Cruise Law News : Maritime Lawyer & Attorney : James M. Walker : Walker & O'Neill Law Firm : Admiralty Law, Cruise Ship Accidents & Injuries

In an exclusive story, Cruise Line News has learned that cruise industry giant Carnival Corporation recently incorporated its business in the United States (in the state of Delaware). Carnival intends to announce this historic development tomorrow, April 2nd, at Carnival's headquarters in Miami.

Since 1972, Carnival has incorporated its business and registered its cruise ships in the country of Panama. For over 40 years, Carnival cruise ships have flown the flag of Panama in order to avoid the onerous safety regulations, excessive labor laws, unreasonable environmental laws, and high taxes of the United States of America.

Cruise Law News' discovery of this historic event came about when prominent maritime lawyer Jim Walker bumped into Carnival's CEO Micky Arison at court side when Arison's championship basketball team, the Miami Heat, won another game.  Maritime ace lawyer Walker asked Arison: "Micky, if Dwayne Wade and LeBron James earn several hundred million dollars from Carnival and pay tens of millions of dollars in U.S. taxes, don't you think it is fair that Carnival - which earns over 15 billion dollars a year in cruise ticket sale - pays a few billion dollars in U.S. taxes?"

Perhaps it was the euphoria of the Heat beating the San Antonia Spurs by two points in a close overtime victory, but Micky was ecstatic. "Yes, let's do it!" he said handing maritime lawyer Walker a half-eaten hot dog and three-quarters of a warm Bud Light which a Miami cheerleader handed Micky in the first quarter of the previous game a few days earlier.

While quickly consuming the beer and hot dog in the excitement of the moment, expert cruise lawyer Walker happened to have U.S. articles of incorporation which he handed to Micky to sign as well as U.S. flags to fly on the Carnival fleet of cruise ships.

Arison has been under intense pressure lately following fires, collisions, sinkings, pirate-attacks, flounderings, norovirus outbreaks and a Jon Secada onboard concert which have ruined the last 37 Carnival cruises.  Just last week Senator Jay Rockefeller called Arison a "scallywag" on national TV. Rockefeller challenged Arison to pay his fair share of U.S. taxes on the bounty his foreign-flagged cruise ships collect on the high seas. 

Micky commented that he was embarrassed that his father Ted, the founder of Carnival Cruise Lines 40 years ago, denounced his U.S. citizenship in order to avoid paying some 10 billion dollars in U.S. taxes.

"I want to make certain that Carnival pays one hundred % of our U.S. tax obligations (estimated to be over $5,000,000,000 a year) plus be subjected to the most rigorous U.S. safety, wage,and labor laws and the most stringent U.S. environmental regulations, Micky announced over the arena's PA system! "I want Carnival Cruise Line to be synonymous with Old Betsy - the U.S. Stars and Stripes - what the U.S. stands for! Its time that indigent crew members from India and Nicaragua who earn $500 working 360 hours a month be entitled to the full benefit of U.S. employment laws, a 401(k) retirement fund, severance pay, and a college fund for their children!"

While appreciative of Arison's change of heart, sources say Walker was miffed that Arison demanded that he pay $6 for the remains of the hot dog and $7.50 for the rest of the Bud Light.

April 1 2013 Update: South Florida Business Journal picks up on this shocking development in the cruise industry. Read here.

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With Carnival under a microscope, the cruise line continues to experience bad PR as yet another Carnival cruise ship experienced a mechanical failure.

The Chicago Tribune reports that last weekend, the Carnival Elation had to get a tugboat escort down the Mississippi River after a mechanical problem.

In the last 2 months, four of Carnival's ship suffered full or partial power failures, the Triumph, Dream, Legend and the Elation. 

It's early in the year, stay tuned.

March 16 2013 Update:  That didn't take long: Yet Another Carnival Cruise Ship Flounders - P&O Ventura Suffers Propulsion Problems
  

Photo Credit: Vacay.ca / Why You Should Say No to a Vacation Cruise 

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Newsweek's Daily Beast Blog published an insightful article about the real issues behind the Triumph cruise ship fire. Entitled "Carnival Cruise From Hell," the article explains that the situation involves a lot more than just another stinky ship bobbing around on the high seas. Rather, Newsweek writes that the fiasco is "a troubling indicator of pervasive safety problems in a booming industry with little oversight."

Written by Eve Conant, the articles points out that last month, the Federal Aviation Administration (FAA) grounded the entire U.S. fleet of Boeing 787s over fire-safety concerns. But where is the maritime equivalent of the FAA overseeing the cruise lines? It has been outsourced to third world countries like the Bahamas which has neither the interest or capability of regulating the billion dollar U.S. cruise industry. 

