Decline in Swiss Flag registrations could be a warning to other established jurisdictions

The seemingly inexorable growth in nations whose link to the companies operating the vessels is geographically tenuous at best looks to be threatening the existence of one such flag.

International trade union Nautilus International and the Swiss Shipowners Association have urged the Swiss government to take action to preserve the Swiss flag in shipping. The duo have rejected a proposed draft framework agreement, which they said failed to ensure ships register under the Swiss flag.

Although Switzerland, a land-locked country, might not at first sight be an obvious candidate for ship flag jurisdiction, it is home to major commodity traders (Glencore and Trafigura) and the world’s largest container shipping company (Mediterranean Shipping Company). Nevertheless, the number of ocean-going vessels flying the Swiss flag has fallen to just 14 ships. If it were a wildlife species, it would be seen as in serious danger of extinction.

The 14 remaining ships are expected to leave the Swiss flag in the coming years, following the expiration of guarantees granted by the government for each ship under a now-abolished system. That would almost certainly be the end of the Swiss flag altogether.

The Swiss flag provides favourable working conditions and comprehensive protection for workers against various maritime hazards, including accidents, piracy, and criminalization, the joint statement said. Unfortunately, those guarantees are of little use if no ship operator or owner wants to sail under it. Many shipping companies now choose offshore flags for a variety of reasons, most of them financial. However, this had led to concerns that the operability of the international flag system could become problematic. The Organisation for Economic Co-operation and Development (OECD) agreed on a minimum tax of 15% on corporate profits, but, as with the initial climate change agreements, ocean shipping was excluded. This was a result of pressure from shipping associations and certain states.

Once significant flags, including the UK, might look at Switzerland and consider it a “special case”, but the fact remains that the UK has seen a dramatic drop in the tonnage sailing under its flag, and brave words from maritime ministers (most of whom do not stay in the job for long enough for their predictions to be tested) have showed no indication as to how the move towards the new flag “giants” such as Panama and the Marshall Islands can be halted. It is a sector in which the power of the shipping owners and operators seems to sit outside that of any single government (US-flagged vessels being a long-standing exception, with strict rules on flags for vessels sailing directly from one US port to another).