VIOLATION OF SHIPBROKING CODE OF ETHICS

Ergun Gunes1, Okan Duru2

1. MSc. Eng. FICS
Elichemoil Chartering & Shipbroking
House
Ph.D Student at Naval Academy Varna
chartering@elichemoil.com

2. Fundamental Sciences Department

Istanbul Technical University
duruokan@yahoo.com

Summary
The paper investigates the nature of shipbroking, its code of ethics, the violation of the ethical
standards, as well as the short- and long-terms consequences of breaching the norms. The
shipping sector offers international trade and commerce. It is not easy for the officials to control
the different branches in the shipping sector and that is why it is difficult to see the results in this
control.
Meanwhile, the maritime sectors that offer consulting services trust mainly their clients and
partners` word than the written contracts. In this sense, it is the shipbroking code of ethics that
is a fundamental for a successful collaboration between ship brokers and ship owners, as well as
between ship brokers themselves. Unfortunately, violation of ethical codes is very typical for the
sector especially when a mediator/commissioner is involved. These brokers often cannot get their
commission once they provide the service they were hired for. The present paper discusses the
forms of ethical code violations, the reasons for these problems occurrence and the ways to solve
them.
Key words: shipbroking, trade ethics, violation/ breaches of ethical codes.
Introduction
The most important factor that influence the enhancement of international maritime trade and
facilitates ship broker`s job is the development of technologies (communications and internet). At
the same time, it is not sufficient only to rely on internet and phone calls. A good broker`s aim is
much more than this. It is strongly recommended to insist on face-to-face communication.
Sometimes, when there is no face-to-face communication people feel free and may demonstrate a
kind of behavior that will not do in real life. One has to keep in mind these disadvantages of
technological development. A good broker will require a role of an agent, a servant of the client.
In its essence, the role of the agent is to represent a person or an organization. That is why it is of
crucial importance to be a fair, honest and ethical broker. The slogan in broker` s job is Our
Word is Our Bond. It is an ethic from the 19th century, adopted in 1801 by the London Stock
Exchange. In 19th century people used to make deals without signing any contracts. Deals were
based only on handshakes and the given words. The fact itself reveals that there was little
regulation other than that of reputation. Over the years, ethic norms were ignored by people who
were led merely by their mercantilism trying to get their personal profit. A good broker will
require a variety of skills to carry out the job not only complying with the written rules adopted in
the system. It is the moral values, the common sense and the ability to develop and sustain
relationships that must rank very highly within brokers` repertoire. This will allow the sector to
select the most skilful and job effectively brokers. The selected professionals will comply with

the ethical code and will rank reputation highly. There is a phrase circulating in shipbroking
system Big deal you are but not a great person that proves the statement of the lack of moral
code in brokers` job. Obviously, it emphasizes on the importance of ethical norms and code.
Shipbroking Code of Ethics
I would like to provide brief information about shipbroking before continuing with ethic norms in
this sector. Shipbrokers are divided into 4 groups. These are:
Broker of the ship owner
Broker of the charter
Independent brokers
Sale and purchase broker
There are no significant differences between these groups of brokers considering their functions.
In general, brokers act as specialists intermediaries/negotiators between sellers and buyers. They
represent a sole person or an organization and broker` s aim is to obtain the best possible terms
for their client/clients. Of course, the broker should obligatory comply not only with ethical code
but with normative base as well. In fact, the crucial question we should ask is: Does a broker
complies with the code of ethic or prefers to comply with the legislative norms and violate the
code of ethics just to obtain personal profits? Another question that arises is whether there will be
an organization that will support a broker who breaches these unwritten ethical norms? Moreover,
whether such a broker will be professionally segregated?
If one asks the question What is ethics?Internet and other sources will provide one with
profound explanations and information. In fact, the definition is very simple. It is not needed to
look for an answer in university books and encyclopedias. The issue and nature of one` s ethical
norms could be found in person` s first years of life (0-7 years). People say It is you and your
beliefs both in your 7th and 70th age.
One of child` s explanation of ethics is To do just what adults do. The essence is that we learn
what is good and what is bad during, what is moral and what is not moral during our childhood
from the adults. Two notions occur and we do not have to mix them. These notions are ethics and
moral. Some information sources define ethics as a set of all moral laws known. In fact, moral
laws may differ in different geographical regions while ethics are universal.
Actually, it is our everyday life mode, our professional experience and knowledge, our
interaction with people that are essential part of the ethic notion formation itself.
In last years, Ethics is a word that successfully fulfills our everyday lives. Unfortunately, we
can give many examples that this very word is used to gain only benefits. Here is the example, in
past people used to make a lot of good things and preferred to stay anonymous. Later, the
situation changed slightly. People used to make good things but did not miss to bring this very
fact to other people` s mind. Thus, they started the process of changing the meaning of the word
adding to it nuances of egoism instead of selflessness. Nowadays, modern technologies rule our
lives. We have an easy and fast access to everything. We are merely consumers and we start to
credit ourselves with good intentions and acts without actually doing them. It clearly proves that