Newsweek interviewed me for the article, but criticism from lawyers who routinely sue the cruise lines are often met with skepticism.  

What's impressive about the article is that Newsweek interviewed a former chairman of the National Transportation Safety Board (NTSB), Jim Hall.

Unlike recent NTSB officials who angled for lucrative consulting jobs with the cruise lines and gave the industry a free pass, Jim Hall earned a reputation for objectivity and credibility when he was the NTBS's top dog from 1994 - 2001. He was involved in investigatng serious accidents in both the aviation and cruise industries. He voiced his concerns that there would be continued problems in the maritime industry because there was no real oversight over the cruise lines.

Here are the recent comment's made by Hall to Newsweek:

Jim Hall, head of the National Transportation Safety Board during the Clinton administration, says the industry is watched over by “paper tigers” like the International Maritime Organization and suffers from “bad actors” much like in the poorly regulated motor-coach industry, which saw its latest fatal bus crash in Southern California earlier this month. “The maritime industry is the oldest transportation industry around. We’re talking centuries. It’s a culture that has never been broken as the aviation industry was, and you see evidence of that culture in the [Costa Concordia] accident,” says Hall.

Ships may seem and feel American but are mostly “flagged” in countries like the Bahamas or Panama in order to operate outside of what he says are reasonable safety standards. “It is, and has been, an outlaw industry,” says Hall. “People who book cruises should be aware of that.”

Cruise lines are an "outlaw industry" watched over by "paper tigers?"  Spot on.  And remember these comments are by a former chairman of the NTSB.  

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Cunard's three cruise ships, Queen Mary 2, Queen Victoria and Queen Elizabeth, will no longer fly the Union Jack.

After 171 years of flying the Union Jack with Southampton painted on the stern, Cunard's cruise ships will now be registered in Bermuda and will bear the name Hamilton - Bermuda's capital. 

The question arises why Cunard, which has flown the British flag on its ships since 1840, would suddenly decide to flay a flag of convenience today?

Cunard claims that the reason is simple.  It wants to offer "weddings at sea" where the captain can perform marriages.  Other cruise lines, like Princess Cruises which is flagged in Bermuda, earn income by performing marriages of passengers during cruises.  However, weddings at sea are not allowed under British law. 

But there is more to this story.  Britain's new "Equality Act 2010" requires that ship employees from EU countries who are working on British flagged vessel such as the Cunard cruise ships must be paid wages equal to those of the British crewmembers. By dropping the British flag, Cunard is dropping all the British wage and labor laws.  

Earlier this year, the New York Times published an excellent article regarding the shipping industry's use of "flags of convenience."  Entitled "Flying the Flag, Fleeing the State," the article explains how unscrupulous ship owners evade responsibility for environmental damage, exploitative labor and unsafe work conditions, and criminal behavior. 

The article reveals that ships used to fly the flags of their nation which protected the seafarers and passengers and punished the shipping companies when they broke the law.  But this changed when American flagged ships began flying the flags of foreign countries in order in order to avoid U.S. laws and government oversight.   The "foreign registries" were in countries with no government oversight and no real connection to the vessel or its owners in the first place, like Panama, Liberia, North Korea and even landlocked Mongolia.  The registries often fail to monitor the safety and working conditions on ships or investigate accidents.    

What are the real consequences of a cruise ship flying a flag of convenience?

For passengers or crewmembers who are victimized by a shipboard crime, Bermuda will have jurisdiction to investigate and prosecute crimes. You can read about the indifference and lackluster efforts of the Bermuda authorities in a recent article here.    

For crewmembers, they can be easily exploited.  The New York Times article points out that there is a "human cost" which includes long hours, punishing work, and little rest; some international regulations permit 98-hour work weeks.  Cruise line employees are a good example.  Stateroom attendants and cleaners work a minimum of 12 hours a day and often are pushed to 14 to 16 hours when required to handle luggage on embarkation days, ending up with a 90 plus hour work week and no days off.  Cruise ship cleaners earn a maximum of $545 a month working a minimum of 360 hours a month.  Repetitive injuries to these crew members frequently occur, and just as frequently the cruise lines abandon them in countries like Nicaragua or India with inadequate medical care.

Because most ship employees are non U.S. citizens, the U.S. public has been indifferent to their plight.  But the problem inherent in flags of convenience came home to the U.S. last year when the offshore Deepwater Horizon oil rig exploded and 11 American oil and gas workers perished.  

