessel owners.

• Table and support ambitious proposals in Regional Fisheries Management Organisations and other
regional fishery bodies, aiming at increasing transparency over beneficial ownership.

• Join forces at the global or regional level to carry out coordinated law enforcement actions targeting
high-risk vessels with support from relevant organisations such as INTERPOL.

These measures, applied in addition to policies designed to improve flag state performance and increase
transparency, would level the disproportionate, negative impact of the FoC system. Alongside this, the
catching sector, importers, processors and retailers should:

• Set a near-term objective to refrain from purchasing seafood transported by or caught by vessels
flagged to fishing FoCs, sourcing and marketing fishery products stemming from such countries and
widely communicate this action to all actors across seafood supply chains.

• In the interim, evaluate and report on the exposure of fishing FoCs to their seafood supply chains,
taking account of the identification of such states by NGOs, the EU carding scheme and the
International Transport Workers’ Federation. In risk assessment exercises, assign high levels of risk to
supply chains that have FoCs and take mitigating measures, such as additional audits.

All actors, governmental and corporate, should support greater transparency in the global fisheries sector
by adopting EJF’s Charter for Transparency (See page 32). The charter includes EJF’s 10 transparency
principles and commits corporate actors to introduce due diligence measures designed to reduce the risk
of supplying seafood that is not legal, ethical and sustainable.

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Introduction
Our seas and oceans are in a state of crisis. 34% of stocks IUU fishing is broadly defined as the use of fishing
assessed by the United Nations Food and Agriculture methods or practices that contravene fisheries laws,
Organization (FAO) are exploited at biologically regulations or conservation and management measures.
unsustainable levels (“overfished”), and a further 60% Examples include fishing in closed areas or during
are maximally sustainably fished (formerly known as closed seasons, targeting protected species, using
“fully fished”)1. Overfishing and illegal, unreported prohibited fishing methods and fishing without a valid
and unregulated (IUU) fishing risk pushing ocean licence. These practices threaten marine biodiversity,
ecosystems into a state of total collapse, with devastating undermine effective management of fish stocks and are
consequences for the marine environment and those one of the main impediments to achieving sustainable
who depend on it. world fisheries2. It is in this context that IUU fishing is
recognised worldwide as a major threat to the future of
our oceans, and its eradication has been identified as a
target of the United Nations Sustainable Development
Goal 14 (life below water)3. In the face of climate change,
protecting marine biodiversity and ecosystems is
essential to build our oceans’ resilience4.

Overfishing and illegal, unreported

and unregulated (IUU) fishing risk pushing
oceans ecosystems into a state of total
collapse, with devastating consequences for
the marine environment and those
who depend on it.

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 BOX 1 Human impact of IUU fishing

IUU fishing can occur in any fishery, from shallow
coastal or inland waters to the high seas. However, it
is often a particular issue in countries or areas where
fisheries management is poorly developed, or where
there are limited resources to enforce regulations. This
commonly occurs in less developed regions, where fish
can be the main source of animal protein and income
for coastal communities5.

Across West Africa, one of the regions with the

highest levels of IUU fishing (estimated to be as high as 37% of all catch)6, fish is a vital source of essential micro-
nutrients, protein, vitamins and minerals. It accounts for over half of animal protein intake in countries such as
Ghana and Sierra Leone7. Across the region, an estimated 6.7 million people depend directly on fisheries for food
and livelihoods8. In the face of rising poverty, the coastal populations’ reliance on fisheries for food and income is
projected to increase in the coming years9.

With fish stocks diminishing and global demand at an all-time high, vessels are turning to illegal fishing to minimise
costs and maintain profits. Driven by the desire to reduce operating costs, IUU fishing is also often associated with
trafficked or forced labour to crew vessels. In Thailand, for example, decades of poor fisheries management resulted
in massive overfishing and illegal activities, with catches falling by an average of almost 80% between the 1960s and
2014. In turn, this created economic pressures that drove the widespread use of forced, bonded and slave labour.
Exhausted fish stocks meant that vessels had to remain at sea longer and travel further for ever-diminishing returns.
In turn, operators used human trafficking networks to crew their vessels with cheap migrant labour. Slavery in the
industry, fuelled by the impacts of overfishing, coincides with widespread pirate fishing, which is itself both a driver
and a response to the overexploitation of fisheries10.

IUU fishing is highly lucrative, resulting in billions of dollars entity, they enable the establishment of opaque corporate
of illicit financial flows every year11. It is also commonly structures that conceal the identities of true beneficiaries,
associated with forgery, fraud, money laundering and other allowing them to profit from illegal fishing with low risk of
enabling crimes, as well as non-fisheries violations such ever being sanctioned.
as human trafficking (See box 1)12. As such, fisheries value
chains are increasingly looked at from the perspective of This is in spite of international laws which give flag states
transnational organised crime13. the responsibility to sanction wrongdoers so as to “deprive
offenders of the benefits accruing from their illegal
Tackling IUU fishing, therefore, requires a broad portfolio fishing activities”14. This, in theory, should be facilitated
of measures, from increased monitoring, control through ensuring that there is a ‘’genuine link’’ between
and surveillance (MCS) to strengthened inter-agency the country of registration (flag state) and the vessel15.
cooperation and corporate due diligence. Being able Nevertheless, in practice, some flag states are failing to do
to identify and sanction IUU fishing offenders and the so by allowing vessels to enter their registers whilst not
networks behind illegal fishing operations is critical to ensuring that they will be able (and in some cases, willing)
effectively tackling the issue. It is only by tracing profits to exercise their flag state responsibilities effectively and
and increasing the likelihood of being identified and hold fishing vessel owners to account.
effectively sanctioned that IUU fishing will end. However,
the endemic lack of transparency in the fisheries sector Becoming a network of flags, they give IUU fishing
makes this very difficult, with illegally-caught fish able to vessels the opportunity to re-flag and escape detection
access reputable markets and sanctions easy to evade as and sanctions. In the global fight against IUU fishing,
IUU fishing operations may span continents and oceans, the attitude of these flag states frustrates the efforts of
involving players far removed from activities at sea. reforming flag states by providing an escape route for
IUU fishing offenders.
Countries that make their flags available as “flags of
convenience (FoCs)” to fishing vessels are at the heart of This report demonstrates the strong link between the use of
this opaque system that prevents the sanctioning of real FoCs and IUU fishing and provides clear recommendations
beneficial owners of illicit fishing activities, and therefore that will reduce abusive flagging practices and build greater
allows them to continue ‘’business as usual’’. As an transparency in the fisheries sector.

