June 14, 2024
Pictured: a containership underway. Photo credit: Cameron Venti via Unsplash.

Global protectionism: restrictive ship-flagging law takes a blow from High Court

By Shipping Australia

A legal decision by the High Court has dealt a blow – albeit only temporarily – to a restrictive ship flagging rule in Bangladesh.

The High Court of Bangladesh has, according to media reports, suspended rules that require foreign ships to get a waiver from the Bangladesh shipping regulator before loading cargo for, or leaving Bangladesh.

Local media reports indicate that, for the next six months at least, ships no longer need approval from the Bangladesh Mercantile Marine Office to carry goods to / from Bangladesh. It is also reported that the parties to the case will also be required to justify why mandatory certificate rules should remain lawful.

Implementation of the “Bangladesh Flag Vessel (Protection of Interest) Rule of 2023” in February of the same year has apparently led to numerous problems including reduced competition for shipping services, delays, congestion, unjustified administrative burdens, discriminatory treatment, and other operational disruptions at Bangladeshi ports, according to reports in the general media, the maritime media, and official documents seen by Shipping Australia.

Back in 2019 the Bangladesh Government adopted the Bangladesh Flag Ships (Protection of Interest) Act 2019 with the aim of building up Bangladesh’s merchant marine by reserving 50% of the country’s maritime trade for Bangladesh-flagged vessels.

However, according to an official filing by a consortium of international interest groups to the European Union, there are only eight box ships registered under the Bangladesh flat but anywhere between 1,300 to 1,500 box ships call at Chittagong Port each year carrying about three million boxes.

“It is therefore without question that 8 vessels are by themselves not capable of carrying 50% of the volumes in order to meet the growing needs of Bangladeshi importers and exporters,” the filing says.

Government authorities in Bangladesh are empowered to grant exemption certificates and it has been alleged that preferential treatment is given for Bangladesh flagged vessels, which is allegedly discriminatory against international vessels and is allegedly in violation of World Trade Organization principles. Meanwhile, membership of the International Maritime Organization is open to all States subject to the provisions of the IMO Convention, the first article of which states: “The purposes of the [IMO] are: To encourage the removal of discriminatory action and unnecessary restrictions by Governments affecting shipping engaged in international trade so as to promote the availability of shipping services to the commerce of the world without discrimination; assistance and encouragement given by a Government for the development of its national shipping and for purposes of security does not in itself constitute discrimination, provided that such assistance and encouragement is not based on measures designed to restrict the freedom of shipping of all flags to take part in international trade” (IMO Convention, article 1(b)).

Seeking an exemption certificate incurs delays along with administration burdens, which has resulted in carriers apparently trying to get waiver certificates on a piecemeal basis, according to reports in the global maritime press. Delays in getting such certificates have allegedly caused such disruptions to services that some shipping companies have quit services to Chittagong. It has also been reported that some ships have had to leave port without loading all their cargo and that some ships have also been fined for transporting goods without the right paperwork.

Captain Melwyn Noronha commented on the general situation: “it is clear that this situation in Bangladesh has been driven by a protectionist sentiment. Protectionism in the maritime industry generally results in adverse effects and this situation in Bangladesh appears to be yet another example of protectionism hurting the very thing it is meant to protect. Shipping Australia cautions all industry executives, and especially all policy makers, to view all protectionist policy proposals in the maritime sphere with a critical eye”.

Editor’s Note: this article is one of a series that Shipping Australia will be researching and publishing on the topic of global protectionist policies.



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