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Flag of Convenience

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All ships owned by DWI are flagged in the Bahamas and Liberia. The "flag of convenience" rules have both public law and private law implications. Private law comes into play in the employer-employee, passenger contract, and cargo contract obligations of the ship. Public law also interfaces with these rules in that ships and companies pick and choose flags of convenience for individual ships based upon liability concerns such as negligence, contractual, labor, customs, immigration, and/or environmental laws.

The "flag of convenience" arrangement, also known as foreign registries, offered by the Bahamas, Liberia, Panama and other countries, permit ship owners to avoid most of the wage and labor laws of the United States. A ship is subject to liability as if it were "within" the country whose flag it flies. DWI's passenger tickets and contracts also make reference to this fact that all claims by passengers or employees must be litigated in and under the law of the country whose flag the ship in question flies.

Mr. and Mrs. Lowell were passengers on one of DWI's smaller cruise ships, The Minnow, for a weeklong journey from Miami, with stops in Nassau, Key West, and Grand Cayman. The Minnow flies the flag of Liberia. One night during the cruise, the Howells returned to their cabin and find two ship employees removing cash and Mrs. Lowell's jewelry from the ship-provided safe. Mr. Lowell struggled with the men, but he collapsed and suffered a fatal heart attack. Mrs. Lowell was locked inside the cabin restroom and the robbers escaped. A few hours later, the ship docked in Grand Cayman, and the two robbers left the ship with the cash and jewelry stolen from the Lowell's safe; the robbers did not return to the ship. Mrs. Lowell was rescued several hours after the ship left Grand Cayman and identified the two employees in a photo lineup.

The day after her return to Miami, Mrs. Lowell's attorney faxed DWI a letter threatening to sue them for negligent supervision, training, and hiring of employees; breach of contract; infliction of emotional distress; assault; battery; theft; and wrongful death unless DWI tendered the sum of $10 Million dollars within 10 business days.

Assume that under Liberian law, a wife is the property of the husband and has no standing to sue or claim damages for his injuries, and further that any property within the possession of Husband and Wife is deemed to be the sole property of the husband.
Discuss the public law and private law ramifications for DWI in this situation. How would the legalities be different if the incident happened at a DWI resort on the US mainland? What should DWI do for Mrs. Lowell, and in terms of developing policies for future criminal incidents?
A few online review for this assignment are:
? Admiralty Law (http://www.legal-database.com/admiralty.htm)provides a summary of maritime and admiralty law.
? International Council of Cruise Lines (http://www.iccl.org)is a trade association website and contains summaries of standards for cruise passenger safety

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Solution Summary

This solution talks about flag of convenience doctrine in the context of DWI. . It then advances ideas regarding the actions that Mrs. Lowell might take.

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Flag of convenience:
The admiralty law is very clear. The ship's flag is supposed to determine the country in which the case would be tried. In this case the as the ship is flying the Liberian flag the jurisdiction clearly falls in Liberia. This is not advantageous to Ms. Lowell because it means that she cannot sure DW1 and she is merely a property. The problem arises because the objective of Ms. Lowell is to get $10 M from DW1.
In addition, the contract made with DW1 is clear that the jurisdiction of any dispute will be determined by the flag of the ship. It is expected that either Ms. Lowell or her husband would be a signatory to this contract.

Different locations:
Had this incident occurred at any resort of DW1 then the jurisdiction of the location of the resort would have been valid. For instance, if the resort were located in Mexico, then the Mexican law would have operated then.
Had this incident occurred in mainland USA then the jurisdiction of the USA would have applied and Ms. Lowell would have been able to sue DW1.
In this case however, ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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