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The Panama Papers: part two

The electronic filing system of one – just one – Panamanian law firm dealing in the incorporation of companies in ‘offshore’ (note then word!) jurisdictions – Mossack Fonseca – has been hacked, and out have spilled all sorts of juicy names. If I were a partner in – for the sake of argument – De Castro and Robles, or Franco and Franco, or Icaza Gozales – Ruiz & Aleman, or Mata and Pitti, or Arosemena Noriega and Contraras, or any of the others, or if I were a partner in any of the London and New York and Hong Kong and Singapore corporate law firms who are their professional clients, I would be thinking very hard about internet security. Because there are an awful lot more names to come, including perhaps two thirds of the shipowners and two thirds of the charterers, as well as most of the world’s remaining politicians. Unsurprisingly, the Marcos dynasty in the Philippines are in the first batch, along with – well – You Know Who, regardless of which side of the Great Firewall you are on.

Who invented ‘Panama’? It’s an artificial country, like so many others, but this one was cooked up by the US Government as a way to protect its canal, in the 1900s. The Panama flag was cooked up just a very few years later, by American passenger-ship owners who wanted to serve alcohol to their passengers, but who could not do so under the US flag because of prohibition. And that was when and where it all started.

Greek shipowners worried about a possible communist take-over of their homeland, American shipowners seeking to avoid the crippling costs of Jones Act compliance, Hong Kong shipowners wanting to operate ‘shikumisen’ ships for Japanese principals, mainland Chinese shipowning entities seeking foreign finance for their ships and in due course Uncle Tom Cobleigh and All, poured into the Panama flag and the Liberian flag and into combinations of the two, such as 80 Broad Street Liberian companies on bearer shares owning Panamanian companies owning Greek ships on the basis of the Union of Greek Shipowners giving the Greek government a nod to the effect that “we know who they are and they are Greek”.

It was all so easy, so quick, so cheap and so – convenient! In the twenty years from around 1960 to around 1980, the balance of shipping tonnage swung decisively in favour of the flags of convenience (FOCs), who were allowed to speak at the IMO even when they were descending into genocide and drug dealing at home.

New, purpose built FOCs joined them, and in the fullness of time the European flags developed second registers – the invisible hand of the market had done its stuff. You can’t pay taxes and run a fleet of ships today, unless you are one of those rather special multinationals, like the oil majors, who find it convenient to set off some of their corporation tax on ships.

As I said in yesterday’s column, we shipping industry people no longer even think that this is wrong. Tax dodging and regulation dodging are second nature to us. Laws and regulations are to be got around. We are relaxed about the improbable origins of the cargo that we carry – I have been to Macau, and I have failed to find any cotton fields there, but I have shipped a good deal of cotton that was said to have been grown there, and you, gentle reader, have done much the same yourself… we are outraged when shippers lie about their cargo but only if their lying harms our ships and our crews – for the rest of the time, we could not give a twopenny damn.

As a young man, I was taught, whilst “sitting next to Nelly” in a once renowned, now vanished, law firm in the City of London, that whereas, 20 years earlier, someone who defaulted on an arbitration award would have been ashamed to be posted on the Baltic Exchange, to post someone was now (this was 1975!) a waste of time, and people would just have a giggle at the stupidity of the unpaid party. Maybe there was a time when a shipbroker’s word really was his bond?

Like the proverbial frog, we have been par boiled. The ethics of our industry have fallen by the wayside. We have very little to be proud of in the way that we go about things. And just maybe the general public are about to wake up.


If you missed part one, you can access it here. Part three can be found here.

Andrew Craig-Bennett

Andrew Craig-Bennett works for a well known Asian shipowner. Previous employers include Wallem, China Navigation, Charles Taylor Consulting and Swire Pacific Offshore. Andrew was also a columnist for Lloyd's List for a decade.
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