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PART 1

Flags of convenience in fisheries: the 'who', 'what' and 'why'
1.1 The right of flag states to register vessels, Various initiatives and other legal instruments have
any vessels provided further understanding of what is expected
of flag state responsibility in relation to fisheries,
especially as regards to both vessel registration and
The “flag state” refers to the country where a vessel fishing authorisation as well as control, enforcement
is registered. The concept plays a central role in and sanctions21. It is worth noting that often different
international maritime law. The United Nations agencies of governments deal with these different
Convention on the Law of the Sea (UNCLOS), which sets responsibilities. The 1993 FAO Compliance Agreement
the current international maritime legal framework, and the 1995 UN Fish Stocks Agreement, two binding
stipulates that flag states have rights to sail ships on international instruments, require flag states to maintain
the high seas, fix conditions for ships registered under a national record of fishing vessels22 and fishing
their flag and to give their nationality to these ships. authorisations23. They should also ensure compliance
To do so, they need to have a “genuine link” with the by their vessels with conservation and management
vessel16; a controversial and poorly defined stipulation measures and take enforcement action where necessary,
that originally intended that there must be sufficient including a full and immediate investigation into
connection with the vessel owner (social or economic) alleged violations, referral to appropriate authorities
that allows the flag state to exercise its jurisdiction over for the institution of proceedings, and the imposition of
the vessel in question17. “Genuine link” was reached appropriate sanctions24.
as a compromise between states favouring nationality
requirements for the owner or crew of ships as a Other non-binding instruments such as the FAO Voluntary
condition of the grant of nationality of ships (traditional Guidelines on Flag State Performance and the FAO
maritime states) and those rejecting such requirements International Plan of Action to Prevent, Deter and Eliminate
(states operating as open registries)18. Illegal, Unreported and Unregulated Fishing have also
provided further guidance for flag states on monitoring,
However, this right to flag ships comes with control and surveillance activities25 and information
responsibilities. Under UNCLOS, “every state shall that should be recorded upon registration, including
effectively exercise its jurisdiction and control in information on the beneficial ownership of the vessel26.
administrative, technical, and social matters over
ships flying its flag.”19 Flag state jurisdiction typically However, in spite of these guidelines, in practice there
includes management of vessel registration; fishing tends to be no immediate consequences for a flag state
authorisation; effective authority and control over that fails to implement them, and the conditions for
vessels including inspection, detention and arrest as registration and the degree of oversight and enforcement
necessary; and ensuring vessel conformity to generally action by flag states vary widely27.
accepted international rules and standards20.

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1.2 What is a flag of convenience in the context 1.3 Which flags should be considered as flags
of fisheries? of convenience in fisheries?
At present, there is no universally accepted and precise The ITF - which focuses on labour issues - maintains
definition of what constitutes an FoC in fisheries. a list33 of FoCs, although it is worth noting that the list
The original definition of FoCs as promoted by the does not strictly adhere to its own definition. The ITF
International Transport Workers Federation (ITF) is also considers factors that indicate a state’s willingness
‘where beneficial ownership and control of a vessel is to comply with international standards when classifying
found to be elsewhere than in the country of the flag a state as an FoC and does not limit classification to
the vessel is flying’28. This means that the owner of the countries which operate open registers34. However useful,
vessel that is flying the flag holds economic control and the list has not been designed for the fisheries context:
resides in a country that is not the same as the flag state. some of the registers in the list do not function as open
registers for fishing vessels. Flag states that operate as
Using the ITF original definition (not specific to the open registers and which have a large number of fishing
fishing sector), FoCs have also become commonly vessels in their fleets or a significant fishing fleet in terms
understood as flag states that operate an open register. of tonnage include Belize (50 fishing vessels), Vanuatu
These registers are “open” in the sense that they have (92 fishing vessels) and Panama (382 fishing vessels)35 but
flexible requirements for ship registrations, generally exclude Cayman Island, Lebanon, and Madeira.
not based on nationality.
Additionally, the list does not include states that are
However, in the fishing sector, the term FoC has not open registers per se but where a high proportion
increasingly encompassed elements of flag state of their fishing fleet is nonetheless foreign-owned.
performance and is often used interchangeably with These countries often have a supposed “nationality
the term “flags of non-compliance” (FoNC), meaning a requirement” when registering but in practice, have
flag that exhibits a consistent pattern of failure with its corporate laws that are permissive, or laxly enforced,
international obligations29. This shift can be associated with the result that their registered fleet may, in effect,
with the difficulty of finding a generally acceptable be under close to total foreign ownership. In Ghana,
definition of the “genuine link”, which pushed the for example, an estimated 90-95% of the industrial
international community to, in practice, refocus the trawl fleet is believed to have some level of Chinese
discussion on specific performance requirements to involvement36. Typically, this is enabled through the use
be applied to flag states, and other ways of enforcing of joint ventures between a foreign company and local
those obligations when flag state implementation is partner or government to gain access to specific fishing
inadequate or ineffective30. Their failure to comply areas and resources. Vessels owned by joint ventures
with these obligations is, however, irrespective of the may be permitted to apply for fishing licenses in a given
location of the vessel beneficial owner31. coastal state. These arrangements may also qualify
them to register under a local flag despite being partially
This means that it has become accepted that when a or even fully owned by foreign entities, with the local
fishing vessel owner chooses to use a flag other than partner in the joint venture, in reality, acting as a local
their nationality and in addition, is a flag from a state agent rather than a genuine co-owner37.
considered "non-compliant" in relation to meeting its
international obligations, the practice has generally been Because most FoCs facilitate secrecy in beneficial
referred to as “using a flag of convenience”32. ownership (see section 2), it is difficult to establish which
flag states have such high levels of foreign ownership in
their fishing fleet that would qualify them as FoC states
from a fisheries perspective. As a result, there is not
currently a complete list of “FoCs in fisheries”.

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• Ghana
• Cameroon
• Liberia
• Sierra Leone
• Somalia
• Belize
• Cambodia
• Comoros
• Panama
• Saint Vincent and
the Grenadines
• Vanuatu
• Bahamas
• Georgia
• Marshall Islands
• Moldova
• Mongolia
• Curaçao
• Kiribati
• Saint Kitts and Nevis

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EJF has produced a non-exhaustive list of states that appear to have been used as fishing
FoCs. This was informed by cases documented by EJF and presented in this report, states
with presence of foreign ownership as identified under the EU IUU Regulation carding
scheme38 and by the ITF list39. The relevance to the fishing sector of the latter list was
corroborated using the database Sea-Web and EJF’s expertise.

13
1.4 Rationale for the existence of flags Kenya, for example, banned most foreign vessels from
of convenience its waters and opted to develop its domestic fishing
industry and facilities to support it42. If a foreign fishing
vessel operator has chosen to register under a local flag
The rationale behind operating an FoC can be described in because it is a condition to gain access to fishing areas
terms of the benefits to both the state and the shipowner. and resources, this strategy may be both perfectly legal
These benefits are, for the most part, economic40, but can and justifiable from a business perspective, although
also be motivated by other operational advantages. potentially problematic from a sustainability and
fisheries management point of view43.
To a vessel owner, the ability to choose a flag from
a pool of open registries provides an economic Even if not a condition to access the resource, long-
advantage. Economic benefits can include favourable tax distance water fleets operating in coastal waters of
environments, low administration and registration fees, foreign countries can also be incentivised by economic
and lower operational costs of the vessel due to lower benefits to adopt the local flag, different from their
compliance requirements41. original country of registration. For example, in
Mozambique, license fees for foreign vessels were made
Operational reasons, such as access to resources, can also nearly 100 times more than they were previously in an
motivate the adoption of a foreign flag in the context attempt to encourage joint venture partnerships with
of fisheries. Some coastal countries adopt policies in local companies and boost the local fishing industry44.
an attempt to generate more revenue from industrial
fishing vessels that access their waters or to encourage Beyond economic and operational incentives (e.g. access
the development of a domestic industrial fishing fleet. to resources) for the vessel owner, the desire to avoid the
For long-distance water fleets wishing to operate in burden of compliance with fisheries management rules
certain fishing grounds, the adoption of the coastal and oversight is also an important motivation to choose a
state’s flag can sometimes be a condition of access. flag other than the vessel owner’s nationality45. Stringent

14
regulatory requirements and increasing fishing
management measures are factors contributing to
the growth of the use of FoCs, to the detriment of the
marine ecosystems the management measures are
meant to protect (See section 4).

