Reputations are not mathematical equations

Last week, ShipInsight published an opinion piece on the Palau Registry and the views of Panos Kirnidis that the system is stacked against new entrants. In the interests of fairness, we have agreed to allow the registry the right of reply. The following is written by Palau International Ship Registry (PISR)...

The recent comments about ships which have a poor PSC record is linked to the recent discussion and comments made by Palau International Ship Registry (PISR) about the and blacklisting system that is grossly biased against new registries. It has provoked strong media and industry comment, particularly from those who see the ‘rites of passage’ process as being inevitable and a way of determining a new registry’s credentials.

My original statement was: “Once a new registry is launched it needs to grow and will not in the first period be attracting the newer and larger vessels, operators or owners. It takes time for the new registry to build trusted relations with the ship-owners and stakeholders in the industry and to show its values.” The idea that there is already a surfeit of flag states suggests that competition in this sector is unwelcome. Imagine a world – as Shipinsight itself has suggested – in which there were only two flags: it is not something we think is healthy in other industries, so why should it be so in shipping registries?

It’s also worth remembering that Palau Islands are exactly that, islands surrounded by water with a heritage that embraces the sea – more than can be said for Luxembourg and Switzerland (on the White and Grey Paris MoU lists) which when I last checked were both landlocked. Yes, Palau Registry is the latest entrant into the industry but we have been around for a decade and our fleet is growing because we have learned from the mistakes and experiences of established registries. We consider ourselves a Smart registry, an e-registry that differs from many others as we believe technology will be the driving force to make us a leader in this sector.

In essence, I believe the blacklist and criteria used to determine ’membership’ of that list is based on flawed assumptions: Port State Control Officers don’t work to a common standard or control for PSC inspections; the selection of ships to be audited does not follow random sampling and therefore does not reflect the real situation; the mathematical formula used is biased against smaller registries. If you have 23 detentions and inspections in a fleet of 300 vessels, that puts a new registry on the blacklist.

Even though the overall number is lower than other fleets with more vessels, more detentions and more inspections you are doomed to relegation. If another registry has 23 detentions but a fleet of 5000, then the simple formula used means these detentions are deemed less relevant in the case of larger registries only because of the maths. These are facts not illegitimate complaints.

This is not a cry in the wilderness; this is a reality threatening the growth of the industry: a mathematical formula without any weighting doesn’t work in the best interests of the industry. If your vessel is flying the flag of a blacklisted flag state, then vessels are inspected more frequently and more thoroughly. Maybe as they inspect your ships, vessels with White List status simply sail by in a similar condition!
We currently have more than 350 active ships in the registry and the fleet is distributed around the globe with 32 deputy registrars in 28 countries and 42 surveyors in 38 countries.

We are a progressive and highly competent registry but being blacklisted by a system that we see as anti-competitive plunges us into a vicious circle. A new registry cannot attract the larger vessels as owners and operators need to see how you first perform. So to grow you have to take older vessels and build that confidence and reputation. Getting placed onto a blacklist is we are told, inevitable taking into account the process of development. This is exactly where it fails the industry and new registries. More quality flags will give more options to ship-owners to choose among competition. The big losers from this monopoly are the shipowners as they have to choose from just a small group of major flags.

“It is hard to imagine why Kirnidis or any of those promoting new registries should believe that the port state control establishment should change its methods to accommodate these new flags which in almost every case have no connection with the ships flying them.” When I read this in Shipinsight I wondered if I had said that at some stage and then realised that I hadn’t, neither have any of those registries who would agree with my comments. What I did say in my original opinion feature was: “In no way are we asking for a dilution of the regulations affecting the critical issues classification societies, flags, registries and any other relevant bodies are subject to. On the contrary, the reason so many registries have exemplary reputations is because of the expert work, diligence and experience they bring to world shipping. What we are asking for is for the anti-competitive practices defining the Performance Lists to be reviewed.”

I understand the scepticism of some in the industry who believe this process should continue as it eventually weeds out the poor vessels. Believe it or not, this is exactly what we have been doing as we continue to grow. It is wrong to suggest that Palau International Ship Registry will take ‘any old ship’ and so deserves to be on the blacklist. If the system is reviewed and changes made to recognise the way detentions are recorded, then my registry will be competing on a level playing field. I’m looking for constructive change to the system, not anarchy.