Inside shipping, the Philipp story: the seas are alive with the sound of robbery.

                                 Money being counted on the Philipp to pay the crew

Its founder, the made-famous Von Trapp and his wife Maria, were the inspiration behind 'The Sound of Music', but that halo has been decisively knocked askew today. The shenanigans of Hamburg based shipowners Vega read like the script out of a French- or should I say German- bedroom farce; the only difference is that it is the all-Filipino crew on one of their ships that has been rolled in the hay. Twice.

The story so far: The vessel Philipp (ex-Beluga Meditation) arrives in Sweden last year. There is no ITF approved agreement in place with respect to the crew's wages, so the Swedish unions insist that one be signed. A year later, ITF inspector Tommy Molloy boards the ship in Liverpool, UK, and finds that two books of accounts are being maintained with respect to crew wages– one in accordance with the Standard ITF Agreement and the other in accordance with the German VER-DI TCC Agreement. The crew, of course, are being paid much lower wages as per the latter. The ITF says that the difference payable to the crew totalled to USD 230,000. Owners agree to pay.

All par for the course so far; even if shipowners from the First World like to pretend they are all above board and terribly concerned about crew's rights, we know better. So Vega did what any self-respecting shipowner does when a part of his body is in a sling - it admitted to the Gibraltar Flag and the ITF that the Philipp accounts were 'wrong' and arranged to pay the quarter million or so to the crew in Liverpool on October 4 this year. It also flew in representatives from its Hamburg and Manila offices who surreptitiously boarded the vessel and waited until the money had been paid and the ITF and Port State Control officials had left. They then threatened the crew with legal action (and, I suspect, blacklisting and other threats too, as is usual) and had them return all the money to Vega.

The story did not end there; there is much more to come. For, in Tommy Molloy's words, "Within hours of the payout I returned to the vessel with port police officers and my suspicions that the money was to be taken off the crew were borne out. The crew had been sufficiently threatened by Vicente Fedelicio of Vega Crewing in the Philippines - who had travelled from Manila to Liverpool to be on board for the payment along with the German owner's representatives - to hand back the money, telling the police they had done so voluntarily because they did not want their wages."

Crew did not want their wages? Come on, Mr Fedelicio, that is not even specious. It is ridiculous. Couldn't you think of something better?

So Vega did, again, what any self-respecting shipowner does when - you know when. Two weeks later, on October 18, they paid the crew the quarter million once again. 

But wait. There is still more. Because seven crew signed off soon thereafter, in what was apparently a normal rotation. Vega's representatives called the crew at their hotel in the UK - to meet and probably threaten them again- but failed since Molloy was escorting them. (When confronted, they told Molloy that they were inviting the crew for dinner! Maybe it was to be the last supper). 

Anyway, the crew flew out from the UK the next morning, but, as you can gather by now, there is more. This is shipping; there is always more.

In Manila, Vega staffers- and hoodlums, judging from Philippines' news reports and ITF statements- waylaid six of the crew at the airport (they missed the seventh, who left from a different exit) when they returned.  According to two witnesses, says one Manila report, the crew were hijacked, put into vans along with their families who had come to receive them at the airport, taken to Vega's office, threatened- including, can you believe it, with legal action for theft- and forced to give back their wages. Again. The famous Fedelicio- the crewing Manager, it turns out- was reportedly again in attendance. As I write this, Vega is said to be trying to blacklist the seventh crewmember at the POEA, the country's overseas employment agency, since he still has his money.

I wish I could say that this story- that is still playing out- will have a happy ending, but it will not, because this is an old story we have heard many times before. The fact that a well-regarded European shipowner has conspired to first defraud, then extort, threaten and bully the crew to rob them is not new either. In many ways, this is the true face of shipping, and the ease with which shipowners shortchange crews is well known here. And although many shipowners do not go as far as Vega seems to have done, many would if they felt they could get away with it. Meanwhile, they defraud mariners of their legitimate wages and rights in a hundred different-smaller-ways. The difference is only in the degree to which they do so. 

 

Such is shipping, unfortunately, and, with the recession upon us, it will get sucher every day- just as it did in the eighties. I have faith in the industry.

I wish I could say that this story will end- like the Sound of Music- with the Von Trapps escaping the bad people over the hills and into the sunset. I wish I could say that the company and its people will be criminally prosecuted - either in Germany, Gibraltar or the Philippines- and made to pay for their crimes. I wish I could say that the crew will get their dues.  I wish I could say that justice will be done. 