From a state point of view, whether an open register is

state-owned or franchised out to a commercial entity BOX 2 Labour and human rights abuses on
(known as “private flags”), the income brought by FoC vessels
opening the registry to foreign vessels is a compelling
rationale. Income can be raised through tonnage taxes
and registration fees or franchise and/or royalty fees Another result of registering with a flag of
amongst other schemes46. A 2002 study commissioned convenience is the potential to outsource
by the FAO demonstrated however that revenue from labour49. By "flagging out", ship owners can take
fishing vessels in 21 states operating as open registers advantage of less stringent labour regulations
was as little as 4.9% of the gross revenue from all and the freedom to employ cheap labour from the
vessels47. In 2010, Sierra Leone, which was at the time global labour market50. In practice, some vessel
operating an open register run privately in the United owners precisely choose to register in FoC states
States and had about 50 fishing vessels, reported because they will not offer effective recourse for
receiving about only $10,000 in a four year period employees with grievances. This sustains a race
from providing this service to fishing companies48. to the bottom in effective legal protection among
These figures demonstrate that the economic benefits FoC states which provides opportunities for
of running an open register are disproportionately low workers to be exploited51.
in comparison with the negative reputational costs
that can potentially incur as a result.

15
PART 2

How FoCs provide a safe haven for IUU offenders

The process of registering with a fishing FoC often secrecy of business 58. Indeed, states that operate open
entails establishing opaque corporate structures that registers are often states which are also considered as
hide ownership information. This allows beneficial tax havens. The secrecy that companies enjoy from their
owners of fishing vessels to remain hidden, and therefore business in tax havens is used primarily for reducing
unaccountable in case of illegal fishing activities. their tax payments, by transferring money among
jurisdictions to take advantage of low tax rates. Still, the
lack of transparency also enables those wishing to do
2.1 How corporate structures in FoC states are so to hide their environmentally destructive activities,
shielding the beneficial owner of illegal such as in the case of illegal fishing. This overlap between
vessels known to be operating in IUU fishing and flying
fishing activities flags of convenience from acknowledged tax havens was
demonstrated in a 2018 study which found that 70% of
The existence of flag states that have flexible the known IUU fishing vessels are, or have been, flagged
requirements for ship registration and turn a blind eye under a tax haven jurisdiction59.
to the enforcement of any nationality requirement is
legally questionable. Their legitimacy concerning the
requirement for a “genuine link” between the flag of Joint ventures used as “front” companies
registration and the vessel as required by UNCLOS has
been the subject of controversy52. Some flag states are not open registers per se but allow
foreign ownership through permitting the establishment
Moving beyond the legal debate of what constitutes a of joint ventures between national and foreign investors.
“genuine link”, it is not the practice of registering foreign- Vessels owned by joint ventures may be permitted to
owned vessels that is problematic per se. Rather, it is apply for a local fishing licence, and these arrangements
the extent to which the use of FoCs facilitates secrecy in may also qualify them to register under a local flag
beneficial vessel ownership. It is a serious problem with despite being partially or fully owned by foreign entities.
specific ramifications in the fisheries context53 as it can
prevent the identification of the beneficial owner(s) of a In theory, joint ventures with the involvement of
fishing operation, meaning ‘the natural person(s) who foreign investors are justifiable as they can allow coastal
directly or indirectly ultimately owns or controls the countries that lack capital, infrastructure and markets to
corporate entity’54 (See Box 3). In order to register to an develop their own industrial fishing industries with the
FoC, a company may establish a corporate structure to, at support of foreign funds (See section 1.4 about rationale).
least on paper, have a presence in that country to allow “Legitimate” joint ventures are common, with a genuine
for registration. This can serve to conceal the identities share of control between the local partner and the foreign
of beneficial owners, precluding detection and sanction investor with a transfer of skills and technology.
where their vessels engage in illicit activities. Opaque
ownership corporate arrangements, and the problems However, the lack of transparency has also allowed many
that they present to global fisheries management, are at fictitious joint ventures to be created whereby the local
the heart of the fisheries FoC system. partner acts only as a “front” or agent for the foreign
investor that in reality owns the company. Major economic
issues have emerged with such corporate structures, in
Open registers and shell companies particular when local partners are not treated as genuine
owners, do not receive any transfer of knowledge or
In the case of many open registers, fishing vessels are technology and are victim of financial manipulations to
registered to fictitious, or shell companies, often only avoid receiving their supposed share of genuine profits60.
nominally “located” in the FoC country that has issued
the flag55. Shares in the shell company may then be A 2015 Greenpeace report demonstrated how the state-
held by further shell companies, further concealing the owned China National Fisheries Company (CNFC) owned
identity of the real beneficial owners56. Because this 12 Senegalese-flagged vessels in Senegal by way of “joint-
opaque ownership system enables the anonymity of the venture” (Senegal Armement S.A and Senegal Pêche).
beneficial owner to be maintained, even if the flag state These vessels, allegedly by the Greenpeace report, have
concerned wanted to exercise effective control over the committed tonnage fraud61. It has been found that CNFC
vessel, or the national operating the vessel, the relevant owned 100% of the shares62, with Senegal Armement
person or company may well not be identifiable57. These being considered as a subsidiary of CNFC63.
structures are often concealed and protected, under the
law and regulations in the FoC state, which maintain the

16
CASE STUDY 1: China’s hidden fleet in Ghana

Ghana, presumably with the view to secure the financial benefits of fishing activities for Ghanaian
nationals and to ensure these benefits contribute to Ghana’s socio-economic development rather than
being sent overseas, has banned foreign ownership from its trawl sector. This restriction applies to
all local (i.e. Ghana-flagged) industrial and semi-industrial vessels, with an exception carved out for
tuna vessels. By referring to “beneficial ownership” and therefore drawing the distinction between the
registered owner and the beneficial owner, it is clear that both the spirit and letter of this provision in the
2002 Fisheries Act is to exclude foreign interests from the local industrial fleet.

The legislation should thus prohibit the use of “front” or “shell” companies that in reality are owned or
controlled by foreign interests. Such “nationality criteria”’ may also be seen as a means by which Ghana
can fulfil its flag state obligations under the UNCLOS, to ensure a “genuine link” between its territory
and vessels applying for registration. However, in practice, it has been found that interests based in the
People’s Republic of China are widespread in the Ghanaian trawl sector64.

According to available information, Chinese companies commonly operate through Ghanaian “front”
companies to import their vessels into the Ghanaian fleet register and obtain a licence to fish. On paper,
interests are entirely Ghanaian, including the Board of Directors of the registered corporate owner65. Yet
the reality is that 90-95% of the Ghanaian trawl fleet is connected to Chinese interests. Within this, it
has been identified that eight Chinese companies beneficially own around 75% of the trawl fleet66. The
arrangements established may differ between companies and vessels, but in all cases are characterised
by their opacity, shielding the foreign owner from external scrutiny. They may include hire purchase
agreements, whereby the licence holder pays part of the purchase price of the vessel upfront and the
remaining amount in instalments over a designated period of time67.

| An industrial trawler operating in Ghana's waters. The image was taken

by a local canoe fisher during a fishing trip in February 2020.
17
2.2 Failing to identify and hold to account of networks behind illegal fishing operations. Notorious
beneficial owners of IUU fishing vessels IUU offenders can assign new or fictitious individuals and
companies to “front” for them as the registered owner in
the country of registration, and continue their operations
IUU fishing operations may span continents and oceans, and evading sanction as the real beneficial owners who
involving players far removed from activities at sea. As direct and profit from these illegal activities, therefore
already discussed in section 2.1, corporate structures in undermining all efforts to combat illegal fishing.
flags of convenience often conceal the identities of true
beneficiaries. This means that in case of illegal fishing The lack of information on beneficial owners also entails
activities, beneficial owners are protected and can profit that levels of sanctions are not necessarily “relevant”.
from illegal fishing with low risk of detection. According to international law, penalties for IUU
fishing should be adequate in severity to discourage
Despite international recognition of the problem violations of fisheries rules and should deprive offenders
of hidden beneficial ownership, both domestic and of the benefits accruing from such activities69. When
international law have maintained adherence to entity considering the proportionality of sanctions for fisheries
law, meaning that each structure within the corporate offences, one should consider the means available to
group is considered a separate legal entity. But for the the entity that is effectively controlling the vessel and
purposes of IUU fishing, such doctrine protects the profiting from illegal activities. It is, therefore, crucial
parent from the liability caused by the acts and activities to identify the true actors and companies behind fishing
of the subsidiaries, therefore avoiding responsibility for activities to ensure that sanctions deter future IUU
the illegal fishing activities of their companies68. fishing offences (see Case Study 2).

