Cruise lines operate under layers of laws – Vessels fly different flags; rules complex across seas

Lipcon, Marguiles, Alsina & Winkleman, P.A

By Dale K. Dupont
Miami Herald
May 31, 2003

The recent boiler explosion on the SS Norway shows the tangle of international and national laws that regulate the cruise line industry.

Who polices cruise ships? The simple answer is: It depends.

The United States has prevailed in enforcing environmental laws. The government and private lawyers have had some success with claims under the Americans with Disabilities Act. Cruise kitchens must pass muster with American health inspectors, and the Coast Guard ensures that ships comply with international regulations. But the vessels’ workers aren’t covered by U.S. labor law.

“It’s not like there’s one rule book,” said Miami attorney Charles Lipcon, who specializes in maritime personal-injury cases on behalf of plaintiffs. There are layers of laws as well as the international treaties. “It’s a really complex area.”

The world’s maritime industries are governed by international treaties that allow ships, no matter where they are based, to be registered in a foreign country and fly the flag of that nation. These flag states have primary authority for enforcing the treaties that cover issues such as safety and pollution.

But ships also must deal with regulations in countries they visit. Which U.S. laws apply depends on how they are written and interpreted.

There’s been a “sort of a nibbling away” at the notion that the flag state is supreme, Lipcon said.

In the case of environmental laws and the ADA, U.S. waters and U.S. citizens are directly affected.

Cruise companies — which make most of their money off North American passengers — have tried to claim immunity. Most are incorporated in places like Panama, the Bahamas or Liberia, and the ships fly various foreign flags.

“The U.S. has gradually extended some of its laws to all vessels that are in its territorial waters or that do business with it,” said Edmund Welch, legislative director for the Passenger Vessel Association, a trade group for U.S.-flag vessels, which nowadays are generally smaller cruise ships, ferries and dinner boats.

NO U.S. FLAG

Labor laws are a different matter. If the ships flew U.S. flags, they would have to employ more expensive U.S. crews as well as have U.S. ownership and be U.S.-built. The United States hasn’t launched a major cruise ship in more than 40 years.

Wage and hour laws were written decades ago, when the cruise business was far different than it is today, Welch said. And, court decisions have since concluded, Congress didn’t say these laws apply to foreign-flag vessels.

The cruise lines maintain that they provide good jobs at better salaries than the workers could make in their own countries. Maintenance workers, for example, earn between $500 and $900 a month, working 10 to 14 hours a day, seven days a week.

No one has made a serious attempt to change the law. “I don’t think a lot of people think about it or are aware of it,” Welch said.

At the same time, some U.S. agencies have authority over certain aspects of ship operations. The U.S. Centers for Disease Control does sanitation inspections. The U.S. Coast Guard is responsible for verifying that ships comply with all the international standards such as the Safety of Life at Sea (SOLAS) convention and with U.S. laws. The International Maritime Organization, a United Nations agency, makes rules on safety standards.

The Coast Guard’s annual reviews focus mainly on fire protection, lifesaving equipment and procedures such as lifeboat drills, crew competence and pollution prevention. It also looks at engineering systems, emergency generator under load, the steering system, remote fuel shutoff valves and bilge pumps.

“We do some fairly detailed examinations, but not to the extent we do our own vessels,” said John Sedlak, manager of the Coast Guard’s Control Verification Examinations of foreign passenger vessels.

Cruise ships are inspected by a number of agencies including their home state authorities or classification societies — private firms contracted for inspections, including engines and propulsion systems, and paid by the lines.

Some countries like Panama delegate a great deal to the classification societies, Sedlak said. Are the inspections of the same caliber as the Coast Guard’s? “I really can’t say yes or no,” he said. “Some countries do an incredibly good inspection and some don’t match up.” He wouldn’t name names.

The Coast Guard looks at ships twice a year. The lines know when they’re coming.

Enforcement can be as simple as fixing something on the spot. Or the Coast Guard can keep a vessel at the port.

NORWAY DELAY

Two years ago the Coast Guard barred the Norway from leaving Miami after inspectors discovered more than 100 improper repairs on leaks in the main pipeline of the sprinkler system. The Norway finally sailed a week later.

“Detention is a powerful tool,” Sedlak said.

The United States has participated in the development of the international regulations and many provisions have been incorporated into U.S. law, said Michael Crye, president of the International Council of Cruise Lines, an industry trade group.

“We acknowledge U.S. environmental laws apply to us in U.S. waters,” he said.

But that wasn’t one line’s initial response in a pollution case in the ’90s.

oyal Caribbean Cruises argued that the prosecution of a foreign-flagged vessel was unprecedented and that the case should have been handled in Norway because the ship in question flew the Norwegian flag.

Neither a federal judge nor the government bought the argument. “What is unprecedented is the claim by a private corporation headquartered in the U.S., doing business in the U.S., plying the waters of the U.S. and using U.S. ports that it is immune from a U.S. criminal prosecution for violations of U.S. law that took place in the U.S.,” the Justice Department said.

In the 1996 case, Royal Caribbean pleaded guilty and agreed to pay what was then the largest environmental fine levied against a cruise line.

In 2002, Carnival Corp. pleaded guilty and agreed to pay fines in another pollution case. The convictions came not for illegal dumping but for lying about it on pollution treatment records presented to the Coast Guard — a federal offense.

In the case of the Americans with Disabilities Act, none of the regulations apply specifically to ships, Crye said.

“If you’re carrying Americans to and from American ports, the ADA probably applies,” he said. What’s unclear are the required standards.

VICTORY FOR DISABLED

Among the recent cases:

  • Carnival Cruise Lines agreed to make substantial changes to its ships to make them more accessible to the disabled, settling a 1998 class action lawsuit filed in Miami.
  • Norwegian Cruise Line agreed to allow people with visual impairments to travel under the same conditions as other passengers, settling a Justice Department lawsuit.

The major cruise companies also manage to avoid paying millions in U.S. income taxes. The industry notes it does pay fees to American ports and buys U.S. goods and services.

Under the Internal Revenue Code, some non-U.S. companies incorporated in certain jurisdictions — Panama, for example — are not subject to federal income tax on the money from the international operation of ships.

“The cruise industry has not carved out some special benefits for themselves,” Crye said. There are, however, a lot of cracks in the laws, said Lipcon, the maritime attorney.

“The guys who started cruise lines were smart enough to use those cracks to create an incredible industry,” he said.

They compete, for example, with U.S.-based resorts that must comply with more U.S. laws. “So, if you look at what a cruise line can deliver,” Lipcon said, “it becomes the cheapest vacation you can take.”