But I can't say that all that will happen with even a hint of conviction, because this is not the Sound of Music. This is not a Hollywood story; it is a mariners' tale.

Command failure

 

When a forty-five year old Master- with eleven years of command experience under his belt- tells me that he has pretty severe family problems at home but is nonetheless compelled to rejoin his last company since they have 'given him a call', I know one thing for sure: he will not be doing his job properly on board, because he is typical of the Captain who will bow to pressure every time it is applied to him- or even when it is not.

To be fair, I have seen this trait- the desire to be ingratiating at whatever cost-  more amongst officers who work for ship management companies, even more so if they have been associated with a single firm for a large chunk of their careers. Ownership companies- if they manage their own ships directly- are generally more practical. They look at longer-term interests and associations; they understand that the relationship is symbiotic, and so do- mostly- the people who work for them. There is therefore more give and take on both sides. The idea is to work together; much better than the Big Daddy culture that permeates especially the larger shipmanning setups.

The problem is that a management setup is, despite claims to the contrary, usually just body shopping. A management firm is an intermediary that puts its own interests way ahead of the ship owner's- an idea that is directly at odds with any Captain's responsibility, where the interests of the crew, cargo and owner (not manager) must be protected first. It is not surprising, therefore, that many of these companies have more than their fair share of Masters who are either spineless or are unable to assert their authority, for strong self-assurance is not rewarded here. Gutless behaviour, on the other hand, will keep all those clerks happy in the office- that in turn will guarantee you a job, it is hoped.

How many times have I heard submissive senior officers say of a management company, "This company is good; they have 150 ships. Even if one ship owner does not like you, they will put you on another ship." This attitude spills over into all facets of work. These Masters and Chief Engineers keep a low profile, hesitating to make a call or postponing important decisions, hesitating to stick their neck out, expending huge effort in doing little except sitting out their contracts. Their lack of confidence is staggering- and, on a ship, dangerous.

I know why companies promote such shooting-yourself-in-the-foot kind of behaviour, but they can only be blamed for this wishy-washy culture up to a point; the truth is that many senior Masters and Chief Engineers will happily crawl when they are asked to kneel. I have come across these officers too often, showing a spineless eagerness to break the rules or compromise on safety for commercial advantage. I have seen them overloading ships, sailing without essential spares, compromising on the safety of navigation, pumping out oil, cheating on cargo and bunker figures, accepting substandard safety equipment, nickel and diming the crew with wages, working conditions or food and generally behaving like clerks in a government office rather than senior officers responsible for two dozen crew and a ship with its cargo. Even when nobody in the office hints that they push the safety envelope, they often do so anyway, perhaps to demonstrate their warped loyalty to the company. All of which comes under the heading of 'not doing your real job', in my book.

Ignoring all expletives (something I am finding very difficult to do here), I want to tell my friend-the one who is ready to rejoin- many things. I want to tell him that a self-effacing nature is good only if it is not the outcome of a lack of self-confidence. Rejoin if you must; that is less important than my belief that your attitude, continued on board, makes you unfit to be a Master. 

Remember your first loyalty is to the ship, its crew and cargo. This is not my opinion; this is the law. Remember the ship owner comes before the ship manager- you can figure out where loyalty to yourself fits into all this.

Remember that the crew, owner or ship manager do not have to like you. Much better if they respect your professional competence; that, after all, is what you are being paid for. So make decisions, even the tough ones; that is your prerogative, not that of some accountant in some office- or even the Superintendent's. Remember that an ingratiating person may be liked but he is usually never respected. Besides, somebody like me automatically questions the competence of a person who is always bending over backwards for nothing.

Remember that it is not enough to know your job; you have to execute it. Which means being tough but fair with everybody- crew and managers included. Which means being able to say no to the crew- or the head of your body shopping setup. Which means being assertive- sometimes aggressively so. This is called being in Command. A Master who is forever eager to jump through hoops and wag his tail in an attempt to ingratiate himself with an organisation with which he has a contractual relationship is not in Command.  

Realise that the safety of the ship is paramount, and you are required- by law and otherwise- to put your foot down whenever attempts are made to pressure you into taking short cuts. Remember that this often entails an aggressive stance that is completely at variance with an ingratiating attitude. The managers or owners who push you really have no option if you say no. They can replace you, sure, but that will come later. Until they do, however, they have to do what you say, Meanwhile- in Connery's words from the movie- they are stuck between a rock and a hard case.