The U.S. Coast Guard released a preliminary report  about the Deepwater Horizon oil rig. The Coast Guard criticized not only rig owner, Transocean, but the foreign registry in the Marshall Islands where Transocean registered the rig.  Just like a cruise ship, the Deepwater Horizon oil rig was considered to be a vessel which had to be registered. 

Why did the rig owners decide to go all of the way to an island in the Pacific to register its oil rig, you may ask?   For the same reason cruise lines like Carnival and Royal Caribbean went to South America and Africa to register their cruise ships in Panama and Liberia - to avoid U.S. laws and oversight. 

Now Cunard, owned by Carnival whose cruise ships fly the flags of Panama, has finally followed suit by registering its three cruise ships in a rocky island in the middle of the Atlantic Ocean.

Yes, Cunard now can marry passengers at sea.  But many crewmembers will lose employment rights and victims of shipboard crime on the Cunard fleet will quickly find themselves in a no-man's land.     

October 20, 2011 Update:  The Cunard cruise ships will now fly the Red Ensign.  The Red Ensign Group is comprised of the United Kingdom, Crown Dependencies (Isle of Man, Guernsey and Jersey) and UK Overseas Territories (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat, St Helena and the Turks & Caicos Islands) which operate shipping registers. 

This will permit the ships to be referred to as "British ships" but in reality be subject to the employment laws of Bermuda. 

October 21, 2011 Update:  Cunard fans are leaving brutal comments at the Cunard facebook page about use of a flag of convenience (my comment was quickly deleted).  You can read the comments here.

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Every so often we receive an email or telephone call from someone asking why cruise ships can't sail from one U.S. port to another. 

The reason is because there is a Federal law which prohibits foreign flagged ships from coastwise trade between U.S. ports.  Only U.S. flagged ship can do that.  The thought at one time was that such a law would promote U.S. shipping by providing preferential treatment of US vessels over "foreign" vessels.

The law in question is the Merchant Marine Act of 1920.  This is a U.S. Federal statute which regulates maritime commerce in U.S. waters and between U.S. ports.  Section 27, known as the Jones Act, deals with the concept of "cabotage" (coastal shipping).  The law requires that all goods transported by water between U.S. ports be carried in U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens. 

This is why you don't see a cruise ship sailing from New Orleans to Galveston and letting off passengers (for example).   The reality today of course is that virtually all cruise ships are foreign flagged in order to avoid US taxes and occupational laws. So the entire US based cruise fleet can't sail from one US port to another.

Critics of the law argue that the law increases the costs of shipping good between U.S. ports.  U.S. shipbuilders are also substantially higher than vessels constructed overseas.  As a result, U.S. shipyards now build only 1 percent of the world's large commercial vessels.

There is now a bill which has been introduced  to amend the law to allow foreign-flag cruise ships to operate in the coastwise trade of the United States.  It was introduced by Representative Blake Farenthold (R-TX) and co-sponsored by Ron Paul.  Representative Farenhold believes that opening up coastal trade to all cruise ships will result in more cruise ships sailing from one US port to another and the US and Texas would benefit economically.

However, U.S. shipbuilders and companies engaged in coastwise trade are opposed to amending the law.  A recent controversy regarding shipping crude oil from the Strategic Petroleum Reserve reveals that the new bills will face strong opposition.

The Boston Herald published an article discussing the Obama administration's decision to waive the requirements of the Jones Act against foreign flagged ships regarding the transportation of oil from one U.S. port to another.  The Jones Act cabotage requirements prohibit shipments from reserve holdings on the Louisiana and Texas coasts to East Coast refineries.

Buyers of the oil wanted to use large tankers to transport the 30 million barrels being sold, because they are larger and cheaper than most U.S. coastwise vessels and barges.  However, there are only nine large tankers flying the U.S. flag, all of which sail from Alaska to California.  The administration let the buyers use foreign ships for 46 out of 47 shipments.

This caused American shipping companies to become "understandably furious," according to the Boston Herald which calls from the repeal of the Jones Act.  "The Jones Act is a smelly piece of protectionism that should have been repealed 50 years ago," says the Herald.

My prediction is that the bill will not make it out of committee. 

Even changing the Jones Act will not significantly affect the cruise industry, which will continue to buy foreign ships, fly foreign flags, and hire foreign employees to save money.   

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The Juneau Empire published an interesting article this morning about how the cruise industry routinely ignores a U.S. law requiring the use of U.S. longshore workers to perform certain duties, such as operating tender boats and handling cargo and luggage.   

The newspaper reports that the International Longshore and Warehouse Union (ILWU) plans to picket today over the practice of the cruise lines which refuse to utilize U.S. union workers when the foreign flagged cruise ships call on Juneau and other ports in Alaska.