in the past people emphasized on ethical and moral norms but gradually these norms gave way to
mercantilism. In our days ethics and moral are almost abstract notions and we are supposed to
loose their meanings at all.
If we have to classify the ethical norms we can divide them into two basic groups:
1. Ethical norms in everyday life
2. Ethical norms in professional environment
Everyday Life Ethics (Common Sense Ethics)
Ethics is considered to be a set of moral principles that help us to define bad and good practices
and to react in accordance with our inner moral values. In fact, our reactions correspond to our
beliefs what is good and what is bad. This is the fundamental that provokes our reactions. It is a
set of rules we choose in our everyday life from. When a person analyzes a given situation in
his/her mind and considers it is not in compliance with his/her moral values, that very person
begins to condemn himself/herself. In such cases, it is obvious that there is or there will occur a
problem with one` s ethical norms.
Ethical Norms in Professional Environment (Business Ethics)
Business ethics is considered to be a set of ethical principles and standards that guide and
characterize people` s behavior in their professional life. Business ethics is a fundament of
principles that rules professionals from a given sector to act according certain standards. It also
outlines their personal characteristics and ignores those who are unscrupulous and inefficient.
That very fundament autocorrects professional competitiveness and aims at saving the
professional ideals.
Different professional groups, different masters and craftsmen are organized in sectors following
different principles. They comply with different sets of principles. These principles are unique in
each sector and ensure professional solidarity. A certain professional activity or service needs to
pass a serious control in the respective professional area in order to meet the requirements of the
consumers.
From the professional point of view ethics is considered to be a set of norms that provides
information whether a given act is necessary to be performed or not. Professional ethics could be
divided into two main groups:
1. Descriptive ethics This type of ethics characterizes and it gives answers to the question
'What is?' [1]
2. Normative ethics This type of ethics characterizes and answers the question 'What
should be?' and it tries to apply the respective moral system.
Violation of Ethical Norms
The competitiveness in shipbroking takes place in online space and it has made the shipbroking
market more competitive than ever. Unfortunately, that very fact presupposes violation and
breaches of ethical norms. Professional shipbrokers can provide you with various examples of
repeatedly violation of the ethical code by their colleagues. In fact, the number of brokers in ship
trading sector is greater than that of ship owners or charters. The mere fact of numbers is a small
indicator about the competitiveness that rules the market. [2]

I would like to give you an example for ethical norms violation from shipbroker` s
professional life. As you know, many brokers compete in the Spot market in hiring ships or
cargoes. Everyone strives to get the job. But there is something that is obvious for everyone in
every concrete deal and namely it is the ship owner who has circulated his ship on the market
and hundreds of brokers are aware of it. The potential broker who can get the job is the one
who proves he/she is charter` s broker himself/herself. It is that broker who knows very well
that he/she will obtain a counter offer to the one he/she gives himself/herself. But if it occurs
that the broker who made the offer and showed the respective cargo did not act as a charter` s
broker but as a third-party` s one, then we have an example of ethic norms violation. Usually,
in these fixed situations brokers claim they are first hand brokers. But once negotiations
start it appears they are independent brokers who do represent neither ship owners nor
charters. Such type of working is not illegal but we consider it as non-ethical behavior. The
example illustrates the very fact that a certain act is not illegal but at the same time it is not
moral.
In shipbroking sector the ethics realm is very tangible as it is a profession based on the mutual
words given by both sides. In its nature shipbroker acts as an agent of a ship owner or of a
charter. It means that the brokers act and take decisions on behalf of another person. It should
be clearly stated that the ship owner or the charter should trust their agent and ensure him/her
confidence.
Baltic Exchange pays a particular attention to broker` s ethics in his/her professional life. A
broker who would like to become a member is obliged to accept brokers` ethical rules and
principles. If a broker tries to violate and ignore the ethical rules and principles set in the
shipping sector, he/she will risk his/her job and his/her good reputation and will be out of the
competitiveness.
The maritime sector has been divided into several sub-sectors. Shipbroking is one of the most
crucial areas. It is included in the group of interdisciplinary subjects on international level.
Brokers know each other very well. We have even a joke saying that the most confidential
and trusted information is the one that could circulate 24 hours on the market.
Chartered shipbrokers pay particularly attention to their good reputation, self-confident and
self-respect. It complies totally with the ethical norms and brokers apply these ethical norms
in their professional life in order to develop their personality and enhance their professional
experience.
It is the Institute of Chartered Shipbrokers established in 1911 that provides specializations
for those involved in shipbroking sector. The Institute has a motto just as the Baltic
Exchange and it is Our Word is Our Bond.
Types of violation
In order to be able to distinguish what is ethical and what is not in shipbroking one should be
very well aware of brokers, ship owners and charters` rights and duties. A shipbroker acts on

