Following the 'Paradise Papers' revelations of tax avoidance in UK overseas territories, Nautilus has urged the UK government to clamp down on the operation of so-called Red Ensign Group (REG) ship registries from the same locations.
In letters to foreign secretary Boris Johnson and shipping minister John Hayes, the union says the evidence revealed in the leaked documents showed widespread use of UK territories and dependencies such as Bermuda, Gibraltar, the Cayman Islands and the British Virgin Islands to create mechanisms for companies and individuals to avoid tax liabilities.
General secretary Mark Dickinson said the press reports of the documents highlighted the union's long-standing concerns over the connections between these mechanisms – and the countries which host them – and the shipping industry.
'The papers contain extensive references to members of the Red Ensign Group (REG) which offer shipowners considerable incentives as well as the opportunity to use low-cost labour.
Essentially, we believe they also serve as another form of tax haven subsidised by the British taxpayer.'
Mr Dickinson said the UK's relationship with the REG is inherently damaging for its domestic maritime policy objectives. 'The 2016 Shipping Fleet Statistics showed that the UK Ship Register (UKSR) now accounts for just 26% of the total REG deadweight tonnage, and the most recent UNCTAD Maritime Report showed that more than 80% of UK deadweight tonnage is registered with foreign flags – which clearly undermines the government's stated aim of doubling tonnage under the UKSR,' he added.
Mr Dickinson told the ministers that there is evidence that some of the REG registers fail to discharge their IMO/ILO convention responsibilities to the same level as the UKSR, and some are classed as flags of convenience by the International Transport Workers' Federation (ITF). 'FoC registries, including those in the REG, make it more difficult for unions, industry stakeholders and the public to hold shipowners to account,' he pointed out.
'The publication of the Paradise Papers raises further questions about their long-term political sustainability,' he added. 'The OECD in particular has been working towards increasing transparency and exchange of information among countries, and these moves will inevitably increase the pressure on the FoC system. Nautilus supports the ITF position that there should be a genuine link between the real owner of a vessel and the flag the vessel flies, in accordance with the United Nations Convention on the Law of the Sea (UNCLOS).'
Mr Dickinson said reform of the REG is long overdue and he also called for ministers to make the findings of the Department for Transport's study of the commercialisation of UKSR publicly available and to ensure there is open debate on its recommendations.
He added: 'There is, according to UNCTAD, 41m dwt of tonnage beneficially owned in the UK but registered in these exotic locations. It's time to bring those ships to the UKSR. Otherwise the suspicion will persist, as the Panama and now the Paradise Papers show, that the shipping industry is an integral part of a global and dirty business of tax and regulatory avoidance.