Given the practical and legal challenges in identifying

the ultimate beneficial owners, fisheries enforcement has
traditionally targeted the registered owners and captains
of fishing vessels. In the long run, failing to hold to
account the recipients of profits prevents the dismantling

BOX 3 Who is the beneficial owner?

There is increasing recognition of the importance of transparency as a basis for good governance and the
sustainable use of natural resources, particularly in the extractive industries and the forestry sector.

The Extractive Industry Transparency Initiative (EiTI) is a voluntary global standard that aims to promote open
and accountable resource management in countries rich in oil, gas and mineral resources.

The 2016 EiTI Standard requires all implementing countries to establish a public beneficial ownership
disclosure regime by January 2020. The standard defines the beneficial owner of a company as “the natural
person(s) who directly or indirectly ultimately owns or controls the corporate entity”70.

The extractive industry sector has become aware of the need to identify beneficial owners decades ago.It is only
recently that similar thinking has reached the fisheries sector.

Enforcement and regulatory approaches to IUU fishing have traditionally prioritised controlling the at-sea activity
of fishing vessels. While assessing a vessel’s activity and maritime policing are critical components of addressing
IUU fishing, the operations of a vessel are ultimately directed and sustained by ownership networks onshore.
In recent years, it has become apparent that focusing on onshore ownership in addition to at-sea vessel activities
is a key step toward targeting the ultimate owners and networks behind IUU fishing71.

18
CASE STUDY 2: “ P roportionate and dissuasive sanctions” rely on identifying
the true beneficial owners – the Meng Xin case in Ghana

A recent investigation by China Dialogue72 found that 35 trawlers operating across Ghana, Sierra Leone and
Guinea are ultimately owned by a single Chinese state enterprise, Dalian Mengxin Ocean Fisheries.
Seventeen of these vessels are registered to the Ghanaian flag even though Ghana’s 2002 Fisheries Act
requires that trawlers fishing under local licences must be owned and controlled by Ghanaian nationals.
The 17 trawlers operating in Ghana are registered to nine local companies, which essentially “front” for
Dalian Mengxin. These Ghanaian companies are registered to PO boxes rather than street addresses.

The investigation found that the vessels are also registered in China, allowing them to seemingly secure
access to benefits in both countries. This can include subsidies from China - as Dalian Mengxin is classified
as a Chinese state enterprise – as well as fisheries access in Ghana thanks to their local registration.

Since 2016, the Meng Xin vessels have committed at least 16 illegal fishing offences in Ghana, including
illegal trans-shipments at sea and catching juveniles. The fines imposed ranged from GHS 3,000 (approx.
$USD 500) to GHS 500,000 (approx. $USD 85,000). The minimum fine for catching undersized fish under
Ghana’s 2014 Fisheries Amendment Act is US$1 million. This is in addition to the apparent illegality of
their ownership structure.

In Ghana, sanctions are applied only to the registered owner of the vessel, and not the beneficial owner,
which may be a much larger entity, often with the controlling interest in the vessel. As a result, sanctions
fail to have a deterrent effect, resulting in systemic illegal fishing in the trawl sector. This highlights
the need to consider the beneficial owner when determining the level of sanctions for fisheries-related
violations, to ensure they reach the true beneficiaries of illegal fishing. In a number of cases, the
Ghanaian registered owners of Meng Xin vessels have refused to pay the fines imposed yet their fishing
licences have been renewed, allowing them to continue their operations.

19
PART 3

How the FoC system lets IUU vessels off the hook through flag-hopping
IUU fishing vessels aim to create as much confusion as between “flag hopping” and IUU fishing. The IUU Vessels
possible around their identities. Through concealing their Combined list76 developed by Trygg Mat Tracking found
identity, vessels are able to escape sanctions and hide their that vessels used for illegal fishing activities with known
history of non-compliance when they apply to operate flag states had, on average, re-flagged more than three
in new areas. Examples may include hiding a history times during their lifespan. More than a quarter of the
of non-compliance to obtain a new fishing licence or to vessels were registered in five or more flag states. This
avoid blacklisting by a Regional Fisheries Management supports the view that flag-hopping is a technique used
Organisation (RFMO), or duplicating the names of vessels by ship owners and operators engaged in illegal fishing.
within a fleet to use one fishing licence for multiple
vessels to reduce costs73. Changing flags frequently ("flag-
hopping" or "abusive re-flagging") is central to this IUU
modus operandi. Through changing names and flags
Case Study 3: E nd of the road for infamous
regularly, IUU fishing vessels are able to operate under the flag-hoppers
radar and escape both detection and sanction.

This is further facilitated by the lack of transparency In April 2018, the illegal fishing vessel STS-50 was
in the global fishing sector. As only a few fishing arrested by Indonesia with support from Interpol.
vessels are mandated by their flag state to have a
Officially stateless, it had managed to evade
unique vessel identifier which stays with them from
shipyard to scrapyard, it is challenging to keep track of authorities by flying eight different flags (including
these identity changes. The lack of publicly accessible Sierra Leone, Togo, Cambodia, the Republic of
information on vessel information (under the format Korea, Japan, Micronesia and Namibia)77. Its sister
of vessel registry or licence lists) and history of non- vessel, the fishing vessel M/V Nika, was arrested
compliance (in the format of IUU blacklists or lists of in July 2019 for illegal fishing operations. Since
sanctions) also frustrates attempts to verify a vessel’s
2006, M/V Nika has changed its flag seven times78.
identity and its history of non-compliance74.
Both vessels are beneficially owned by a Russian
It is therefore common for identified IUU fishing vessels company, operated from South Korea, but with
to have a track record of identity changes, facilitated registered owners in Belize and the Marshalls
by FoCs which often have relatively easy registration Islands respectively79.
processes for foreign vessels. A 2016 analysis by the
Nordic Council of Ministers75 found a strong correlation

April 2017 February 2018 September 2019

Wisdom Sea
Reefer timeline

Illegal trans-shipment Fine of $50,000 Vessel arrest

Beneficial ownership P.K. Shipping and Agency Co. Ltd

Vichai Sangsukiam Vichai Sangsukiam Unknown (Thailand)

Registered ownership Wisdom Sea Reefer Line S.A Wisdom Sea Reefer Line S.A Marine Honor S.A. P.K. Shipping and Agency Co. Ltd
(Panama) (Panama) (Belize) (Thailand)

Vessel name Wisdom sea reefer Renown reefer Honor Uthaiwan

Flag Honduras Bolivia Moldova Cameroon

20
CASE STUDY 4: Fleeing the law – the case of the Wisdom Sea Reefer

In April 2017, the fish carrier Wisdom Sea Reefer was sighted engaging in an at-sea trans-shipment in
contravention of the rules adopted by the Indian Ocean Tuna Commission (IOTC)80. At the time of the sighting,
it was flying the flag of Honduras and purportedly owned by Wisdom Sea Reefer Line S.A. a Panama-based
company linked to Thai nationals81.

