bloor et al. (2013), room for manoeuvre. regulatory copliance in the global shipping industry

Article

Room for Manoeuvre?Regulatory Compliancein the Global ShippingIndustry

Michael Bloor, Helen Sampson, Susan Bakerand David WaltersCardiff University, UK

Katrin DahlgrenU&W, Sweden

Emma WadsworthCardiff University, UK

Philip JamesOxford Brookes University, UK

AbstractThis article combines data from two separate studies of the shipping industry, one onenforcement of new regulations on the use of low-sulphur fuel and one on supply chaininfluences on ship operators’ health and safety policies and practices. The shippingindustry is a valuable natural laboratory for the study of patterns of compliance andgovernance in late modernity because it is characterised both by highly developed poly-centric governance structures and by globalising economic processes including verticallydisaggregated global value chains, outsourcing and offshoring. Segmented markets havepermitted some ‘blue riband’ companies to operate a social license ‘beyond compliance’,and that such social licenses are more extensive in respect of environment policies thanin health and safety policies that may be attributed to supply chain influences. Ship opera-tors’ compliance is seen as a combination of instrumental compliance, normativecompliance, a taken for granted culture of compliance and corporate policies of

Corresponding author:

Michael Bloor, Seafarers International Research Centre, Cardiff University, Cardiff CF10 3AT, UK.

Email: [email protected]

Social & Legal Studies22(2) 171–189

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labour-force governance. A taken for granted culture of compliance is identified as themain reason for compliance with the new low-sulphur regulations, which are currently(uncharacteristically) subject to only limited enforcement effort.

KeywordsCompliance, global governance, polycentric governance, seafarers health and safety

Introduction

This article draws on, and reflects upon, the compliance literature in order to understand

the variable compliance behaviour of ship operators in respect of two different sets of

international shipping regulations, those pertaining to crews’ health and safety and those

pertaining to permitted sulphur levels in vessels’ fuel, which were the subjects of two

contemporaneous qualitative studies, described below. The health and safety regulations

include the implementation of an effective safety management system, provision of

salubrious accommodation, potable water, cooking facilities, the proper stocking of the

medicine chest, the provision and maintenance of emergency and safety equipment such

as lifeboats and fire-fighting equipment, regular drills to effectively operate that equip-

ment, protective clothing and the allowance and documentation of statutory hours of rest.

The low-sulphur regulations were only recently introduced. Since 2006 in the Baltic

Emission Control Area (ECA) and 2007 in the North Sea/English Channel ECA, all ves-

sels in those waters must burn fuel with a sulphur content currently capped at 1.0% and

due to reduce to 0.5% in 2015, while the worldwide sulphur cap is currently 3.5%; EU

regulations require vessels while in port to burn fuels with a sulphur content of no more

than 0.1%; the worldwide sulphur cap is due to reduce to 0.5% in 2020. The additional

cost of compliance with the low-sulphur fuel regulations is considerable and operators

trading in the ECAs are now typically paying more in fuel costs than in crewing costs.

Conceptualisations of compliance, and of its counterpart, legitimacy, stretch back to

Hobbes and Rousseau, embracing luminaries like Weber and Habermas en route (cf. the

discussion in Beetham, 1991: 3–41) and have been meat and drink to lawyers, sociolo-

gists, political scientists and criminologists alike. The study of compliance has become

more complex with the growth of non-state regulatory authorities and standard-setting

bodies, both national and international (cf. the discussion of ‘polycentric’ governance

in Black, 2008). And such study has become more complex still through the growth

of corporate and non-corporate devices (e.g. ‘brass plate’ single ship companies in off-

shore jurisdictions), which facilitate (intentionally or not) the avoidance and sometimes

evasion of compliance (e.g. Levi and Reuter, 2006).

The shipping industry is an excellent natural laboratory for the study of the complex-

ities of compliance and non-compliance for several reasons. First, it exhibits a poly-

centric governance structure, defined by Black as that ‘in which the state is not the

sole locus of authority, or indeed in which it plays no role at all. [it is] marked by frag-

mentation, complexity and interdependence between actors, in which state actors are

both regulators and regulated, and their boundaries are marked by the issues or problems

172 Social & Legal Studies 22(2)



they are concerned with, rather than necessarily by a common solution’ (Black, 2008:

138). While Black and others have emphasised fragmentation and complexity, other

writers have used different terms to describe rather similar governance structures;

Ostrom and Ostrom (1999) have written about ‘type II multi-level governance’, with par-

ticular emphasis on the scalar dimension; Frey and Eichenberger (1999) have written

about ‘functional, overlapping and competing jurisdictions’.

The governance of the shipping industry can be seen to be fragmentary, complex,

multi-level and overlapping in character. All vessels must be registered with a national

ship registry and are subject to that nation’s shipping regulations wheresoever the vessel

trades (‘Flag State Control’). Flag states are represented at an international United

Nations (UN) agency, the International Maritime Organisation (IMO), and they give

force in their national laws to those international IMO conventions to which they are

signatories. In relation to many regulations, nation states may also enforce those inter-

national conventions on ships berthing in their own ports, regardless of the vessel’s flag

(‘Port State Control’). Port State Control, the equal treatment of all berthing ships regard-

less of flag, was explicitly developed to address the deficiencies of Flag State Control

and employs ‘smart regulation’ strategies (Gunningham et al., 1998). It sought to incen-

tivise ship operators’ into proactive compliance, most notably through naming-and-

shaming on industry websites those vessels found on inspection to be deficient, and so

influencing the freight rates that the shamed vessels can command (compare Bloor

et al., 2006). Furthermore, states also enforce their own distinctive national regulations;

for example, the Swedish maritime authorities enforce the payment of ‘fairway dues’

from berthing ships to pay the costs of ice-breaking and navigation lights, with those

dues being reduced for vessels which attest that they operate continuously on low-

sulphur fuel. In European Union, port states berthing ships are also subject to EU

shipping regulations (e.g. on the sulphur content of marine fuel burnt in port). In addition

to the ship standards set by IMO, labour standards are set by another UN agency, the

