12.1 How maritime regulation affects maritime economics
Shipowners, like most businessmen, find that regulation often conflicts with their
efforts to earn a reasonable return on their investment. When Captain Plimsoll
first started his campaign against the notorious ‘coffin ships’ in the 1870s, British
shipowners argued that the imposition of loadlines would put them at an unfair
competitive advantage. Fayle observes that:
In their efforts to raise both the standard of safety and the standard of working
conditions afloat, the Board of Trade frequently found themselves, during the
last quarter of the nineteenth century, at loggerheads with the shipowners. They
were accused of cramping the development of the industry by laying down hardand-
fast rules which in effect punished the whole of the industry for the sins of a
small minority, and hampering British shipping in international competition, by
imposing restrictions from which foreign ships were free, even in British ports.1
The same, sometimes legitimate, resistance to regulation is found in most industries,
but the world’s oceans provide the shipping industry with an unrivalled opportunity to
bypass the clutches of regulators and thereby gain an economic advantage. The goal of
maritime regulators is to close the net. As a result, in the last 50 years the regulatory
regime has become a central factor in the economics of the shipping market.
It would, however, be wrong to think that the regulatory process is just concerned
with pursuing villains. A few regulations are made in response to particular incidents.
The Titanic, the Torrey Canyon, the Herald of Free Enterprise and the Exxon
Valdez all provoked a public outcry which led to new regulations. However these
are the exceptions. Over the last century the shipping industry and the maritime
states have evolved a complex regulatory system which impacts on all aspects of
the economics of operating ships. The design of the ship, maintenance standards,
crewing costs, operating standards, company overheads, taxation, commercial
confidentiality, pollution liability, and cartels are all subject to regulation. As we
shall see in the course of this chapter, there are many more examples. Thus a
knowledge of maritime regulation has become an essential part of the maritime
economist’s toolkit.
The aim of this chapter is to discuss the international regulatory framework of
maritime economics and the legal and political issues that have influenced, and in
some cases dominated, the maritime scene since the mid-1960s. The chapter seeks
to answer three questions:
1 Who regulates shipping and commerce?
2 What do they regulate?
3 How do regulations affect shipping economics?
The intention is simply to gain an understanding of the areas of shipping which
these regulations affect, and the general procedures by which they are made and
changed. We also address the question of ownership of the world fleet and the
major issue of flags of registration.