Honduras promptly initiated legal proceedings to sanction the vessel. While these were ongoing, the
Wisdom Sea Reefer succeeded, while still flagged to Honduras, in obtaining the nationality of Bolivia under
the name of Renown Reefer. ITF lists Bolivia as an FoC82. The sanctioning process was concluded in February
2018 with the vessel being fined US$ 50,000. The Honduran authorities also decided not to renew the
vessel’s shipping licence and not to issue any deletion certificate to the vessel before the fine was fully paid83.
However, the fish carrier was still at large, with Honduras calling on other countries to cooperate to allow for
effective enforcement.

It took more than a year and a half until Honduras’ request was fulfilled. On 13 September 2019, Thai authorities
successfully arrested the vessel off of Phuket84. The ship’s identity had changed again. It was intercepted under
the name of Uthaiwan, flying the flag of Cameroon and owned by a Thai company, P.K. Shipping and Agency
Co. Ltd.,85 whose owners claimed they were not aware of the ship’s history of non-compliance and bought it for
scrapping86. Between the conclusion of sanctioning and arrest, authorities found that the vessel continued to
"flag-hop", also flying the flag of Moldova, another FoC according to ITF, under the name Honor. It also changed
ownership to a company incorporated in Belize, Marine Honor S.A.87.

According to the information available, the ship is now to be scrapped. However, a letter sent by the Honduran
authorities to authorities in Cameroon in November 2019 highlighted that the fine imposed on the vessel was
still outstanding, together with US$ 5,495 of unpaid taxes88. As the Panama-based company Wisdom Sea Reefer
Line S.A. was dissolved and the company incorporated in Belize turned inactive89, it required tremendous effort
on the part of the Honduran authorities and over two years to collect these outstanding amounts90.

Through "flag-hopping" from one FoC to another, countless changes in names and corporate structures, the
Wisdom Sea Reefer, its operators, owners and beneficiaries found an escape route and successfully escaped
Honduran sanctions for years.

21
 CASE STUDY 5: How transparency can combat FoC systems – The Mahawa case

In November 2018, EJF investigated the fishing vessel Mahawa, a 135 gross tonne trawler, operated by a
Korean-owned company based in Sierra Leone but believed to be Guinean-flagged.

After being alerted by EJF, the Guinean authorities called the vessel back to port to investigate its activities.
­­By sharing information with Sierra Leonean counterparts, they discovered that the vessel was operating
under both Guinean and Sierra Leonean flags, which is illegal under international maritime law91. As a
result, Mahawa’s owners were sanctioned by the Guinean government.

Mahawa’s story demonstrates how illegal operators use the lack of transparency in the fishing industry to
their own ends. Had both countries’ fishing vessel registries been public, the double-flagging could have been
revealed sooner by cross-checking registries. Given that the vessel is eligible for an International Maritime
Organization (IMO) number, had Sierra Leone or Guinea made IMO numbers mandatory and added their fleet
to the UN Global Record of Fishing Vessels, the vessel’s flag could have been verified with the click of a mouse.

In early 2020, fishers in Sierra Leone again documented Mahawa operating illegally in inshore areas, as well
as covering its markings. At the time of writing, the vessel is reportedly flagged to Sierra Leone.

Photograph of the Mahawa taken in the waters of Sierra Leone.

Vessels may also change flag repeatedly to avoid such as the EU and Korea, have adopted measures to
the consequences of violations of conservation and sanction nationals involved in IUU fishing, regardless of
management measures committed under a previous flag. the flag, this is relatively uncommon93. In many cases, the
The principle of exclusive jurisdiction of the flag state flag states will have sole jurisdiction to sanction vessels
over their vessels as set out in international maritime law for illegal fishing activities. FoCs essentially provide a
renders it difficult to take actions against vessels that are safe haven for these vessels and allow beneficial owners
involved in IUU fishing if the newly adopted flag state is of IUU vessels to go unpunished and continue their
unwilling or unable to act92. Although some regulators, illegal activities.

22
CASE STUDY 6: Flag-hopping to avoid detection

In October 2019, EJF identified two suspicious vessels in Chittagong, Bangladesh. These vessels, named Sea
View and Sea Wind, had entered Chittagong port a month and a half before, flying the flag of Cameroon.

Photo comparisons demonstrated that they were in fact vessels that had been added to the IUU vessel list
of the (IOTC) in May 2018 for having engaged in activities contravening the conservation and management
measures adopted by this RFMO94. These activities took place in spring 2017 off the coast of Somalia where
the vessels are also suspected to have engaged in human trafficking95.

Like other IUU vessels, the Sea View and Sea Wind have a long history of flag-hopping. In recent years, they
changed flags at least four times: from Thailand, to Djibouti, to Somalia, and finally Cameroon, and a period
when their nationality could not be established. Name changes generally accompanied these operations96,97.

The confusion surrounding the two vessels’ identities and activities is an important factor in creating the
conditions for them to be able to operate under the radar while being wanted by many, including through
INTERPOL98. This certainly helped them to access Chittagong port while Bangladesh, as a party to the FAO
Agreement on Port State Measures99 and the IOTC100, could have refused them entry into any of its ports.

Photograph of the Sea Wind (under one of its former names) taken on 4 March 2017 in the EEZ of Somalia.
Credit: European Union via Indian Ocean Tuna Commission.

23
PART 4

How the FoC system perpetuates IUU fishing

Due to the FoC system, unscrupulous operators are Even if the flag state has the capacity and does exercise
able to make strategic decisions about their flag of effective control and jurisdiction over the operation
registration through flag-hopping. In doing so, they are of the ship, it has been argued that there is the need
likely to choose a flag that would allow them to avoid to reinforce the safety net from the ownership and
scrutiny as far as possible and offer the most competitive registration point of view. As discussed in section 2, the
advantages. A 2020 study found that “desirable flags” various mechanisms and corporate devices that enable
are flags of countries that are largely non-cooperative the identity of beneficial ship owners to remain hidden,
with international efforts to sustainably manage shared do not act as a deterrent against IUU fishing. Had criteria
fish stocks and prevent IUU fishing, regardless of their been pre-set regarding accountability and identification
ratification of major international agreements101. For of vessel operators and beneficial owners, the probability
many countries operating as FoCs, their registry is of the risk of unlawful intention associated with the use
operating in a manner akin to a commercial enterprise. of ships (such as IUU fishing) would have lessened107.
Such states could become incentivised to be as Recent studies have found that IUU fishing operators will
permissive as possible to attract customers. therefore tend to choose a flag state that protects their
privacy and cater to anonymous ownership108.
If a fishing vessel operator has consciously chosen to
register under a foreign flag to avoid rules and oversight,
this strategy is likely to facilitate unsustainable or illegal
fishing activities102. It is very attractive for IUU fishing
operators that would otherwise have to comply with Box 4 FoC states at the heart of the EU’s
such measures to opt for an FoC state that lacks the will combat against IUU fishing
or ability to ensure that their vessels act lawfully103.

