Does a Ship’s Flag Matter?

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Does a Ship’s Flag Matter?

The container ship that collided with the Francis Scott Key Bridge flew a Singaporean flag, but this is unlikely to play much of a role in the complex legal case to come.

Does a Ship’s Flag Matter?

Wreckage of the Francis Scott Key Bridge rests on the container ship Dali, in Baltimore, United States, Sunday, March 31, 2024.

Credit: AP Photo/Julia Nikhinson

Maritime law is fascinating, yet also exceedingly complex.

The recent collision of a Singaporean-flagged ship with a bridge in Baltimore demonstrates just some of its complexities, and the case looks likely to be one that will take years to resolve.

First, to the background of the incident.

While it is still early, and an investigation is ongoing, it appears that the cargo ship named Dali lost power and was unable to avoid crashing into a pillar of the Francis Scott Key Bridge, catching fire as it did so. The collision, which took place in the early hours of the morning on March 26, is thought to have killed at least seven people working on the bridge, and collapsed the majority of the structure.

In the wake of the devastation, much has been made of the fact that Dali flew a Singaporean flag – the implication being that the collision has precipitated an international incident between the U.S. and Singapore.

But what does a ship’s flag actually mean?

Put simply, flagging a ship is a procedural act as, by law, all merchant ships must be registered to a state, and must also fly its flag to identify the ship’s registry.

This also means that the ship must adhere to the maritime laws of that state while at sea and, in open seas, a ship’s flag can be used to establish legal jurisdiction if something goes wrong.

In the case of the Dali however, it was not sailing the high seas when the crash happened, but was in U.S. waters and therefore under the jurisdiction of the American authorities.

In addition to pointing towards legal jurisdiction in a maritime case, flagging a ship also means that it has access to tax breaks, certification, and security measures from the state in which it is registered. This practice has its own term, “flag of convenience,” or choosing a flag (state) that allows an easy registration process and other attractive benefits rather than registering the ship in the country of its owner.

To that end, most merchant ships are registered in only a handful of countries, with the top eight flag states for 2023 listed as Panama, Liberia, the Marshall Islands, Hong Kong, Singapore, China, Malta, and the Bahamas, although there is some debate about whether Singapore is considered a flag of convenience due to the country’s high safety standards.

Regardless of its flag, of more importance in the Dali case is who actually owned the ship, because it is the ship’s owners who will be liable for damages.

A ship’s owner does not have to be of the same nationality or even in the same country as the ship’s registry, and even the use of the term “owners” of a ship can be complicated. While often the “legal owner” of a vessel is considered its registered owner, this is not the same as its “beneficial owner,” who ultimately owns the legal entity that owns the ship.

In the case of the Dali, while it is registered to a company named Grace Ocean Private based in Singapore, that company is in turn owned by a Hong Kong-based group.

That is still not the end of the story.

Ships have liability insurance and, in the Dali case, that insurance comes from Britannia Protection and Indemnity Club, based in London.

None of this is unusual.

One retired maritime lawyer I spoke to when writing this column recalled a similar incident in Indonesia in the 1970s. That case involved a tanker collision in the Palembang channel in West Sumatra, which caused some environmental pollution of the port due to oil spillage.

The respective ships involved in the collision had Liberian and Panamanian flags (see above for the most common flag states) and Greek beneficial owners. As with the Dali, the ship’s insurance was based in the United Kingdom, and English jurisdiction had been agreed upon for ship damage claims.

In the end, Liberia, Panama, and Greece were not involved in the case, and the liability insurers paid Indonesia for pollution of the port and cargo loss.

Undoubtedly, in the case of the Dali, there will be a huge insurance claim, encompassing bridge wreckage removal and rebuild, the loss of life in the U.S. (which is expensive), and the cost to shipping unable to leave Baltimore.

All of this will likely take years to resolve, but the crux of the case is likely to be more about the insurers, the beneficial owners of Dali, and the U.S. authorities, and less about the crimson and white Singaporean flag under which the stricken ship sailed.