I want to tell him that anybody who is unwilling to take responsibility for his job on a ship- or somebody who is happy to outsource his decision making to sometimes unqualified, often unaware and probably less experienced people sitting thousands of miles away- is not fit to be given the responsibility to begin with. 

I want to tell him that he has been a merchant ship Captain for more than a decade; it is time he started behaving like one.

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Strategy for Shipping: survival, not growth

I hope shipping does not react the way stock markets across the world did last week in response to the latest Greek bailout; the euphoric unthinking rise in indices did not hide for long the deep structural problems that exist in many economies across the world. Two days later came ILO warnings of a likely dramatic drop in future global employment and the associated 'ignition' of civil unrest. More bad news surfaced, this time about Chinese manufacturing slowing down. And of course, the biggie- plans for a Greek referendum on the new bailout plan- a vote that could see Greece defaulting and exiting the EU in the worst-case scenario. Many Greeks prefer this; they want to be able to print Drachmas again.

The stock markets, true to form, promptly went down again after the referendum story broke.

There exists great risk that we are all in for a multi-year economic slowdown, and shipping would do well to be realistic- even circumspect- in these times. Which means hold on to those new building plans for a bit, please, for a start. 

The European Union- read Germany and France here- has written off half the Greek debt to try to keep that country afloat. The problem is that the Eurozone is reeling under sovereign debt even if one ignores Greece; numbers out of Italy, Spain and Portugal make the Greek figures look positively rosy in comparison. Just one of them- Italy, the world's eight largest economy, has $2.6 trillion in outstanding sovereign debt, the fourth largest in the world after the United States, Japan and Germany. French banks have the biggest exposure here- $500 billion- but banks across the world, especially in Europe and the US, have significant Italian risk- and will be tottering should Italy collapse Greek style. No wonder Standard and Poor downgraded Italy's debt ratings recently. 

The Greek bailout has to be seen in this context: Greece is the domino that cannot- in Brussels' eyes- be allowed to fall and take down everybody else with it. To me Greece is not the end; it is the beginning of a series of steps that will need to be taken to prop up many others in the Eurozone. The US may be even worse off, mired in debt as it is. However it can, in comparison to individual countries in Europe, print dollars to prolong, postpone (and deepen) its inevitable economic slide. European countries cannot print Euros; only the Union can. Which means that the entire European Union will continue to be economically hamstrung because of the follies (and fraudulent figures, as with Greece) of its weaker members, of which there are many.

With fifty percent of Greek debt written off, recapitalising banks and building the 'European Financial Stability Facility (EFSF)' - a bailout contingency fund- will require belt-tightening in Europe. Even if these plans go smoothly (Within days of the announcement, The Federal Constitutional Court in Germany issued an injunction against the committee on the EFSF and barred it from taking any decisions pending clearance about its constitutionality), money will be sucked in to service European debt at the cost of growth. Overall, not even the beginnings of a recipe for European economic recovery. For shipping, therefore, cause for grave concern. I will be keeping a sharp lookout for signs that the EFSF plan is unravelling.

News from the rest of the world is not much better. The Arab Spring- or parts of it- is slowly morphing into a war for resources. With President Obama announcing last month that he was sending US troops to Uganda to join the civil war there- and with US troops ready to go to Sudan, the Central African Republic and Congo on one excuse or the other, I can easily buy into John Pilger's assessment that rapidly growing Chinese involvement in African resources is driving Obama's actions. "With Libya secured, an American invasion of the African continent is under way," he says. This may not necessarily be bad news for shipping- except that instability and conflict in Africa will inevitably threaten trade, and may even increase piracy.

The Indian story, such as it is, has been hard hit with high inflation and a paralysis of Government. Some economists have already started talking about possible growth figures that are closer to 6 percent than the eight or nine that the Prime Minister wistfully tom-toms. A six percent figure may seem quite good, given the global economic scenario today, but the cumulative effect of a two percent differential in GDP growth over the next few years, if it happens, will be devastating for trade and investment- and shipping.

Then there is the biggie, China. An export economy that is starting to feel the pinch of weakening global demand. Consumers in the US and Europe are already rapidly scaling back consumption and repaying personal debts; this drop in demand of goods from China will probably stay weak for years. China may be rich- with reserves of $3.2 trillion, it certainly appears so- but it has its own problems. To begin with, it may have to start shutting down factories should its two biggest markets- Europe and the US- stagnate. In addition, Chinese banks are said to be riddled with bad debts- the country had to shore up some of them recently. 