International Labour Organisation (ILO). ILO has a tripartite structure composed of gov-

ernments and workers’ and employers’ organisations. Thus, a non-state actor, the Inter-

national Transport-Workers Federation (with affiliated member unions of seafarers

worldwide), played a pivotal role in framing ILO’s 2006 Maritime Labour Convention,

a consolidation of international labour laws relating to the shipping industry. Further-

more, non-state actors have set-up their own standard-setting international organisations

that enforce those standards through their own ship inspections; the most successful of

these is the Oil Companies International Marine Forum (OCIMF) of 90 companies with

its own Ship Inspection Report Programme (SIRE) inspectorate (www.ocimf.com),

which provides detailed vetting of vessels in the tanker trade. And local statutory bodies,

such as port health authorities, may also act as enforcement agencies in respect of berth-

ing ships. In illustration of overlapping jurisdictions, a port state control inspector may

report a deficiency in a vessel’s International Ship Management code, which is a flag

state responsibility, the non-state SIRE inspectorate can fail a tanker for deficiencies

in both IMO and ILO standards, which could also have been picked up in port state or

flag state inspections, and port health inspectors frequently pick up vessel deficiencies

that are also a focus for port state inspections. Indeed, such overlaps in inspection prac-

tice are a source of complaint from ship operators.

Bloor et al. 173



The second reason for making the shipping industry a focus for studying the complex-

ities of compliance lies in the vertical disaggregation of the industry into complex

‘global value chains’ (Gereffi et al., 2005), where different enterprises seek to specialise

in particular aspects of shipping operations. Typically, a 21st century ship may be owned

by a transnational corporation, operated by a specialist international ship management

company and crewed by a casualised, out-sourced labour force, supplied ‘just-in-time’

and employed by a specialist international crewing company. Such global value chains

are the characteristic features of industries that have been subject to globalising eco-

nomic processes and the shipping industry is arguably the traditional industry that has

been the most radically transformed by globalisation (Alderton et al., 2004). The present

complexities of compliance in the shipping industry may presage the future complexities

of compliance in other industries currently experiencing changes associated with the

processes of globalisation.

Third and relatedly, the shipping industry is a valuable ‘compliance laboratory’

because several of its organisational features, by accident or design, serve to inhibit

effective enforcement. A ship is self-evidently a highly mobile industrial plant and can

readily transfer to lax jurisdictions: the transfer of ship registrations from traditional

national ship registries to laxer offshore jurisdictions (a process known as ‘flagging out’)

began after the First World War as US shipping interests, seeking to evade US shipping

regulations on crewing standards, set-up first Panama and then Liberia as ‘offshore’ open

commercial registries. Even land-locked Mongolia now has an open commercial regis-

try, operated under license by Mr Chong Koy Sen, a Singaporean businessman who

previously operated the Cambodian Registry until that license to operate was withdrawn

following international protests over Cambodia’s failure to police its ships (Brooke,

2004). Further, a fleet owner may divide the ownership of the fleet amongst a series

of single-ship companies with ‘brass plate’ addresses in opaque offshore jurisdictions.

Subcontracting (‘outsourcing’), while it may efficiently concentrate management effort

on ‘core functions’, also serves to conceal or dilute legal responsibilities. When the Erika

foundered in 1999 and spilled oil over 400 km of the French coastline, the registered

owner was ‘Tevere Shipping’, a single-ship Maltese-based company, the Italian ship

management company (‘Panaship’) had re-let the vessel to another operator (‘Amar-

ship’), and the main charterer, the oil company Totalfina, had re-let the vessel on a time

charter to ‘Selmont International’, based in the Bahamas (Organisation for Economic

Cooperation and Development, 2001, pp. 30–33). The shipping industry is characterised

by segmented markets. Regulatory avoidance does not characterise the whole of the

shipping industry: there are many blue riband operators able to command premium

freight rates for a quality service. But the cost savings for those operators practising

regulatory avoidance are considerable (a 1996 OECD report estimated that a bulk carrier

carrying two fewer crew than the statutory requirement would save $37,000 per annum)

and make it difficult for well-found, well-crewed vessels to operate profitably: there is a

Gresham’s Law of the Sea – bad ships drive out good.

Last but not least, the shipping industry can serve as a compliance laboratory because

continuing efforts are being made to strengthen the industry’s governance. Maritime law

has historically been one of the foundation stones of international law and the industry’s

regulatory framework is very comprehensive, even (uniquely) embracing an




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international minimum wage. Port State Control itself emerged in response to a per-

ceived need amongst states to find an effective means of enforcing international regula-

tions on ship operators who were avoiding regulations by offshoring, that is by ‘flagging

out’ to commercial registries (aka ‘flags of convenience’) such as Cambodia. Driven by

well-publicised maritime disasters and major marine pollution incidents, the first

regional alliance of port states operating a common inspection methodology on

foreign-flagged ships was established by a group of European maritime states and

Canada in 1982, the Paris Memorandum of Understanding on Port State Control (Paris

MoU). Other regional alliances have subsequently been established, which now cover all

the world’s major ports. Progress in port state enforcement has been uneven: Port State

Control is not a revenue-generating activity and in some states, particularly developing

countries, port state inspections are under-resourced. A comparison of Port State Control

in the United Kingdom, India and Russia (Bloor et al., 2006, fieldwork conducted in

2002–2003) found inconsistency in inspection practice between inspectors and between

states, with Indian and Russian inspectors, for example, generally paying less attention to

the enforcement of labour standards (as opposed to ship standards) than their UK

counter-parts. Initiatives to increase effectiveness continue to occur. Thus, the Paris

MoU mounts periodic ‘concentrated inspection campaigns’ focused on specific regula-

tions, where all port state inspections for a 3-month period must address those specific

regulations. Thus, for example, enforcement of labour standards on European berthing

ships may have been improved by a concentrated inspection campaign to enforce ILO

standards on seafarers’ maximum hours of work and minimum hours of rest, with a

repeat of the campaign scheduled for 2014. Improvements may also occur through col-

laboration between different elements in the governance framework. For example, the

records of the SIRE inspectorate are available for the information of the Paris MoU port

state control inspectorate, which in turn works closely with the European Commission’s

European Maritime Safety Agency.