The president of the local longshore union (Alaska Longshore Division Local 200 Unit 16) is quoted in the newspaper as saying that the cruise industry is in "blatant disregard" of the Immigration and Nationality Act - INA: ACT 258 (Limitations On Performance Of Longshore work By Alien Crewmen). 

A representative of the cruise industry responded to the longshore union's complaints by stating that the cruise ships only recently began utilizing U.S. ship crew members for tender boat operations after the U.S. Customs and Border Patrol required the use of American employees.

The issue remains whether the cruise lines are violating the INA by not using union workers to perform the tender and other longshore operations. 

The union representative stated that the union employees intend to demonstrate in Juneau and later in Sitka and Ketchikan, but are not going to disrupt the cruise ship operations.

in addition to Alaska, the ILWU primarily represents dock workers on the West Coast of the U.S., Hawaii and British Columbia, Canada.  The union was established in 1937 after the 1934 "West Coast Waterfront Strike," a 3 month long strike that turned violent in California. 

This issue is just the latest dispute between the ILWU and the cruise industry.  Cruise ships routinely try and use their non-U.S. non-union crewmembers to perform shore-side longshore duties such cargo work, baggage handling, tender operations, and making electrical power connections when the cruise ships are in port.            

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A reader of Cruise Law News (CLN) brought an excellent opinion piece from the New York Times regarding the shipping industry's use of "flags of convenience" to my attention.  Entitled "Flying the Flag, Fleeing the State" and written by Rose George, the article explains how unscrupulous ship owners evade responsibility for environmental damage, exploitative labor and unsafe work conditions, and criminal behavior. 

The article reveals that ships used to fly the flags of their nation which protected the seafarers and passengers and punished the shipping companies when they broke the law.  But this changed when American flagged ships began flying the flags of foreign countries in order in order to avoid U.S. laws and government oversight.   The "foreign registries" were in countries with no government oversight and no real connection to the vessel or its owners in the first place, like Panama (flag above left), Liberia, North Korea and even landlocked Mongolia.  The registries often fail to monitor the safety and working conditions on ships or investigate accidents.    

What are the real consequences to employees working on foreign flagged ships? 

The New York Times article points out that there is a "human cost" which includes long hours, punishing work, and little rest; some international regulations permit 98-hour work weeks.  Cruise line employees are a good example.  Stateroom attendants and cleaners work a minimum of 12 hours a day and often are pushed to 14 to 16 hours when required to handle luggage on embarkation days, ending up with a 90 plus hour work week and no days off.  Cruise ship cleaners earn a maximum of $545 a month working a minimum of 360 hours a month.  Repetitive injuries to these crew members frequently occur, and just as frequently the cruise lines abandon them in countries like Nicaragua or India with inadequate medical care.

No foreign registry in Liberia, which often rages in civil war itself, gives a damn about the working conditions which men and women from Nicaragua or India face daily on Liberian flagged cruise ships.    

Because most ship employees are non U.S. citizens, the U.S. public has been indifferent to their plight.  But the problem inherent in flags of convenience came home to the U.S. last year when the offshore Deepwater Horizon oil rig exploded and 11 American oil and gas workers perished.  

The U.S. Coast Guard just released a preliminary report  about the Deepwater Horizon oil rig. The Coast Guard criticized not only rig owner, Transocean, but the foreign registry in the Marshall Islands (flag below) where Transocean registered the rig.  Just like a cruise ship, the Deepwater Horizon oil rig was considered to be a vessel which had to be registered. 

Why did the rig owners decide to go all of the way to an island in the Pacific to register its oil rig, you may ask?   For the same reason cruise lines like Carnival and Royal Caribbean went to South America and Africa to register their cruise ships in Panama and Liberia - to avoid U.S. taxes, U.S. safety regulations, and U.S. labor laws.  

One of the the Coast Guard's initial conclusions is that the Marshall Islands "abdicated" its safety responsibilities.  Transocean got just what it wanted - lax safety inspections and substandard safety requirements from the little spec of an island in the Pacific.   The owners enjoyed lower operating costs in addition to the substantial tax benefits of flying a flag of convenience.  But the financial benefits came at the expense of poor training, poorly maintained equipment, and even poorer safety procedures which resulted in inoperable alarms and failed shut-down systems.  

The ultimate result of the Marshall Islands flag of convenience?  11 dead men.  And 11 families consumed with grief and suffering.  

For additonal information, read:

Like Cruise Ships, Foreign Flagged Oil Rigs Avoid U.S. Laws

No Taxes - The Cruise Lines' Dirty Little Secret

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