It is easy to see that a prolonged Western slowdown will have a cascading effect on the rest of the world that will not go away in a hurry. Demand for raw material may drop significantly in China if it finds no markets for finished products. Additional risks to shipping include a commodity bubble that may burst and civil unrest like the Greek riots and the 'Occupy Wall Street' kind of protests that, amongst other things, shut down the port of Oakland in California recently. Things can get hairy in other parts of the world- rising disparity and the war over resources will together prompt yet unseen upheavals in populations.

One of the few bright spots for shipping may be a mini-collapse of bunker prices, should commodities crash; the industry may feel, additionally, that falling commodity prices will by themselves stimulate demand. That scenario is far from being an open and shut case, I think. Recessions are funny things. They tighten belts and encourage protectionist policies- both anathema to free trade. Remember that the world is in recession with some of the highest unemployment figures seen for many years- in the case of the US, since the 1930's.

I fear that the biggest risk to the global economic order is that the western model of the crony capitalist system followed almost worldwide - the only game in town since the collapse of the Soviet Union- is coming apart, and there is nothing on the horizon to replace it. Can anybody tell me why the rest of the world, following an identical model and heading down the same road, will not similarly collapse sooner or rather? We are all persisting with the same doctrine that has proven to have spectacularly failed.

So once again, my advice to shipping will be to be very careful. It is already plagued with huge overcapacity issues and rising environmental, insurance and operational costs. Problems in the US, Europe, China-and India- are fundamental; they will not be resolved next year. Things in India may worsen by 2013, as a paralysed and besieged government starts preparing for the next general elections- and ignores policy in favour of populism. The European and US crises will probably play out over a few years, and I doubt there will be many soft landings here. Or anywhere else. 

Shipping is already struggling to stay afloat. It will be wise for the industry to pause now, to circle its wagons and remain extremely defensive. It is time for the short timers to quit the industry; they will be the first victims of the consolidation that will surely happen. For the others, sitting on cash may be a good idea- although it is probably too late to start now. 

In the midst of all the mayhem, appreciate the irony, if you will, of Europe looking to China- where 200 million people live on around a dollar a day- to shell out money for the Eurozone bailout. China may well do this in the end, for reasons to do with its own strategic goals and its inevitable expansion at the centre of the global stage, but I can't see how China buying European bonds will do anything to bring economic growth back to the Eurozone- just as their buying US debt over the years has done nothing except keep the US afloat. But that is exactly the imperative today. 

So forget growth; survival is the recommended strategy here, for shipping and the global economy both.

Seafarer (in)competence and the fallout of the 'Race to the Bottom'

 Filipino mariners are under fire again. The flashpoint this time is the Rena grounding and oil spill in New Zealand- the country's largest environmental disaster. The Rena was manned completely by Philippine nationals, and questions are being asked about their competence.  The Green Party has called for an investigation on the adequacy of Filipino seafarer training; referring to the action taken in May by the Lisbon based European Maritime Safety Agency (EMSA) that threatened to ban Filipino seafarers from EU ships unless issues raised by the agency were not satisfactorily addressed. That Damocles' sword has still not been sheathed.

“Given the tragic consequences that can occur when things go wrong at sea, it is of the utmost importance that our Government ensures that all vessels entering New Zealand waters are crewed by well-trained individuals,” said Green Party Co-leader Dr Russel Norman. “Considering that the Rena was a flag of convenience ship, crewed by Filipinos – whose training is under question – I hope the Government will consider greater scrutiny and regulation of our coastal shipping vessels and crews," he added. 

Interestingly, even before the Rena grounded on Oct 5, the European wing of the  International Transport Workers’ Federation (ITF) had said at the end of September that Filipino crews "should be subjected to targeted inspections and unspecified control when calling in EU ports", according to a Lloyd's List report. Philippe Alfonso of the of the European Transport Worker's Federation had written to the European Commission, quoting earlier EMSA findings and expressing concern about the quality of training at some maritime academies in the Philippines.  “The ETF urges the commission and the member states to adopt the necessary measures to remedy the breach. These measures could include targeted inspections and controls for Filipino crews calling at EU ports until such moment when EMSA receives satisfactory reports of improvement of the present situation,” he had reportedly written.

Now EMSA is coming to audit India this month, the grapevine tells me. I am unsure exactly what they are coming to inspect, but it appears that the visit is official and the Directorate General of Shipping is preparing for the EU inspection. It is perfectly possible that India may be next in EMSA's firing line- keep in mind that EMSA derecognised Georgian certificates late last year because of competence and quality of training issues. India or the Philippines are not Georgia, sure, but these countries may find that their armour is not as thick as they once thought it was.