The shipping industry is not the only global industry with an existing comprehensive

governance framework: financial markets, for example, have a complex governance

framework (Picciotto, 2006, 2011), although much of it is constituted by the market

participants themselves (seemingly ineffectively). But the shipping industry is of partic-

ular value as a compliance laboratory, both because it is a ‘critical case’ (Goldthorpe

et al., 1968) where there is a 30-year record of official attempts to address compliance

issues and because it is possibly prototypical in the sense that other industries currently

being subjected to similar globalising economic processes may well experience similar

compliance issues in the future.

There is no space here to review comprehensively the large and contested literature on

compliance and its near-neighbour, legitimacy, and there are several monograph-length

reviews already available (e.g. Beetham, 1991; Koh, 1997; Tyler, 2006). While drawing

on that wider literature, we will focus here on some of the literature dealing with

compliance and legitimacy in respect of business behaviour and in respect of polycentric

regulatory regimes. There appear to be four main strands to compliance theories. First,

there is the instrumentalist strand, deriving from rational choice theories and exemplified

by international relations scholars like Keohane (1989), which sees it as being in the

short- or long-term interest of the business to comply with the law, and which is often

Bloor et al. 175



linked to deterrent effects. However, it is an axiom that rules are rarely enforced but

widely obeyed. As Tyler (2006) puts it:

In studying general compliance with the law, attention has been directed to instances where

compliance cannot be easily explained using a simple deterrence perspective. Citizens have

been found to obey the law when the probability of punishment for noncompliance is almost

nil and to break laws in cases involving substantial risks. (p. 22)

Thus, the second strand in the compliance literature, going back to Max Weber, stresses

normative rather than instrumental compliance. May (2005) takes this view in his over-

view of three different studies of business compliance in three different sectors, arguing

that, while inspections do have a deterrence effect, their chief significance lies in focuss-

ing within management a pre-existing corporate propensity towards voluntary compli-

ance. Indeed, some studies of corporate behaviour have detected volitional practices

and policies which go ‘beyond compliance’ to curb environmentally undesirable aspects

of their activities. Gunningham et al. (2002) describe this corporate activity as businesses

operating in accord with their ‘social license’.

A third and related strand is suggested by Gunningham et al. (2005) who argue that,

rather than possessing a volitional normative wish to comply, firms that experience sus-

tained inspection and enforcement activity are led to adopt a ‘culture of compliance’ in

which the regulations themselves rather than the enforcement action lead to compliance.

Black (2008: 144) in her overview of legitimacy in polycentric governance structures

makes a similar distinction between ‘morally based’ legitimacy (where the person or

business perceives the goals of the regulatory organisation to be morally appropriate) and

‘cognitively based’ legitimacy (where the regulatory organisation is simply accepted as

necessary or inevitable). From this perspective, compliance is no longer a matter of

deliberated choice, but rather becomes part of Alfred Schutz’s taken for granted world

of routine activities (Schutz and Luckmann, 1974).

The final relevant strand in the compliance literature relates to how compliance may dif-

fer according to plant-specific and firm-specific variables (Gunningham et al., 2005). Thus,

Gunningham et al.’s (2005) study showed small- and medium-sized firms to be more likely

to be influenced by enforcement actions, whereas large firms were more likely to be proac-

tively compliant in their plant governance in order to maintain their various reputations for

corporate responsibility. This article will seek to demonstrate how ship operators’ compli-

ance may be variously related to all these difference strands in the compliance literature –

instrumental compliance, normative compliance, taken for granted compliance and corpo-

rate policies of plant (i.e. vessel) governance.

Methods

This article combines data from two separate studies. The two studies occurred in the

same time period and generated similar data sets, allowing a common indexing frame

for the data to facilitate systematic comparative analysis. The data on compliance with

the low-sulphur regulations are drawn from a continuing Economic and Social Research

Council-funded study (grant number RES-062-23-2644) of governance issues relating to




both low-sulphur regulations and projected regulations on ship’s carbon emissions, and

which is comparative between the United Kingdom and Sweden. The work on the low-

sulphur component of the study is complete and has been the subject of a final report

(Bloor et al., forthcoming). Those data comprise observational data on 16 port state control

ship inspections in Sweden and the United Kingdom and 50 audio-recorded interviews

with Port State Control Officers, officials of national and international regulatory agencies,

and industry stakeholders representing a wide range of interests (fleet management, indus-

try associations, bunker suppliers, classification societies, port management, trade unions

and non-governmental organisations concerned with shipping and the environment).

The data on compliance with health and safety regulations were collected as part of a

wider study of impact of supply chains on health and safety management funded by the Insti-

tute of Occupational Safety and Health (IOSH). In the course of the 2-year research project,

case studies were carried out in the construction sector and two segments of the maritime

sector (tankers and containers). Here, we draw upon the illustrative case of the container

sector where we undertook documentary analysis, audio-recorded interviews with workers

employed by different companies aboard ship (a total of 14), interviews with ship manage-

ment company personnel (eight), informal interviews with charterers (two) in the course of a

10-day voyage and interviews with representatives of two industry associations.

