Michael Roe: Shipping governance in the Baltic Sea

The governance of anything is messy exemplified by the countless attempts at definition and the failure to reach a satisfactory conclusion; maritime governance is even messier than most and the Baltic Sea is no exception. In fact in some ways it is a prime example of the difficulties that maritime governance presents to policy-makers, institutions, enforcers and clients from the shipping sector. To understand why it is such a complex process we can break it down to a series of constituent parts which, whilst not always being precent, together illustrate its complex structure and point the way towards the most effective solution.

A definition of maritime governance is made complex by the multiple and diverse factors, contexts and actors that are present. However sufficient for our purposes:

”Governance refers, therefore, to all processes of governing, whether undertaken by a government, market, or network, whether over a family, tribe, formal or informal organization, or territory, and whether through laws, norms, power or language. Governance differs from government in that it focuses less on the state and its institutions and more on social practices and activities.” Bevir (2012).

It is important to recognise that it is not the same as government but subsumes government within it. In many ways it is all-embracing and includes all the influences in the shipping industry of clients, owners, the entire supply chain, environment, social, technical and political issues and much more. And this makes its understanding, design and organisation that much more complex as well as factors such as globalisation, multiple ownerships, boundaries, territories and nation-states, public goods and ill-defined jurisdictions each having a significant effect.

The governance of shipping in the Baltic Sea area is made even more complex than most because of its multiplicity of national jurisdictions, its complex political context, its environmental sensitivity and its central role in global trades.

Shipping governance everywhere has a large number of drivers that stimulate the need for an effective structure, and which often contradict and are exacerbated by the inherent mobility of the industry in terms of labour, finance, ownership and cargo and exemplified by the variety of vessel registrations many of which bear no relation to the vessel, trade, cargo, crew, management or ownership. These vary with location but might include:

• the need to contain monopoly power (conferences, cartels)
• the need to control excessive and destructive competition
• the complexities of public goods (sea, shoreline, air, views) and the absence of clear ownership boundaries
• the tendency for very long payback periods vessels, ports)
• the high cost of infrastructure (vessels, ports)
• the need for integration and coordination across national boundaries for supply chains
• the role of prestige, influence and international representation (flag choice, IMO, local politics)
• commercial profit versus social good
• tradition (highly significant to national shipping policies)
• employment (less important than commonly recognised; the role of third world flags and crews)
• defence (the role of merchant shipping as support vessels; the need to sustain supply chain security)
• security (terrorism, piracy)
• illegal cargoes (drugs, arms, embargoed materials)
• illegal immigration
• the importance of capital mobility (shipping as a vehicle for financial mobility and money laundering)
• labour mobility (almost infinite across vessel flag choice)
• technical conformity (the example of containers)
• the rise in global shipping businesses, transit and sovereignty
• problems of contradictions between global (UN IMO) and national sovereignty

An analytical framework for shipping governance is widely agreed to consist of a number of elements. Clearly the precise nature of each of these varies with location and context but still provides a sound basis to understand shipping governance in the Baltic Sea.

The most significant of them is that of jurisdiction. Shipping exhibits a range of jurisdictional platforms which correspond to the scale of governance that is under examination. Commonly these are viewed as pyramidal shape with global at the top, and under which lie in turn the supranational (for example the EU, ASEAN), national (USA, India, Japan, UK etc), regional, (Noord Brabant, Scotland, Tasmania) local the ports of Marseille-Fos, Felixstowe, Kobe) and culminating in the body (seafarer, societal individual, swimmer, fishing personnel). In theory this structure provides a mechanism for policy decisions for the shipping industry to be decided at the highest level, encompassing a broad understanding of the needs of the sector, which then trace down the pyramid with each successive layer taking the principles derived above and applying specific detail needed at the different scales and finally arriving at an impact upon the individual body. Thus the UN IMO might discuss global warming and shipping, derive principles that are accepted, adapted and applied by the EU and then passed on to member states to do the same at national level. Regional and local policy would then follow becoming increasingly detailed settling finally at the individual. Feedback would occur at all levels resulting in policy adjustment. All manner of shipping related issues can be considered in this way including their integration.

Vertical governance presents problems. National jurisdiction remains the most significant in that it dominates the structure at global (UN) and supranational (e.g. EU) levels. This means that global policy institutions have no formal or meaningful jurisdiction over that on the nation-state, thus confusing, if not destroying, the vertical pyramidal process. This is exemplified by the difficulties faced by the IMO over environmental policy which is slow and often although agreed by the nation members, may remain domestically unenacted. A major feature of governance in all sectors but especially one as international as shipping, is this national/global conflict exemplified by the abuse of vessel registration, the predominance of flagging out, and the opportunities for policy (and governance) avoidance.