The link between IUU fishing activities enabled To counteract the lucrative illicit trade of IUU
by poor flag state control and FoCs has been fishing products, the EU IUU Regulation entered
demonstrated for decades. While some states that into force in 2010 to establish an EU-wide system
operate open registers have taken positive steps to to prevent, deter and eliminate the import of
fulfil their international responsibilities, the majority IUU fishery products into the EU market. The
of open registry states are not bound by the many Regulation enables the European Commission
international instruments that require the exercise to enter into dialogue with non-EU countries
of flag state control over fishing vessels, nor do they that are assessed as not combating IUU fishing
exercise flag state control voluntarily104. A 2014 study in accordance with their obligations under
examining the variations in flag use between a subset international law and underperforming as a flag,
of IUU fishing vessels and the global fleet of fishing coastal, port and market states109. If these countries
vessels, found that IUU vessels were more prominent fail to put in place required reforms in a timely
amongst FoC flags. These flags states also exhibited manner, the EU can impose sanctions, including a
consistent patterns of failure in compliance with ban on the import of their fisheries products into
international obligations (FoNCs)105. Often, these are its market. Out of the six states that are, or formerly
the same - to the extent that in the fisheries sector, the were, designated by the EU as non-cooperating
difference between the terms FoCs and FoNCs have the fight against IUU fishing (also known as
somehow become blurred (see section 1.2). ‘red-carded’), ITF lists five as FoC states (Belize,
Cambodia, Comoros, Sri Lanka and Saint Vincent
In addition, many flag states that operate as FoCs are and the Grenadines).
developing countries that have low MCS capacity and
weak enforcement infrastructure. Besides the secrecy
offered by FoCs, the lack of enforcement capabilities
in such flags provides further opportunities for
unscrupulous vessels to fish illegally with a low risk of
being detected106.

Beyond poor flag state control, the willingness

(or in some cases, laxness) of FoCs to open their registry
to foreign-owned vessels seriously questions their
determination to address IUU fishing.

24
CASE STUDY 7: Are “private flags” even able to sanction IUU vessels? The case of Liberia

In some cases, flag states operating as open registers outsource the management of their registries to
private companies (known as ‘private flags’). These companies are often located in a different country
from the flag state. Such arrangements cast doubt on the very notion that the flag state would be able to
exercise their flag state duties over the vessels in question. In addition to helping vessel owners remain
anonymous, it was found that the ship register does not always provide the flag state administration with
continuously updated information on the vessels it has on its register110. This means that it will be difficult
for law enforcement officers in these flag states to exercise effective control over vessels as they may not
know which vessels are flying the flag state’s flag, where the vessels are, or who owns or controls them111.
In addition, private flags, as a for-profit business, will tend to register large foreign-owned fleets without
ensuring the country has the requisite resources and expertise to exercise their due diligence obligation
over the fleet effectively.

This is the case in Liberia, a West-African coastal country that is the third-largest ship registry in the
world112. The European Commission, in its decision to warn Liberia that it may face sanctions if not more
cooperative in the fight against IUU fishing, seriously questioned Liberia’s ability to monitor its vessels
operating in external waters (See box 4).

The European Commission highlighted in its decision that the Liberian national authority in charge of
vessel registration consults with the fisheries officials about the record of new fishing vessels that will
operate in national waters. However, the entity in charge of the international vessel registry (Liberian
Maritime Authority) did not consult the national fisheries authorities before registering any fishing vessel
which will operate outside Liberian waters. National fisheries authorities did not have any information
on Liberian fishing vessels operating beyond Liberian waters, nor did they monitor or control the 100
Liberian flagged fishing vessels (mostly fish carriers) operating beyond the Exclusive Economic Zone (EEZ).
The apparent lack of cooperation between the Liberian Maritime Authority and the national fish­eries
authorities was considered to compromise Liberia’s ability to monitor the activi­ties of its fleet, potentially
allowing illegal operators to use the flag of Liberia without fear of sanction113. The IUU Fishing Index found
Liberia to be the 7th “worst flag State”, having failed to ratify the FAO Compliance Agreement, being non-
Compliant with RFMO flag state obligations and vulnerable to IUU fishing among its fleet due to the size of
it fleet operating beyond national waters and in RFMOs114.

At the time of writing, we estimate that the fleet of fishing-related vessels of Liberia has decreased to 20.
This estimate is made based on information published by RFMOs as Liberia has not entered its fleet data
in the FAO Global Record of Fishing Vessels, Refrigerated Transport Vessels and Supply Vessels. Although
the fleet has decreased in size since the EU’s warning, all remaining fishing-related vessels seem directly
or indirectly connected to owners and operators located outside Liberia. This indicates that Liberia has
not fully departed from its open registry policy. In addition to these 20 fishing-related vessels, two purse
seiners entered the Liberian fleet at the end of 2019. These two fishing vessels, the Liberty Grace and
Liberty Queen share the same registered owner and operator, which is a legal person located in Liberia.
Nonetheless, further investigation suggests there may be foreign ownership interests in these purse
seiners, with potential links identified to South Korean interests through a Ghanaian natural person.

25
FoCs, therefore, undermine efforts by states working BOX 6 How to detect FoC vessels?
to stop illegal fishing by providing an escape route to
unscrupulous operators. For example, if a previously States face regular situations where they need to
non-compliant flag state decides to clean and reform assess fishing vessels information: for example
its register to improve compliance, it may inadvertently when a fishing vessel applies for registration and a
export the problem, as the vessel concerned can licence to fish, or when deciding whether or not to
simply find a new, less responsible flag state115. Thus, inspect a vessel according to a risk-based approach.
this requires to be collectively, and in a coordinated In determining whether a vessel is an FoC vessel,
way, addressed by the international community at the and therefore higher-risk, authorities can take into
instigation of responsible fishing players - be they flag, account the following criteria:
coastal, port or market states.
• Impossibility to identify with certainty the
beneficial owner

• Natural and legal persons involved in the

BOX 5 Ending abusive re-flagging management of the vessel are based in different
countries
The European Union has adopted new
measures116 to stop “abusive reflagging”, as it • The registered owner resides in a country
was found that some European vessels would considered a tax haven and/or a secrecy
deregister from European flags and adopt jurisdiction
foreign flags to circumvent conservation and
management rules, such as quota117. Essentially, • The address of the company is a PO box
the EU’s new rule means that non-compliant
vessels that have a history of flag-hopping are no • The flag state documentation has been issued in a
longer able to re-register with a European flag. different country and/or by a commercial entity
Such a measure is positive for the reforming flag
state that is essentially deterring “flag-hopping” • The vessel has a history of abusive re-flagging
and preventing potential IUU vessels from
re-entering their register. It is also favourable • Nationalities of the crew onboard the ship,
for legitimate fishers in the same registry who especially the officers in command and the fishing
face unfair competition from other vessels master, are different from those of the persons
circumventing the “burden of compliance” and operating and managing the vessel
limits on fishing.

26
CASE STUDY 8: How the Korean clampdown has pushed vessels to re-flag

South Korea has one of the world’s largest distant water fishing fleets. In late 2013, the European
Commission issued a formal warning (‘yellow card’) to Korea after numerous reports of IUU fishing
by its distant water fleet (see box 4). In the years following the EU warning, Korea began dramatically
strengthening control of vessels operating under the Korean flag, resulting in a significant number of
unscrupulous operators leaving the Korean registry.

For instance, in 2014 EJF documented a fleet of four Korean-flagged trawlers (Butiyalo One, Butiyalo Two,
Haysimo One and Haysimo Two) apparently fishing without a valid licence in Somali waters. They had been
operating off the coast of the state of Puntland in apparent breach of the Somali Fisheries Law (number 29)118,
as later confirmed by the Federal Somali and Puntland Government119.

In line with its new approach to fisheries management, Korea took action against the vessels and denied
them the authority to export their catch. In response, rather than reforming their behaviour, the four vessels
left the Korean registry and changed their names. In early 2015, they claimed to have changed their flags to
Somalia. They were later joined by another vessel, the Butiyalo Three, while the Haysimo One was observed
sinking in the Gulf of Aden120.