Each of the two component studies was itself undertaken because of different policy-

critical circumstances. In case of the ship emissions study, the new regulations had been

introduced because, while European land-based emissions of sulphur and associated

particulate matter have been controlled for many years, uncontrolled emissions from inter-

national shipping have been the single most important contributor to ‘acid rain’ in North-

ern European coastal areas (Mellqvist and Berg, 2010) and have resulted in an estimated

27,000 premature deaths per annum across Europe due to pulmonary and coronary

diseases (Corbett et al., 2007). The effectiveness of new controls on ship emissions is thus

a matter of critical importance. In case of the seafarers’ health and safety study, next to

fishing, seafaring remains the occupation with the highest mortality rate in many devel-

oped countries. In the United Kingdom, seafarer occupational mortality is 12 times as great

as the average occupational mortality rate; it is twice as high as occupational mortality in

the construction industry and eight times as high as in manufacturing industry (Roberts and

Williams, 2007). Nor are the majority of these seafarer deaths due to maritime disasters

and tempests: in the UK fleet, founderings and collisions claimed only two deaths in

1988–2005 and, although there were five crew lost overboard in 1996–2005, only two

of those occurred in heavy seas (Roberts and Williams, 2007). Past cross-national research

on the enforcement of international regulations on seafarers’ health and safety (Bloor et al.,

2006) has shown non-compliance with those regulations to be widespread.

The Compliance Culture

We are going to be compliant because that is what we do (shipping company manager)

In a highly segmented industry, many ship operators comply with international regu-

lations as a matter of course, as a taken for granted part of their corporate culture. They

Bloor et al. 177



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may believe that compliance is also the morally correct course of action (see below),

but that course of action is not deliberated, it is followed automatically – ‘that is what

[they] do’. It seems clear that this culture of compliance has arisen out of prolonged

corporate exposure to a regime of frequent inspections and associated enforcement

activity.

In the oil tanker sector, the critical inspection regime is that of the industry’s own

SIRE inspectorate (Walters et al., 2011), but in most other sectors, the critical inspection

regimes are those of Port State and Flag State Control. Port State Control is of particular

importance for ships berthing in European and North American ports. For example, the

Paris MoU on Port State Control (covering the European seaboard states and Canada)

oversees around 24,000 ship inspections per annum, targeted on the basis of ships’ ‘risk

profiles’, based on factors such as time elapsed since last inspection, age, type of vessel,

flag of vessel and past inspection record. Ships with higher risk profiles can expect a pun-

ishing schedule of inspections: the RMS Riga, a 1984-built, Belize-flagged, general

cargo vessel inspected in a UK port in 2011 had undergone 35 previous Paris MoU

inspections between 1992 and 2010. Further, operators of ships with serious deficiencies

on inspection can expect financial losses through detention of the vessel (for rectification

of the deficiencies) and through publication of the detention on industry websites with a

consequent impact on the freight rates of vessel. For many companies, the reputational

damage associated with detention, or the identification of serious non-conformities, is

simply not a business risk that can be taken. As one manager in a ship management com-

pany explained

Effectively these days, I don’t know if you know the Paris MOU and the company calcu-

lator, because whatever ships you have [with non-conformities] directly reflects on the com-

pany rating. [ . . . ] we want to be able to go through port state control inspections without

any deficiencies – that is what the aim is.

Paris MoU inspections as a mechanism for the detection of individual instances of non-

compliance are of only variable effectiveness (Bloor et al., 2006), but as an enduring,

cumulating mechanism for instilling an unthinking propensity towards compliance, they

may be judged considerably more effective. Ship detentions in the Paris MoU (covering

UK, European and Canadian ports) fell from 1699 vessels in 2001 (comprising 9% of all

ship inspections) to just 790 in 2010 (comprising 3% of all ship inspections – Paris MoU,

2011) – a statistic that is testimony to a substantial change in compliance patterns over

time.

Relatedly, although some flag states are little more than mechanisms for regulatory

avoidance, others have sought to position themselves in the marketplace as ‘quality’

flags for ‘blue riband’ ship operators, providing both rigorous inspection regimes and

some protection from frequent port state inspections (vessels flying ‘quality’ flags will

have a lower risk profile on the Paris MoU database and thus be subject to fewer

inspections).

Taken for granted compliance is not the only component in a culture of compliance:

normative expectations also appear important. Thus, one interviewee, the fleet technical

superintendent of a medium-sized company, recalled his horror at witnessing the




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polluting exhaust plume of a bulk carrier, as he flew across the English Channel: he felt a

personal commitment to ensuring his company’s adherence to environmental regulations

– a ‘policy champion’. Regulators too may have normative expectations of regulatees: a

Swedish regulator, speaking of the attestations required of ship operators (to qualify for

discounted ‘fairway dues’) that they continuously operate with low-sulphur fuel, stated

that ‘We rely on people in Sweden’ (though it should be pointed out that the authorities

also operated a random fuel sampling and testing programme).

The Desire for a Level Playing Field

The expressed willingness of ship operators to comply with regulations is often qualified

by an express desire that enforcement practice be universal and invariate, that there be no

‘free riders’ who would gain a competitive advantage through non-compliance. The esti-

mated savings of $37,000 per annum by cutting two crew members from the statutory

crewing level of a bulk carrier (OECD, 1996) have already been mentioned, but such

savings would dwarfed by those that could be earned by operating with non-

compliant fuel. The car carrier operator, Wallenius Wilhelmsen, has chosen to operate

continuously on low-sulphur fuel since 1995. This policy was estimated by the company

to have cost an additional $2.7 million in 2009 (Wallenius Wilhelmsen, 2011). In that

year, the price differential between low- and high-sulphur heavy fuel oil was around

$10 per tonne. In early 2011, the price differential suddenly increased to around $80 per

tonne, following disruption to supplies of Libyan oil, which has naturally low-sulphur

content.

A number of interviewees thus expressed a conditional willingness to comply: a will-

ingness to comply that was conditional on the governance structure of the industry being

sufficiently effective to identify and punish free riders, who would otherwise depress

freight rates by unfair competition. Thus, a fleet manager stated ‘We don’t have a prob-

lem with enforcement because we fully comply. And we expect everyone else to fully

comply’ (emphasis as in the original). And a shipping industry representative stated ‘I

think of course we need enforcement, the industry wants enforcement because we don’t

want people cutting the corners. So all the good shipowners want everybody else to be

paying the same price. And that is almost the fundamental mantra that we follow in [the

industry association]’.