behalf of another person. The violation of ethical norms could occur in the following
situations:
A shipbroker could exercise his/her job without care and diligence needed.
He/she would not be able to fulfill his/her obligations entitled. It is all about the so-called
'Fiduciary Duties'. The word 'Fiduciary' itself originates from Latin and it deals with
trust/confidentiality notions, betray somebody` s trust.
A shipbroker would like to try to demonstrate specific knowledge and good practices in
his/her job without actually being able to do so as his/her personality lacks these qualities.
A shipbroker could hide information from the organization or the person he/she acts on
behalf of.
A shipbroker could try to demonstrate inappropriate behavior to his/her employer, or, a
little slang here- to play boss of his/her boss. He/she could try to sabotage the work
process in the company he/she works for.
A shipbroker could do fixings and get money in addition without informing his/her
employer.
It is the shipping sector where the above-mentioned violations occur mostly and unfortunately,
very often. The following example illustrates a similar situation. An experienced shipbroker from
'X' company takes advantages of his/her position and starts doing hi/her own fixings. Later,
he/she opens his/her own company where he/she incorporates all details of 'X' company clients
and starts making offers on the market not as an employee of 'X' company but as a newly-opened
company owner. Another example can be given a broker shares information about client` s
portfolio with a friend, also a broker. In this case, it is violation of information and
confidentiality. The aim is to obtain personal benefits which is not only illegal but also is not
ethical. Unfortunately, our sector is full of such cases and most of us have encountered such
problems in our practice.
The above-mentioned violations of mutual responsibilities are considered to be violations of
ethical code.
Prevention of Ethical Code Breaches
As it was mentioned earlier, our institute` s motto is Our Word is Our Bond just like the Baltic
Stock Exchange. It is a slogan that underpins shipbroking practice. Members of these
organizations are supposed to abide by this statement and present specific skills and knowledge.
A special control committee will analyze whether a person possesses required qualities and skills
to practice shipbroking profession. It is all about testing brokers` trust, experience and

professionalism. Our motto symbolizes the crucial role of ethics in trading. A good shipbroker
should be led by the following principles: [4]
1. Trust
2. Confidentiality
Trust
If a broker discredits the principle of trust he/she will be ignored by the market and by his/her
fellows. What does it actually means? Shipbroking is all about relationship between brokers,
ship owners, charters, buyers and sellers. We know each other and if someone would
intentionally try to cause damages the news would be spread worldwide within 24 hours and we
would be informed. A good shipbroker should keep client` s confidentiality in order to get the
maximum. As it was said earlier, a shipbroker is a representative of another person and if he/she
makes something wrong, he/she will not only discredit his/her client or employer but also will
risk his/her career. A good shipbroker will require not only profound knowledge of commercial,
technical, geographical, historical, legal and cultural information but also he/she will have to be
able to apply it appropriately in order to obtain the best possible terms for his/her clients. Such
information is not always easily obtained as it is, in most cases, confidential and market sensitive.
A good broker has to use information wisely. If a broker undertakes inadequate actions or relies
on unverified information he/she will not only risk the respective deal but will also lead to great
loses for each party. Professionalism combines both trust and justice and only a good shipbroker
that has substantial knowledge possesses these qualities.
Confidentiality
The principle of confidentiality is very simple in its nature. All parties know each other in
shipping sector. Information is the key and the more information there is the better the service
the broker will be able to deliver. Once a broker has information he/she is the one to start
negotiations. But here is the nuance a good broker will not pass information immediately.
He/she will find the most appropriate person counterpart in order to provide him/her with that
information. That person will be the contact person. Otherwise, if a broker negotiated to get 2,5%
commission from the deal, he/she would find that the cargo has been fixed was offered on the
market by other brokers with 5 % commission. Moreover, correspondence between a broker and
a client is confidential and if information passes to a third party without client` s permission it
will cost a broker a lot. We should keep in mind that the shipping sector offers equal
opportunities both to big and small broker company. It is the big companies that have greater
human resources and if such companies brokers contacts your client be sure that you will be at
risk.
Education and specialization are the key factors that could prevent ethical norms from violation.
A well-specialized broker has knowledge about the specifics on the market and characteristics of
the market players. Such a broker has an appropriate attitude towards these market players. One
of the biggest disadvantages in our sector is that employers do not require special education to be
obtained by the broker who applies for a position. When a company hires personal it is enough