Shipping governance is also characterised by objectives. These include ambitions for sector efficiency (e.g. to control monopoly abuse and destructive competition); to protect the environment; to increase shipping safety and security of labour, cargoes and vessels; to promote national development (through incentives, subsidies ad collaboration); to improve social conditions (though seafarer training and welfare, cargo, port investment and routing support); and a range of specifically international, cross border issues where the Baltic Sea, with its multitude of national interests, presents a good example. Others issues presenting significant governance problems include transit though the Bosporus, Panama and Suez Canals, the English Channel and much of the Mediterranean ad Black Seas.

However, governance requires policy implementation, and objectives alone are not enough, and to achieve this needs instruments. These include the very common measures in shipping of state intervention through ownership, regulation, promotion and financial support. Commercial regulation is an alternative and one pursued by many m=national governments including those with direct interests in the Baltic Sea. It might involve direct and legally enforceable rules for training, technical standards and inspections, encouragement for shipping companies to operate in certain ways through financial incentives or publicity, direct fiscal measures such as tax incentives typified by the very common tonnage taxes of EU members, and even industrial self-regulation although this latter approach relies upon a disciplined sector and one with some principles which in a commercial environment can sometimes be lacking.

Shipping governance is still not quite complete in its formulation as even though the jurisdictional challenges might be clear, the objectives largely agreed and the methods to achieve them accepted, there still has to be an organisation to deliver them – the agencies.

Agencies delivering shipping policy can be varied in size, operation and structure but commonly include government related departments implementing legislation, incentives and advice, for example, national ministries, UN organisations (IMO, UNCTAD), local and regional government institutions. Common today are also quasi-autonomous non-governmental institutions (QUANGOs) which have close relationships to governments of all types and levels but considerably more independence. However they are often far-from entirely independent characterised by state appointments and funding and thus susceptible to political pressures. They are also almost wholly undemocratic unlike ministries which at least have some democratic credentials – although at times very loosely defined. This is also an issue with institutions such as those of the UN where democratic control is so far removed as to be almost non-existent.

Hybrid state ownership is also an alternative agency with, for example, shipping companies and port authorities jointly owned by the state and by private sector interests, hopefully providing the best of both worlds – democratic representation and commercial acumen. Finally there is entirely self-regulated trade such as that exemplified by BIMCO, International Chamber of Shipping, InterCargo, IACS and many more. They rely upon a combination of loyalty and pride as well as the commercial incentives stemming from retaining a good reputation. This latter characteristic, whilst significant, has been eroded in shipping governance by practices such as widespread flag-hopping, and the complex nature of the structure of the shipping industry, its global activity and the jurisdictional inadequacies of policy-making for inherently mobile activity.

How can the deficiencies in shipping governance be addressed given the domination of the national model operating within a global industry where national boundaries can be, and are, readily abused by the shipping industry, and their importance emphasised or ignored whenever it proves convenient. Some suggestions include improvements in policing and enforcement of regulations which have been adopted. This is obviously not easy as it requires a process of global policing raising issues of varied standards and interpretations, and a diverse legislative base stemming from the requirement for national legal acceptance and interpretation.

Shipping governance is also made more accurate if it is applied at limited points rather than in a general fashion. Specificity along with simplicity are both attributes making application more directed and easier to understand and enforce. Preferable also is commitment by the industry, something that has been sorely lacking in many commercial quarters to date in particular in relation to governance of standards and their application and the impact of the national/global interface.

That leaves us to what remains to be done and much of this relates to all shipping activities across the globe. In particular the industry remains highly nation-state dominated and so in the Baltic Sea, the differing objectives and political and financial pressures that exist across the adjacent nations, all of which have responsibilities and ambitions for their territorial waters and the overlaps that inevitably exist between them, remains a serious governance deficiency. The fiercely commercial nature of shipping and its diverse national interests, many of which bear no relationship to the Baltic Sea yet operate there, makes this difficult. The industry also remains institutionally constipated with representatives from the shipping industry in the governance process surprisingly few and mainly traditional. This is mirrored by conservatively defined stakeholders with poor representation from other industries, social communities and individuals. This in turn is reflected in. the domination that shipowners hold in the policy-making and governance process. And finally, governance remains static, reflecting single point problems with few opportunities to migrate and adapt policies despite the industry itself characterised by movement and change.

The Baltic Sea is an ideal location to see many of these issues on show, and also an ideal location for governance development to be analysed.

Reference: Bevir, M. (2012) Governance; A Very Short Introduction, Oxford University Press: Oxford.

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