Corporate Culture and Compliance

Conditional compliance is not the only form of instrumental compliance to be found in

the industry. Driven, at least in part, by the adverse business consequences of being

named-and-shamed as non-compliant, head offices exhort their crews to treat Port State

Control as a major concern. The following message, from the chief executive officer

(CEO) of a Far Eastern shipping company, was posted on the wall of the Master’s office

in a product tanker:

2011 Yearly Aims:

1. Detention zero by PSC inspection

Bloor et al. 179



2. Save costs. Cut down 5% against the 2010 year’s budget for repairs (including dry-

dock repair) and stores

3. Reduce the personnel injury on board by half against 2010 year

4. High risk zero and observation less than 5 items by Oil Major Inspection (i.e. the SIRE

inspections mentioned previously).

As mobile plants, ships are self-evidently difficult to manage, despite modern satellite

communications. Attempts to foster a corporate culture, through company magazines,

liveries, uniforms and the rest, are one means to reduce variable and inadequate perfor-

mance across a fleet. Corporate culture is a management strategy to minimise interplant

variations in compliance.

The instrumental character of corporate culture is evident in the fact that employees

are always aware that divergence from the culture carries sanctions. The consequences of

vessel being detained by Port State Control can be particularly serious for the ship’s

senior officers. The industry now has a casualised labour-force where many of the senior

officers are on short-term contracts: the master of a detained ship may not find his con-

tract renewed. In an earlier study of Port State Control, Bloor et al. (2004) report the case

of a port state inspection of an elderly product tanker, due to be scrapped in a further

5 months. Thanks to the discretionary powers of the inspector, the crew were allowed

to undertake remedial works overnight (to improve insanitary conditions in the crew

accommodation) and the ship thus escaped being detained. As the inspector disem-

barked, the relieved master remarked that his chances of getting the command of a new

ship, currently being built for his company in Korea, had been greatly increased by

having avoided a detention. The exercise of the inspector’s discretionary powers had

improved accommodation conditions on that particular vessel for the next few months

and had reinforced the corporate culture that demanded crews focus on avoiding port

state control detentions but had failed to punish corporate policies that seemingly did not

attend to the maintenance and upgrading of crew accommodation.

Beyond Compliance/Social License

As stated above, writers on corporate compliance have recently identified an aspect of

corporate behaviour, particularly in respect of environmental issues, whereby firms may

deliberately go beyond the mere compliance with regulations in expending effort and

resources to meet what they take to be the wider expectations of society and avoid

potential adverse impacts of their corporate activities. This is termed operating in accord

with the ‘social license’ of business (Gunningham et al., 2002). Thus, Swedish ferry

companies discharge all their toilet waste ashore, although regulations do not oblige

them to, simply because they believe their customers and the wider public expect them

to do so. Similarly, in the container sector, some companies have on their own initiative

begun to require their suppliers to observe ISO 1400 standards as they see their clients as

taking a more ‘responsible’ attitude towards the environment. As one manager explained

A lot more clients that are taking the decision to be a bit more environmentally friendly, they

realise that shipping gets a bit of a bad name for itself and we are just moving with the times.




We are also now looking at, on one of the KPIs [Key Performance Indicators] we’ve got, I

think they say 5% of all our supplies should be ISO 14001 approved. So we are now going

out to a lot of suppliers to cover those requirements as well.

While discussions on a regulatory framework for reducing greenhouse gas emissions in

shipping have continued at the IMO for a number of years with very little progress, a

number of blue riband companies, such as BP Shipping and Maersk Line, have joined

Forum for the Future and World Wildlife Fund to form the Sustainable Shipping Initia-

tive with a shared ‘Vision for 2040’, which includes ‘dramatically reducing greenhouse

gas intensity’ (www.forumforthefuture.org/project/sustainable-shipping-initiative/

overview). Fine words butter no parsnips, as the saying goes, and it is notable that one

of the Sustainable Shipping Initiative signatories has also submitted evidence to the 2011

House of Commons Transport Committee Inquiry into the regulation of ships’ sulphur

emissions, where the company threatened to relocate vessels from Southampton to Med-

iterranean home ports when the sulphur limit on fuel in the North Sea ECA (which

includes Southampton) is reduced to 0.1% in 2015 (House of Commons Transport Com-

mittee, 2011), an act of ‘regulatory flight’ that is difficult to reconcile with the Sustain-

able Shipping Initiative’s aim of ‘proactively contributing to the responsible governance

of the oceans’ (www.forumforthefuture.org; House of Commons Transport Committee,

2011). Nevertheless, by no means, all companies’ environmental pronouncements are

‘hot air’ – as previously noted, Wallenius Wilhelmsen expend millions of additional dol-

lars every year operating continuously on low-sulphur fuel, although many of their fleet

are frequently operating in waters where the low-sulphur regulations do not apply.

Supply Chain Influences and Markets in Virtue

It is notable that another of the Sustainable Shipping Initiative members is Unilever, a

charterer rather than a ship operator. The company has adopted the Unilever Sustainable

Living Plan that contains the statement:

The majority of our products are moved by external carriers over whose carbon efficiency

we have limited direct control. But for many distribution contractors, Unilever is an impor-

tant customer. We want to lead the way in changing the way consumer goods are trans-

ported, and we will use our influence to ensure our contractors help us meet our targets.

(www.sustainable-living.unilever.com/the-plan/greenhouse-gases/transport)

Unilever is not alone as a charterer seeking to influence ship operators to go ‘beyond

compliance’ in their environmental policies and practices. For example, the ocean-

going tugs that move and position the North Sea oil platforms are required by their

charterers to operate continuously on 0.1% sulphur distillate fuel (although the permitted

sulphur level for fuel in the North Sea is currently 1.0%). Thus, ‘instrumental compli-

ance’ may play a large part in the ‘beyond-compliance’ behaviour of companies.

