What Happened
Panama’s flag remains one of the most widely used in global shipping, a status highlighted by the recent cases of the Eventin and Jazz tankers, both sailing under the Panamanian flag. The ships encountered problems in northern European waters, drawing attention to how often vessels choose Panama’s registry for international operations.
The Panama flag has long been associated with low-cost registration and flexible rules. That reputation has made it a preferred option for shipowners around the world, including companies seeking to reduce regulatory burdens and operating costs.
Why Shipowners Choose Panama
Panama operates an open registry, which means any person or company, regardless of nationality, can register a vessel under its flag. There is no limit on the number of ships that can be added. That system has helped Panama build the world’s largest registry by vessel count, with 8,540 ships at the end of 2023, according to maritime industry figures cited in the piece.
The country also handled around 16% of the world’s merchant ships in 2023, according to UNCTAD. For shipowners, the appeal lies in comparatively low registration costs and the ability to operate under a flag that is widely recognized in global trade.
A Longstanding Maritime Practice
The use of the Panama flag dates back more than a century, with roots in the years after World War I and during the Prohibition era, when alcohol restrictions on U.S. vessels encouraged shipowners to seek alternative registries. The model later spread to other countries, including Honduras and Liberia, and expanded sharply in the 1980s.
This practice is often described as “flagging out” or using a flag of convenience. It allows shipping companies to register vessels in jurisdictions where taxes and regulations are generally less strict than in the owner’s home country.
Legal and Economic Context
Maritime law experts say the system persists because flag states hold sovereignty over their registries. The UN Convention on the Law of the Sea requires a “genuine link” between a state and a ship flying its flag, but international legal interpretations have clarified that this does not prevent states from granting their flag broadly, as long as they fulfill their responsibilities once registration is approved.
For Panama, the registry is a major business and an important part of its maritime economy. The system remains politically and legally difficult to change, despite repeated criticism from observers who argue that open registries can make it easier for operators to avoid higher labor and regulatory standards.
What This Means for Panama
Panama’s flag continues to play an outsized role in world shipping, reinforcing the country’s influence in global maritime trade. The current debate over economic substance rules in Panama has also put the maritime sector back in focus, especially after lawmakers considered excluding it from stricter substance requirements because registered vessels already operate under the Panamanian flag.
That discussion underscores a broader reality: Panama’s shipping registry is not just a symbol on a ship’s stern, but a significant part of the country’s international economic standing.