The Indian maritime education juggernaut should be worried at these developments, because some of the comments made by the Green Party in New Zealand, the ITF in Europe -and in the EMSA report on the Philippines- apply equally to this country:  Here are a few of those:

"Mr Alfonso (of the European Transport Worker's Federation) points out that concerns include the functioning of the maritime administration, insufficient quality procedures, insufficient monitoring of schools, inaccurate approval and review of courses, the level and quality of training, the poor quality of inspection of maritime training institutes and the allegedly insufficient qualifications of instructors and assessors"- David Osler, Lloyds List.

"The ETF believes that every seafarer in the world should comply with the same requirements and that it would be wrong for European seafarers effectively to be subjected to stricter training and regulation than third-country nationals".- Philippe Alfonso, ETF

"Unfortunately, Filipino seafarers have become fodder in the global race to the bottom to produce and transport goods as cheaply as possible, and could be missing out on the proper training they need and deserve"- Russel Norman, Green Party, New Zealand.

Anybody connected with maritime training in India will tell you that these people could very easily be talking about this country, not just the Philippines.

As expected, the threatened derecognition of Filipino STCW certificates by EMSA- and other ban calls- have raised hackles in the Asian shipping world. There has been much written about the criminalisation of the Master and some other crew on the Rena; there has been criticism too, of the seemingly arbitrary and high-handed approach of EMSA and others, with some saying that the derecognition of STCW certificates should not be a matter for local agencies, the ITF or political parties to either comment on or threaten mariners with. Many point out that the Flag-of-Convenience business model is what is to blame, as it is inherently flawed and cannot be allowed to continue if we desire safer seas or cleaner oceans.

Some say that EMSA- founded in the aftermath of the Erika and Prestige disasters- should be examining the deplorable behaviour of European nations, ship owners, managers and classification societies before it points fingers at the training systems of developing countries. Some are angry that the Indian authorities have even permitted an audit of their training infrastructure. One serving sea Captain says, "How will Europeans react if civil aviation authorities in India demanded that they be allowed to audit European flying schools or their country's aviation administrations, on the grounds that many European pilots are flying on Indian airlines?"

  

I take all these points; they all have some merit. I will even add one or two of my own- that EMSA or anybody else will find it much harder to browbeat the Chinese, either today or especially years later, when their nationals proliferate in commercial shipping, as I believe they will. Even if the Chinese training and certification systems are weaker than ours are- certainly the case today.

My main objection, however, is that EMSA and the others have once again chosen to target just seafarers rather than address other 'root causes' (that term should please the jargonists that overwhelm us) of poor competence on the ground- Flags of Convenience, short manning, fatigue, corrupt or inefficient international and national administration et al. Not to speak of other participants in the 'race to the bottom.'

In the end, I think that all these arguments- including mine- are valid but diversionary.  The fact is that the quality of seafarers in India is dropping to levels where we often attract the dregs of the available talent pool, such as it is. Additionally, our training apparatus leaves much to be desired and must be overhauled irrespective of what EMSA may say. The fact is, also, that ships are being built bigger, casualty statistics are rising- and will continue to do so, because the calibre of the modern seafarer and the calibre of the maritime educational and administrative system is suspect. Bigger ships will mean a bigger scale to everything, including accidents.

Western populations are becoming much more sensitive to ecological and environmental issues; the rest of the world will slowly follow. When all this is put together, there will be much greater public pressure to examine the professional credentials of the men and women who crew commercial vessels. Answers will be angrily demanded after every accident on every coast- they already are.

A good thing, overall, I think, if it improves safety and environmental protection. Sorely needed. In fact, let me go a step further, tongue in cheek, and say that I would like to see EMSA- or the Green Party, or the ITF- take this beyond issues of competence. I want to see them stopping ships sailing from their ports- or banning them altogether on their coasts- for other reasons besides the supposed incompetence of crews. I want them to ban ships also because, for example, the Flag of Convenience the ship is sailing under is a little too convenient. Or because the crew are too fatigued to operate the vessel safely. Or because the vessel is calling so many ports in such a short span of time that unfatigued safe operations are obviously physically impossible with the number of crew on board.

I bet the fur will really fly if we set all the cats amongst all the pigeons all at once.
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(Between the writing and publication of this piece, PMI Colleges- the largest and oldest maritime college in the Philippines- has been forced by local authorities to close down its maritime education programmes for failing to comply with local and international standards. An estimated 10-13,000 students are affected). That news is here;  Philippine Government clamps down on oldest and largest maritime school )