According to the database Sea-Web, the registered owner of Butiyalo Three, Butiyalo One, Butiyalo Two and
Haysimo Two is the Somali company North East Fishing Co., which is one of the subsidiaries of Al Jubail
Group in the United Arab Emirates121. The latter three vessels are owned by Al Jubail Group and operated
by Al Kaus Overseas Trading LLC since March 2015. Butiyalo Three was purchased by Al Jubail Group in
March 2018 and has been operated by Al Kaus Overseas Trading LLC since. A Korean national allegedly owns
the latter company122. In September 2019, EJF documented Butiyalo Three operating in Puntland inshore
areas, as close as 0.3 nautical miles from shore. At the time of writing, the vessels are believed to continue
operating off the coast of Somalia and reportedly still flying the flag of Somalia123.

27
Conclusion
Our oceans are under threat. Over-fishing has driven
many fish stocks to the brink, and some to total
collapse. IUU fishing is a key cause of this. The endemic
lack of transparency in the fisheries sector has been
identified as one of the most important enablers of
illegal fishing. Tackling IUU fishing requires a broad
portfolio of measures which prioritize increasing
transparency, including through improving means to
identify and hold to account IUU offenders and the
networks behind illegal fishing operations.

Efforts to increase transparency are frustrated by

FoCs because they allow the “beneficial ownership
and control of a vessel to be elsewhere than in
the country of the flag the vessel is flying”. Often
using opaque corporate structures, FoCs hinder
the sanctioning of the true recipient of profit from
illicit fishing activities, and allows them to continue
"business as usual". As a network of flags, the FoC
system enables IUU operators to re-flag and escape
detection and sanctions. In the global fight against
IUU fishing, these flag states frustrate the efforts of
reforming flag states by providing an escape route
for IUU vessels and by often refusing to adhere to
international efforts to manage shared fish stocks
and prevent IUU fishing.

The world needs sustainable, legal and ethical

fisheries management more than ever. Fishing
FoCs undermine efforts to achieve this. Ultimately,
their use must end. There are realistic and
straightforward steps that states can take to address
the disproportionate, negative impact of FoCs on
global fisheries. The recommendations set out in
this report are designed to do that.

28
 Recommendations
Examples of best practice in fisheries governance targeting flags of convenience (non-exhaustive)

European Union Republic of Korea

Requests a record of Adopted sanctions against
compliance with applicable nationals responsible for,
USA benefiting from, supporting or
laws for all vessels applying for
Shares information on its a fishing authorisation after engaging in IUU fishing under
distant water fleet through the re-entering a flag state registry a third country flag in order to
FAO Global Record of Fishing to combat abusive reflagging. circumvent the protection
Vessels, Refrigerated Transport provided by FoCs to IUU vessel
Vessels and Supply Vessels. owners.

Taiwan
Maintains and publishes
a list of vessels
Honduras authorised to fish,
Refrains from issuing including include
Thailand foreign-flagged vessels
deletion certificates to Guinea Maintains and publishes
vessels which have failed to owned by Taiwanese
Acceded to the FAO Port an up-to-date list of vessels
settle all fines and liabilities. nationals.
State Measures Agreement. that have deflagged to
other nations.

Chile
Shares VMS data with
public platform Global
Fishing Watch.

Ultimately, all flags operating as FoCs should

Damages caused by the FoC system and the lack of remove foreign-owned fishing vessels and fish
accountability that it creates for vessel owners have
carriers altogether from their registry.
been debated in the fisheries sector for decades.
Ultimately, the Environmental Justice Foundation’s
(EJF) strong view is that all flags operating as FoCs
should remove foreign-owned fishing vessels and fish
carriers altogether from their registry.

For many states operating as FoCs, this change will

not happen overnight and in the meantime, EJF
recommends that all flag states (regardless whether or
not they operate as FoCs) have systems in place to be
able to identify vessels’ beneficial owners and enable
owners to be held accountable in the case of IUU
fishing or other offences that require sanctions. These
should be adopted alongside measures designed to
improve control over fishing vessels and strengthen
fisheries legal framework.

Crew member holding the Panama flag of fishing vessel Isabel.

29
 All flag states should: Coastal, port and market states should:

adopt the following operational measures: • Coastal states should require details on the
ownership systems behind vessels when reviewing
• Require from all vessels registered, and as part of fishing licence/authorisation applications. When
all applications for entering the fleet register, detail it cannot be established with certainty who the
on ownership arrangements and records on the beneficial owner is, these organisations should
destination of profits from fishing activities. Unless refrain from licensing those vessels (See potential
there can be a clear assurance that a vessel’s beneficial risk criteria in box 6).
owner can be identified and held to account if needed,
the flag state should remove the vessel from their • Port states should accede to the FAO Port State
registry or refuse registration. Measures Agreement and, in determining which
vessels to inspect, also consider as ‘higher risk’
• Carry out background checks on any person or vessels flying the flag of fishing FoC states or
company forming a new, or taking over an existing, connected to opaque ownership systems
corporate entity and that any proposed change to (See potential risk criteria in box 6).
existing ownership arrangements is immediately
notified to the flag state. • Market states should establish trade-related
measures requiring that imported seafood is caught
• Ensure that agencies responsible for flagging vessels and transported by vessels flagged to states that
and fisheries management work in close cooperation implement their obligations under international
and that fisheries managers have substantive input on law; if need be, by closing their market to products
decisions on whether or not to flag a fishing vessel. stemming from countries, including fishing FoCs,
that are not taking measures to ensure that the
• Ensure that fisheries authorities and ship registration vessels they flag do not engage in IUU fishing.
authorities from the former and the applicant flag
state cooperate and exchange vessel information for
any vessel before entrance into the fleet. Refrain from
issuing deletion certificates to vessels which have
failed to settle all fines and liabilities. Applicant flag
states shall refuse applications of such vessels.

• Request a record of compliance with applicable laws

for all vessels wishing to re-enter a flag state registry
and scrutinise vessels with a history of flag-hopping
to combat abusive reflagging.

publish online the following information:

• List of vessels registered to their flag and make

the relevant information available through the
FAO Global Record of Fishing Vessels, Refrigerated
Transport Vessels and Supply Vessels (‘FAO Global
Record’), mandating IMO numbers for all eligible
vessels and national unique vessel identifiers for all
other vessels.

• Information on foreign-flagged vessels owned by

their nationals and vessels that have de-flagged to
other nations.

30
 All states should ensure that they:

• Amend domestic corporate regulations to These measures, applied in addition to policies designed
strengthen legal provisions on beneficial ownership to improve flag state performance and increase
through the inclusion of minimum disclosure transparency, would level the disproportionate, negative
requirements. impact of the FoC system. Alongside this, the catching
sector, importers, processors and retailers should:
• Adopt policies to require nationals to disclose
beneficial interests in foreign flagged vessels in • Set a near-term objective to refrain from purchasing
order to map where their nationals have registered seafood transported by or caught by vessels flagged
the vessels they own and/or operate under FoCs. to fishing FoCs, sourcing and marketing fishery
products stemming from such countries and widely
• Adopt and implement sanctions against nationals communicate this action to all actors across seafood
responsible for, benefiting from, supporting or supply chains.
engaging in IUU fishing under a third country flag
to circumvent the protection provided by FoCs to • In the interim, evaluate and report on the exposure
IUU fishing vessel owners. of fishing FoCs to their seafood supply chains,
taking account of the identification of such states by
• Table and support ambitious proposals in Regional NGOs, the EU carding scheme and the International
Fisheries Management Organisations and other Transport Workers’ Federation. In risk assessment
regional fishery bodies, aiming at increasing exercises, assign high levels of risk to supply chains
transparency over beneficial ownership. that have FoCs and take mitigating measures, such as
additional audits.
• Join forces at the global or regional level to carry
out coordinated law enforcement actions targeting All actors, governmental and corporate, should support
high-risk vessels with support from relevant greater transparency in the global fisheries sector by
organisations such as INTERPOL. adopting EJF’s Charter for Transparency (See page 32).
The charter includes EJF’s 10 transparency principles
and commits corporate actors to introduce due diligence
measures designed to reduce the risk of supplying
seafood that is not legal, ethical and sustainable.