Charterers may seek to influence ship operators’ environmental policies and prac-

tices, but operators in turn may seek to create markets in virtue – displaying their green

credentials to customers and potential customers who value a green profile. For example,

Bloor et al. 181



one large operator in our IOSH-funded study not only has a technical department inves-

tigating developments such as waste heat recovery and more efficient propeller designs

but also provided customers with monthly reports on how much they had saved in CO2

emissions compared to having their goods shipped by other companies. Again, markets

encourage instrumental behaviour, but some of our interviewees were at pains to point

out that their company’s competitive emphasis on environmental policies coincided with

their own personal predilections:

I don’t think it is right myself that companies should only take the environmental side

because they think it will sell their ships.

In every different sector of the industry (tankers, containers, bulk carriers, etc.), there

are some individual operators competing in virtuous markets, seeking to position them-

selves as ‘quality’ carriers. The relative size of these virtuous markets varies across

sectors, with bulk carriers, for example, long having been recognised as one sector

where quality carriers are few and enforcement effort needs to be concentrated – Paris

MoU inspection criteria award bulk carriers a higher risk profile (www.parismou.org).

Moreover, markets in virtue are themselves differentiated across different sectors: the

character of virtue varies. Thus, in the tanker sector, charterers were more interested in

safety issues, while in the container sector, safety issues are less salient (‘They just

want to make sure their containers are not dropped in the water. And they are delivered

on time’). For charterers in the container sector, environmental issues are much more

important:

. . . the tanker world is driven by the oil majors and they are looking very harsh [sic] into the

safety part, then in our [container] industry at least [ . . . ] it is more important to show the

buyer of any product that it has been transported in an environmentally friendly way. (qual-

ity manager of a large container company)

To summarise the argument so far, compliance patterns vary both within and across

different sectors of the shipping industry and there are also intra- and inter-sector dif-

ferences in patterns of beyond-compliance behaviours. Elements of normative compli-

ance and taken for granted compliance (an unthinking culture of compliance), arising

out of prolonged corporate exposure to frequent ship inspections, are both important in

understanding such patterns. However, there is also a strong element of instrumental

compliance shaping these patterns: operators fear both detection of non-compliance

and the market consequences of such detection (naming-and-shaming); operators’

compliance may be conditional on their belief that their market competitors are simi-

larly compliant; compliance of a casualised workforce with limited labour power is

influenced by the fear of corporate sanctions for non-compliance; and operators’ com-

pliance and beyond-compliance behaviour may be dictated by charterers’ corporate

policies. Some differences in behaviour (and particularly in beyond-compliance beha-

viour) were also evident between environmental and safety regulations. Further differ-

ences between operators will now be evident if we examine patterns of enforcement

and non-compliance.




Enforcement and Non-compliance

In principle, it is clear that, of all the forms of compliance examined above, instrumental

compliance is the most fragile: if enforcement is seen to be inadequate, then one would

expect to see levels of instrumental compliance decline, and if competitors are seen to be

evading enforcement, then one would expect to see levels of compliance fall rapidly.

However, in examining enforcement and non-compliance with the low-sulphur fuel reg-

ulations, we encounter the anomalous situation where enforcement effort appears to be

quite limited, but non-compliance appears to be low.

Consider first of all, the case of the enforcement of health and safety regulations.

Fieldwork undertaken in 2002 and 2003 by Bloor and colleagues on Port State Control

inspections in the United Kingdom, India and Russia found that, while enforcement of

technical regulations on safety equipment (e.g. provision and maintenance of lifeboats,

fire-fighting equipment, emergency generator, etc.) was generally good, many inspectors

gave much less attention to other health issues such as salubrious accommodation and

galley areas and working hours (Bloor et al., 2006). However, over the last 10 years,

changes have been made in inspection practice with additional training, the issuance

of new guidelines on the implementation of ILO’s 2006 Consolidated Maritime Labour

Convention and concentrated inspection campaigns on particular health and safety

issues. During inspections in European and Canadian ports in 2010, port state inspectors

recorded 7223 deficiencies in respect of ILO Convention 147, the 1976 Merchant Ship-

ping Minimum Standards Convention, and 1275 deficiencies in respect of ILO Conven-

tion 180, the 1996 Seafarers Hours of Work and the Manning of Ships Convention (Paris

MoU, 2011). In October 2011, for example, of the 39 ships detained in those European

and Canadian ports by inspectors, six were detained, at least in part, because of deficien-

cies in respect of hours of work and rest, or in respect of insalubrious accommodation

(Paris MoU, 2012). Until a recent change in the targeting system for inspections, the

signatory countries of the Paris Memorandum on Port State Control gave (and largely

fulfilled) an undertaking to inspect 25% of ships berthing in their ports. Clearly, in

European ports at least, labour standards are now being much more effectively enforced,

while compliance remains limited: a total of 8498 deficiencies in respect of ILO conven-

tions 147 and 180 in 2010 are testimonies to that.

However, a different picture emerges in case of the enforcement of the new regula-

tions on the use of low-sulphur fuel. In that same month of October 2011, only one vessel

was detained in European ports for burning non-compliant fuel, the Jag Leela in the port

of Rotterdam (Paris MoU, 2012). This may be attributed in part to inadequate and

variable enforcement. Very few inspections involved sampling and testing fuel samples.

For the most part, inspectors rely upon examining the Bunker Fuel Delivery Note (BDN)

and the Chief Engineer’s Oil Record Book. Neither of these documents was designed to

have a statutory function: they are both normally handwritten and are thus vulnerable to

forgery and fraud; the BDN is not always in English (the international language of the

shipping industry) and, as a carbon copy, is frequently illegible.

