Panama, which is home to one of the busiest maritime shipping routes in the world, the Panama Canal, has recently implemented stricter registration policies for maritime vessels. This comes in response to pressure from Western countries to crack down on illicit trades, specifically oil smuggling from countries like Iran and Russia. The new executive decree issued by Panama’s President Jose Raul Mulino on October 18 allows for the revocation of national registrations of maritime vessels facing sanctions from the US, UK, UN Security Council, or EU. The Panama Maritime Authority is tasked with carrying out any registry cancellations.
Former US ambassador to Panama, John Feeley, has praised the new decree as a positive step by Panama’s government to improve the business climate. Feeley highlighted the importance of reputation in the maritime industry, with global authorities closely monitoring registries for potential risks. By taking action to protect the prestige and reputation of its flag, Panama aims to maintain a registry free of international sanctions and ensure compliance with global regulations. The immediate consequences for ships losing their licenses include industry monitoring and reporting on their activities.
Panama is known as a “flag of convenience” state, where international ship owners can register their vessels with the local government to bypass stricter regulations in their home countries. This has led to Panama attracting global shipping companies with its accommodating regulations and lower costs. With over 8,000 registered ships, Panama is one of the largest ship registries in the world. The recent executive decree is seen as a response to international pressure, with the US and other allies seeking to restrict illicit trade through Panama’s waters.
In addition to pressure from the US and other foreign governments, Panama has faced criticism for being included on the EU’s list of non-cooperative jurisdictions for tax purposes. President Mulino recently met with the French President Emmanuel Macron to petition for Panama’s removal from the list, emphasizing that the country has been unfairly stigmatized. The importance of Panama as a key shipping route, especially for the movement of goods and energy resources, has led to increased scrutiny and regulation from international partners.
Experts expect the executive decree to have a significant impact on vessel owners and operators engaged in risky or illicit activities, prompting other flag states to review their regulatory frameworks. The move by Panama is part of a broader trend among “flag of convenience” states to stamp out vessels involved in illicit activity. Most notably, the island nation of Palau recently revoked the registration of three liquefied natural gas carriers following US sanctions over ties to Russian gas. Panama’s actions are likely to set a precedent for other countries to take similar decisive measures against vessels engaged in illegal activities on the high seas.