for the applicants to have good command of English. Employers believe that they will be able to
train the applicants to work as brokers. At the same time, shipping market deals with big money
and employers prefer to pay lower salaries to the personal and recruits non-specialists. In this
sense, I would like to remind you Socrates` view on education:
'If you think education is expensive, try the cost of ignorance'
Actually, I do believe that brokers in shipping sector should be only those who possess needed
qualification and education. Unfortunately, most of the employers do not share my view. Many
company owners cannot not make distinction between a broker graduated from an university in
Maritime Management major and a person with a high-school diploma who has good command
of English. That very example illustrates what kind of a board consisted of men of vision
manages our shipping sector. Education is considered to be to most crucial factor that could be
applied in breaches prevention.
Moreover, that very prevention could be stimulated by proper division of mutual responsibilities.
A broker` s employer should be responsible for: [3]
1. Broker` s payment once fixings are finalized;
2. Loss compensation. Theses loses could occur during the negotiations and a broker should
receive the respective compensations.
If an employer follows his responsibilities a broker will not be liable to undertake any steps that
could be considered as unethical. If mutual responsibilities are respected then the brokercompany employer relation will be strengthen.
In this sense, I would like to say few words about our institute named as The Institute of
Chartered Shipbrokers. It was established in 1911 in London. Over the last 100 year the Institutes
aims at enhancing brokers` professional qualities, skill and knowledge. Examinations are held all
over the world and these examinations guarantee enhancement and improvement of brokers`
skills and knowledge. It has to do much more to encourage new entrants to take the educational
courses offered by the Institute of Chartered Shipbrokers. Our Institute has a motto and it is Our
Word is Our Bond and that motto underpins entire brokers` operations.
Results
Shipbroking is a sector where brokers introduce business to people who have never seen each
other. Brokers have to take best decisions regarding ships and cargoes which are thousands
kilometers away from each other. It is a sector where transactions are realized on behalf of a
given word and parties do not meet personally at all. It is a sector where ethics and law are
respected no matter how difficult it could be sometimes. Brokers will require not only substantial
knowledge and good equipment but also they will have to be persons that could be trusted.
Shipbroking is a sector that pays a great emphasis on words given and where reputation remains
the best form of regulation we have. There will always be certain individuals that let the

profession down but they should not be allowed to cloud sterling work undertaken by most
brokers. These individuals should be isolated and it should be priority in our sector. Education
should introduce not only knowledge and skills but also ethical norms. Being professional
brokers we should promote a greater emphasis on the relationships required to maintain the level
of service clients expect from shipbrokers. It is a job that could be worked only by people with
specializations and great experience. Good and experienced brokers will enhance Turkish
shipbroking image worldwide. Each employer should know that a good broker has to have at
least 4- years university education (Bachelor degree) and not a 2- or 3-months course. Turkish
Trade Maritime Management will gain success and reputation if the Republic requires brokers to
have graduated respective universities. Each party involved in shipping sector should consider
ethics as a priority. Shipbrokers, maritime education institutions, lecturers, broker associations
and other organizations that assist the trading should mobilize their efforts to keep the ethical
norms and values as trust is placed in shipbroking than ever before. It is brokers who have
graduated from universities, who have already situated themselves on the market, and who have
gained experience that will play a crucial role in the process of putting emphasis on ethical
norms.

References:
1. www.business.utah.edu/~mgtab/BS-06.ppt page 8
2. ICS Shipping Business, Page 47, 2013
3. ICS Legal Principles in Shipping Business, page 36
4. http://www.centurymarineservices.com/downloads/D3P6.pdf