Sweden is one of the few maritime administrations routinely collecting and analysing

fuel samples: Swedish inspectors take about 200 samples a year on a quasi-random basis,

as part of the enforcement of their system of fairway dues (see above). The Swedish

Bloor et al. 183



authorities have kindly made their 2010 test results available for analysis: these show

that 4% of the sampled vessels were non-compliant (allowing for a margin of error on

testing of +0.05%) and that some vessels presented BDNs stating a sulphur content that

was clearly at variance with the results of the test sample. The Netherlands Human Envi-

ronment and Transport Inspectorate took 86 samples for analysis in Rotterdam in the first

11 months of 2011 and detained 13 vessels (15%) as a result, including the Jag Leela

(M. Vink, 2012, personal communication). A total of 86 samples may seem quite limited

from a population of around 34,000 ocean-going vessel arrivals and 108,000 inland ves-

sel arrivals at Rotterdam per annum (it is approximately 0.06% of all arrivals or 0.25% of

all ocean-going arrivals), but most other European authorities, such as the United King-

dom and France, took no samples at all. The Danish Maritime Administration takes and

tests around 70 fuel samples per annum. In 2008, the German Water Police took 365

samples (Bundesamt fur Seeschifffahrt und Hydrographie, 2011), but many of these

were from inland barges rather than from ocean-going vessels. It is clear that the chances

of a vessel in a European port having the sulphur content of its fuel tested by the port

state are very small indeed. One ship operator carried out an internal investigation in

2011: 33 fleet vessels were contacted, 27 of which traded in the ECAs at least periodi-

cally; none of the vessels had ever been asked by an inspector to provide a sample for

testing (Anon, 2012, personal communication).

Not only are the chances of detection small but also the rewards for regulatory avoid-

ance are considerable and dwarf those for avoiding most other shipping regulations. The

estimated annual savings for a 30,000-gigatonne bulk carrier operating with two crew

below the statutory minimum have already been reported to be $37,000 (OECD,

1996). Compare this with the extra cost to Wallenius Wilhelmsen operating continuously

with low-sulphur fuel (see above). In March 2012, the price difference between high-

sulphur (3.5%) fuel oil and low-sulphur fuel oil is around $40 per tonne, and the price

difference between high-sulphur fuel oil and gas oil (0.1% sulphur) is more than $300

per tonne, with the expectation that by 2015 (when vessels in the ECAs will have to run

continuously on gas oil), the price difference will rise to $500 per tonne. At current

prices, the total cost of fuel is already outstripping the cost of crewing in most industry

sectors. P&O Ferries, in its submission to the House of Commons Transport Committee,

suggested that the projected 2015 change in sulphur limits (to 0.1%) in 2015 will

increase fuel costs to vessels in the ECAs by 70–87%, an additional annual cost increase

for shipping of up to £3.6 billion (House of Commons Transport Committee, 2011).

Even allowing for the fact that these are lobbyists’ figures, it is clear that the potential

rewards for non-compliance with fuel regulations are enormous.

There is insufficient evidence to form a close estimate of levels of non-compliance

with the low-sulphur regulations, but it seems reasonable to assume a non-compliance

level somewhere between 4% (the Swedish figure) and 15% (the Rotterdam figure).

Here, it should be made clear that at least some of these cases of non-compliance will

be inadvertent, in that ships may be supplied with ‘off-spec’ fuel by a bunkerer without

the knowledge of the operator or the crew. In order to seek to discourage such practices

by bunkerers, many larger operators routinely take bunker samples and send them for

testing to commercial laboratories. One such laboratory, Lintec Testing Services Ltd, has

kindly made available an analysis of their 2011 test results. These show that analyses of




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Markering

bunkers taken in Rotterdam, for example (Europe’s largest bunkering port), showed that

2.3% of the samples were off-spec for sulphur (M. Green, 2012, personal communica-

tion). Another reason for inadvertent non-compliance may lie in poor fuel changeover

practice, where compliant low-sulphur fuel is mixed with a residue of non-compliant

high-sulphur fuel in the ship’s tanks. Vessels not only with multiple storage tanks but

also with only a single service tank (servicing the engines) are particularly vulnerable

to this inadvertent non-compliance. Meindert Vink of the Netherlands Human Environ-

ment and Transport Inspectorate is of the opinion that the majority of the vessels tested

and found to be non-compliant in Rotterdam were non-compliant as a result of poor fuel

changeover practice, rather than as a result of deliberate non-compliance (M. Vink,

2012, personal communication). Thus, the (admittedly fragmentary) all available evi-

dence points to a current low level of deliberate non-compliance, probably closer to

4% than to 15%, with the sulphur regulations, despite the very large financial rewards.

What then are the reasons for this anomaly? Why is current non-compliance see-

mingly so low? Our data suggest the following factors may be pertinent.

Importantly, not all operators appear to be aware that the levels of fuel sampling and

testing by maritime administrations (and thus the chances of detection) are so very low.

Thus:

You don’t see much [testing] but you are always open for testing by Port State Control. And

they will come on board, they will look through all your figures, your change-over proce-

dure [Oil Record book] and take the sample analysis of the oil and things like that. (technical

manager of a large ship management company)

And:

. . . maybe if you are in a large bunkering port area within a SECA area [ECA] your port-

State inspector, I would think, would be more generated to check those things. Especially if

there had been a history of bad bunkers previously, they will check that type of stuff. And

again, they can call in the metering equipment and they can even analyse the [exhaust] gas1

to see what the sulphur content is and check the fuel as well. But I mean we haven’t seen it

because we have always been OK with it, we have never had any problems where we have

run on the high-sulphur in these areas [ . . . ]. But I think if you had a track record where you

had been caught with this before, you have had the fines, I think you would find port-State

interest where they will come on board, they will check your samples, they will take fresh

samples, and they will analyse the actual emissions as well to do that. (technical manager of

a medium-sized ship management company)

This lack of appreciation of the very small likelihood of detection, in combination with a

normative predisposition towards compliance, a strong corporate demand that crews

avoid port state inspection deficiencies and detentions for reputational reasons and an

unexamined taken for granted assumption that operators should comply with regulations,

would together appear to be sufficient to account for the current low level of non-

compliance with the low-sulphur regulations. Whether this misapprehension of the like-

lihood of detection is likely to continue beyond the short term, and whether those other

Bloor et al. 185



factors are sufficiently influential to continue to ensure operators’ compliance once there

is an awareness that the likelihood of detection is low, is a matter for stargazers rather

than researchers.

