Article

Room for Manoeuvre?

Regulatory Compliance
in the Global Shipping
Industry

Social & Legal Studies

22(2) 171189
The Author(s) 2013
Reprints and permission:
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DOI: 10.1177/0964663912467814
sls.sagepub.com

Michael Bloor, Helen Sampson, Susan Baker

and David Walters
Cardiff University, UK
Katrin Dahlgren
U&W, Sweden
Emma Wadsworth
Cardiff University, UK
Philip James
Oxford Brookes University, UK

Abstract
This article combines data from two separate studies of the shipping industry, one on
enforcement of new regulations on the use of low-sulphur fuel and one on supply chain
influences on ship operators health and safety policies and practices. The shipping
industry is a valuable natural laboratory for the study of patterns of compliance and
governance in late modernity because it is characterised both by highly developed polycentric governance structures and by globalising economic processes including vertically
disaggregated global value chains, outsourcing and offshoring. Segmented markets have
permitted some blue riband companies to operate a social license beyond compliance,
and that such social licenses are more extensive in respect of environment policies than
in health and safety policies that may be attributed to supply chain influences. Ship operators compliance is seen as a combination of instrumental compliance, normative
compliance, 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: BloorMJ@cf.ac.uk

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labour-force governance. A taken for granted culture of compliance is identified as the

main reason for compliance with the new low-sulphur regulations, which are currently
(uncharacteristically) subject to only limited enforcement effort.
Keywords
Compliance, 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 equipment, 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 vessels 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: 341) and have been meat and drink to lawyers, sociologists, 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 offshore 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 complexities of compliance and non-compliance for several reasons. First, it exhibits a polycentric 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 fragmentation, complexity and interdependence between actors, in which state actors are
both regulators and regulated, and their boundaries are marked by the issues or problems

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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 particular 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 nations 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 international conventions on ships berthing in their own ports, regardless of the vessels flag
(Port State Control). Port State Control, the equal treatment of all berthing ships regardless 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 incentivise ship operators into proactive compliance, most notably through naming-andshaming 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 lowsulphur 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 governments and workers and employers organisations. Thus, a non-state actor, the International Transport-Workers Federation (with affiliated member unions of seafarers
worldwide), played a pivotal role in framing ILOs 2006 Maritime Labour Convention,
a consolidation of international labour laws relating to the shipping industry. Furthermore, 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 berthing ships. In illustration of overlapping jurisdictions, a port state control inspector may
report a deficiency in a vessels 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 practice are a source of complaint from ship operators.

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The second reason for making the shipping industry a focus for studying the complexities 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 economic 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 registry, 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 Cambodias 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 (Amarship), 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. 3033). 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
Greshams 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 industrys governance. Maritime law
has historically been one of the foundation stones of international law and the industrys
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 perceived need amongst states to find an effective means of enforcing international regulations 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 worlds 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
20022003) 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 regulations, 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 collaboration 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 Commissions
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 particular 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

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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 overview 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 focussing within management a pre-existing corporate propensity towards voluntary compliance. 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 sustained 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 Schutzs taken for granted world
of routine activities (Schutz and Luckmann, 1974).
The final relevant strand in the compliance literature relates to how compliance may differ 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 proactively compliant in their plant governance in order to maintain their various reputations for
corporate responsibility. This article will seek to demonstrate how ship operators compliance may be variously related to all these difference strands in the compliance literature
instrumental compliance, normative compliance, taken for granted compliance and corporate 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

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both low-sulphur regulations and projected regulations on ships carbon emissions, and
which is comparative between the United Kingdom and Sweden. The work on the lowsulphur 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, industry 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 Institute 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 management 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 policycritical 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 international shipping have been the single most important contributor to acid rain in Northern 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 developed 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
19882005 and, although there were five crew lost overboard in 19962005, 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 regulations as a matter of course, as a taken for granted part of their corporate culture. They

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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 industrys 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 punishing 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 company explained
Effectively these days, I dont know if you know the Paris MOU and the company calculator, because whatever ships you have [with non-conformities] directly reflects on the company 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 noncompliance 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 companys 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 estimated 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 noncompliant 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 willingness 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 dont have a problem 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 dont
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 Masters office
in a product tanker:
2011 Yearly Aims:
1. Detention zero by PSC inspection

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2. Save costs. Cut down 5% against the 2010 years budget for repairs (including drydock 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 performance 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 ships
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 contract 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 disembarked, 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 inspectors 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.

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We are also now looking at, on one of the KPIs [Key Performance Indicators] weve 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 Initiative 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 Mediterranean 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 Committee, 2011), an act of regulatory flight that is difficult to reconcile with the Sustainable Shipping Initiatives 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 dollars 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 important customer. We want to lead the way in changing the way consumer goods are transported, 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 oceangoing 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 compliance may play a large part in the beyond-compliance behaviour of companies.
Charterers may seek to influence ship operators environmental policies and practices, 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,

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one large operator in our IOSH-funded study not only has a technical department investigating 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 companys competitive emphasis on environmental policies coincided with
their own personal predilections:
I dont 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 themselves 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. (quality 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 differences in patterns of beyond-compliance behaviours. Elements of normative compliance 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 similarly compliant; compliance of a casualised workforce with limited labour power is
influenced by the fear of corporate sanctions for non-compliance; and operators compliance and beyond-compliance behaviour may be dictated by charterers corporate
policies. Some differences in behaviour (and particularly in beyond-compliance behaviour) were also evident between environmental and safety regulations. Further differences between operators will now be evident if we examine patterns of enforcement
and non-compliance.

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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 regulations, 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 ILOs 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 Shipping Minimum Standards Convention, and 1275 deficiencies in respect of ILO Convention 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 deficiencies 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 conventions 147 and 180 in 2010 are testimonies to that.
However, a different picture emerges in case of the enforcement of the new regulations 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 Engineers 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

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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 Environment 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 vessel 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 Kingdom 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 periodically; 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 avoidance 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 highsulphur (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 7087%, 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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bunkers taken in Rotterdam, for example (Europes largest bunkering port), showed that
2.3% of the samples were off-spec for sulphur (M. Green, 2012, personal communication). 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 ships 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 Environment 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 evidence 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 seemingly 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 dont 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 procedure [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 portState 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 havent 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 noncompliance with the low-sulphur regulations. Whether this misapprehension of the likelihood of detection is likely to continue beyond the short term, and whether those other

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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 numerous governance challenges. Patterns of compliance vary across the globe (with vessels
operating in European and North American waters being most compliant), vary by regulation (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 associated 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. Additionally, 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 businesss 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%, 20012010) 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 Convention (consolidating existing maritime labour conventions into a single regulatory instrument) 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 Control, 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. Instrumental 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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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 punishment 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 reputational cost. However, other reasons can also be advanced here for the present continuance 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 detentions 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 compliance, that is of most importance here. Arising out of repeated experience of inspections (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 corporate disposition towards compliance, provided superordinates have the power to
enforce their demands on a labour force (as in the present case, through the nonrenewal 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 publication 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 Schutzs students) and Luckmann (Berger and Luckmann, 1967).
Schutz emphasised the strongly conservative character of taken for granted understandings, 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 alternative viewpoints. And finally, adherents to this culture, if it is questioned, have an affective 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 noncompliance with the low-sulphur regulations. However, whether the conservative
character of some ship operators culture of compliance can be proof against future cultural 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.

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