31
Global transparency principles
EJF’s ten principles for states to adopt are:

• Immediately mandate IMO numbers for all eligible crew documentation. These should be designed in such
vessels and implement a national UVI scheme for a way as to support a rapid move towards a universal,
non-eligible vessels, maintaining a vessel registry and interoperable digital catch certification scheme.
providing all information to the FAO Global Record of
Fishing Vessels (which ultimately includes all eligible • Publish information about beneficial ownership
vessels over 12 metres length overall). in all public lists and require companies to provide
information on the true beneficial ownership when
• Require AIS for fishing vessels and/or make unedited applying for a fishing licence, fishing authorisation
VMS data public with regular transmission intervals or registration to their flag.
sufficient to ensure vessels can be permanently tracked.
• Include provisions in legislation to identify where
•P
 ublish up-to-date lists of all fishing licences, nationals are supporting, engaging in or profiting from
authorisations and vessel registries. IUU fishing, and implement deterrent sanctions against
them. This effort can be aided by a register of vessels
• Publish information about arrests and sanctions owned by nationals but flagged to other countries.
imposed on individuals and companies for IUU fishing
activities, human trafficking and other related crimes. • Adopt international measures that set clear standards
for fisheries vessels and the trade in fisheries products,
• Implement a ban on trans-shipments at sea unless they including the FAO Port State Measures Agreement, the
are pre-authorised and are subject to robust, verifiable, ILO Work in Fishing Convention (C188) and the IMO
human and electronic monitoring. Cape Town Agreement.

• Close open registries to fishing vessels and stop the use These principles are primarily for states to implement,
of flags of convenience by vessels fishing in their waters with the support, where relevant, of other stakeholders.
or importing to their markets. They complement efforts needed in the private sector
to increase due diligence throughout supply chains to
• Mandate and implement the near-term adoption of identify and mitigate the risk of supplying illegal or
cost-effective digital tools that safeguard in a digital unethical seafood to consumers. Through changing
form key information on vessel registration, licenses, the opaque environment in which IUU fishing is able to
unloading records, catch location and information and thrive, we have a chance to advance sustainable, legal,
and ethical global fisheries.

32
33
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11 Agnew DJ, Pearce J, Pramod G, Peatman T, Watson R, Beddington JR, et al.
8597X19306372?dgcid=coauthor
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46 Swan, J., (2002), FAO Fisheries Circular No. 980 FIPP/C980 , Fishing vessels
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operating under open registers and the exercise of flag state responsibility, Rome,
12 Stop Illegal Fishing (2017), Illegal Fishing? Evidence and Analysis. Gaborone,
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47 Ibid.
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48 Reuters, 28.10.2010, Sierra Leone ends flag of convenience for fishing vessels,
13 Haenlein, C. (2017), Below the surface: How illegal, unreported and unregulated
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49 Gregory, W., (2012), Flag of convenience: the development of open registries
14 Article III FAO Compliance Agreement; Article 19, 1995 UN Fish Stocks
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16 Article 90/91(1), 1982 UN Convention on the Law of the Sea
50 International Transport Workers Federation, Flag of Convenience, accessed on
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18 Goodman, C., (2009), The Regime for Flag State Responsibility in International
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52 Hosanee, N., (2009), A critical analysis of flag state duties as laid down under
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53 Goodman, C., (2009), The Regime for Flag State Responsibility in International
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21 Goodman, C., (2009), The Regime for Flag State Responsibility in International
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54 Extractive Industry Transparency Initiative (EiTI), Beneficial Ownership –
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28 Miller, D., Sumaila, R.,(2014), Flag use behavior and IUU activity within the
law.uq.edu.au/journals/index.php/maritimejournal/article/viewFile/115/153
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Red Herrings: Flags of Convenience and the Impact on Fisheries Crime Law
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29 Ibid
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30 Hosanee, N., (2008), A Critical Analysis of Flag State Duties Laid Down Under
59 Galaz et al. (2018), Tax havens and global environmental degradation, Nature
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31 Miller, D., Sumaila, R.,(2014), Flag use behavior and IUU activity within the
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63 Fish Information & Services, CNFC China National Fisheries Corporation -
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64 EJF (2018), China’s Hidden fleet in West Africa, https://ejfoundation.org/
science/article/pii/S0308597X13001930
resources/downloads/China-hidden-fleet-West-Africa-final.pdf
35 Estimates based on RFMO vessel lists and countries’ publicly available vessel lists

34
65 This has been confirmed by EJF through a request for company information https://www.iuu-vessels.org/Vessel/GetVessel/cfa1bbe6-d353-496b-b014-
from the Registrar General’s Department. 746e96516a77
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67 Ghana Fisheries Commission, pers. comm. to EJF, April 2018. In some cases, https://www.iuu-vessels.org/Vessel/GetVessel/ac9194d0-1747-44dd-9526-
questions have been raised regarding the validity of hire purchase agreements, be241fb673da
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of the type in Ghana’s fleet registry have a maximum life span of around 25 years. brink’, accessed 20.4.2020, https://www.bbc.com/news/world-asia-52227735
68 Griggs, L., Lugten, G. (2007), Veil over the nets (unravelling corporate liability
99 Food and Agriculture Organization, ‘Agreement on Port State Measures to
for IUU fishing offences), Marine Policy, Volume 31, https://www.sciencedirect.com/
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69 Article 217, 1982 UN Convention on the Law of the Sea; Article 19, 1995 UN Fish
Stocks Agreement; Article 21, 2001 International Plan of Action to Prevent, Deter 100 Indian Ocean Tuna Commission, ‘Resolution 18/03 on establishing a list of
and Eliminate IUU Fishing; Article III 1993 FAO Compliance Agreement. vessels presumed to have carried out illegal, unreported and unregulated fishing
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73 Stop Illegal Fishing (2017), Illegal Fishing? Evidence and Analysis. Gaborone, https://rusi.org/sites/default/files/201707_rusi_below_the_surface_haenlein.pdf
Bostwana, https://stopillegalfishing.com/wp-content/uploads/2017/03/Illegal- 104 Swan, J., (2002), FAO Fisheries Circular No. 980 FIPP/C980 , Fishing vessels
Fishing-Evidence-and-Analysis-WEB.pdf
operating under open registers and the exercise of flag state responsibility, Rome,
74 EJF (2018), Out of the shadows: improving transparency in global fisheries
Italy, http://www.fao.org/3/a-y3824e.pdf
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105 Miller, D., Sumaila, R.,(2014), Flag use behavior and IUU activity within the
resources/downloads/Transparency-report-final.pdf
75 North Atlantic Fisheries Intelligence Group and INTERPOL (2017), Chasing international fishing fleet: Refining definitions and identifying areas of concern,
Red Herrings: Flags of Convenience and the Impact on Fisheries Crime Law Marine Policy, Elsevier, vol. 44(C), pp. 204-211, http://www.sciencedirect.com/
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