Conclusion

The shipping industry has a polycentric governance structure and a corporate structure

(disaggregated global value chains with outsourcing and offshoring) that poses numer-

ous governance challenges. Patterns of compliance vary across the globe (with vessels

operating in European and North American waters being most compliant), vary by reg-

ulation (with compliance with labour and health and safety standards being relatively

poor), vary by sector (with the tanker sector being more compliant than the bulk carrier

sector) and vary within sectors (with some operators seeking to position themselves as

blue riband carriers). Some at least of these variations in compliance appear to be asso-

ciated with the evolution of new governance practices – in particular, ‘smart regulation’

port state control and (in the tanker sector) the oil majors’ own SIRE inspections. Addi-

tionally, and particularly in respect of some environmental policies, some blue riband

operators consciously incur additional costs to go ‘beyond compliance’ – operating in

accord with the business’s social license.

There is a mixed picture. In some parts of the globe, Port State Control has arguably

been too poorly resourced to be an effective agency of enforcement. But in European

waters the aforementioned fall in the proportion of port state inspections that have

resulted in detentions (from 9% to just 3%, 2001–2010) should be taken as testimony

to the effectiveness of the Paris MoU smart regulation strategy. Nevertheless, problems

remain. Not all substandard vessels have been deterred from entering European ports:

just to take one contemporary example, the m/v Sultan was detained in Malta on 12 April

2012 with 14 deficiencies – the Mongolian-flagged Sultan was 35 years old. Further,

despite increased Paris MoU efforts through a concentrated inspection campaign, so far

there is limited evidence to suggest an increase in ship operators’ compliance with labour

standards. Possibly the coming into force in 2013 of the new Maritime Labour Conven-

tion (consolidating existing maritime labour conventions into a single regulatory instru-

ment) and a further concentrated inspection campaign in 2014 may lead to future

improvements. But, for the present, many operators appear to be more concerned with

meeting ship safety and environmental standards than labour standards. Port State Con-

trol, through its naming-and-shaming strategy, seeks to encourage compliance through

market influences and it appears that charterers are more likely to be influenced in their

market decision-making by vessel operators’ adherence to ship safety and environmental

standards, than their adherence to labour standards.

Port State Control and associated market influences provide instrumental reasons for

operators to initiate compliance. However, it appears that instrumental compliance is not

the only reason for the present continuance in compliance. This can be seen most clearly

in respect of the seemingly low level of deliberate non-compliance with new low-sulphur

fuel regulations, despite the very high financial rewards for non-compliance. Instrumen-

tal compliance occurs through the deterrent effect of a fear of detection and punishment.

And in the absence of a widespread fuel sampling and testing programme by the




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Markering

maritime administrations (bearing in mind the vulnerability to forgery/fraud of ships’

documents such as the BDN and the Oil Record Book), the chances of detection and pun-

ishment are very small. Of course, as we have demonstrated, not all ship operators appear

to be currently aware that their chances of successful evasion are so high, and other

operators may feel that even a very small chance of detention carries too high a reputa-

tional cost. However, other reasons can also be advanced here for the present continu-

ance of compliance: namely, a normative predisposition towards compliance (and

especially a normative predisposition to compliance with environmental standards), a

strong corporate demand that crews avoid port state inspection deficiencies and deten-

tions and an undeliberated, taken for granted assumption that operators should comply

with regulations.

It is possibly the last of these reasons, that of the taken for granted ‘culture of com-

pliance’, that is of most importance here. Arising out of repeated experience of inspec-

tions (and perhaps out of the experience of the deleterious consequences of past ship

detentions), compliance may become unexamined second nature. Of course, where there

is a taken for granted culture of compliance, there will also be an associated normative

disposition towards compliance – tacit understandings are usually invested with piety. A

course of action that is unthinkingly endorsed is also, if questioned, likely to call forth

both commitment and capable intellectual defence. And where there is a normative cor-

porate disposition towards compliance, provided superordinates have the power to

enforce their demands on a labour force (as in the present case, through the non-

renewal of short-term employment contracts), then one may expect a strong corporate

demand that crews exert themselves to comply.

The study of taken for granted activities was transformed by the posthumous publi-

cation in the 1960s of the writings of the philosopher Alfred Schutz (see especially

Schutz, 1964) and of the subsequent widely read book The Social Construction of Reality

by Berger (one of Schutz’s students) and Luckmann (Berger and Luckmann, 1967).

Schutz emphasised the strongly conservative character of taken for granted understand-

ings, their resistance to change. Thus, the taken for granted culture is a shared culture,

daily revalidated and reinforced by friends and colleagues. Further, being taken for

granted, it is only occasionally and unusually open to re-examination in the light of alter-

native viewpoints. And finally, adherents to this culture, if it is questioned, have an affec-

tive commitment to it and an ability to reconcile apparent contradictions, explain away

contradictory evidence, question the motivations of critics, and so on, in order to reassert

the validity of the culture to which they adhere. It should be no surprise, therefore, if ship

operators currently share a misapprehension of the likelihood of detection of non-

compliance with the low-sulphur regulations. However, whether the conservative

character of some ship operators’ culture of compliance can be proof against future cul-

tural change remains uncertain.

Note

1. The interviewee is referring here to the use of laser technology to analyse ships’ exhaust plumes

to identify the sulphur content. Rigs that can be mounted on spotter planes or at port entrances

are available and there are also portable kits in the market. But no maritime administrations are

currently using this technology because of technical and cost problems.

Bloor et al. 187



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