Flag state
The flag state of a commercial vessel is the state under whose laws the vessel is registered or licensed.
The flag state has the authority and responsibility to enforce regulations over vessels registered under its flag, including those relating to inspection, certification, and issuance of safety and pollution prevention documents. As a ship operates under the laws of its flag state, these laws are used if the ship is involved in an admiralty case.
The term "flag of convenience" describes the business practice of registering a merchant ship in a sovereign state different from that of the ship's owners, and flying that state's civil ensign on the ship. Ships are registered under flags of convenience to reduce operating costs or avoid the regulations of the owner's country. Since the 1921 Flag Right Declaration, it has been recognised that all states—including land-locked countries—have a right to be a flag state.
Panama is currently the world's largest flag state, with almost a quarter of the world's ocean-going tonnage registered there.
