by Kevin Griffin of The Cruise People writing for cybercruises.com
Last week, after a month of public speculation, Cunard Line announced that it would transfer all three of its Queens to the Bermudian registry. That the first ship is being transferred as early as to-day, however, was unexpected. Behind the move, many suspect that the official reason for this, being able to offer weddings at sea, is just a cover to help Cunard to remove its ships from under the mess that is the UK’s Equality Act 2010, legislation from the last Labour government that came into effect this summer.
The new Equality Act act will adversely affect UK shipping by doing away with differential pay, whereby foreign nationals hired from abroad have been paid less than UK nationals. The fact that two ships are changing registry immediately – Queen Elizabeth today and Queen Victoria on Thursday, with RMS Queen Mary 2 to follow in five weeks – leads to this suspicion, especially as no weddings will be on offer before April 2012, and details of these packages will not even be announced until November.
Here is the sequence of events.
On July 3, 2010, after last year’s election, UK home secretary Theresa May announced that the UK would implement the previous Labour Government’s Equality Act in October. On the same day, the BBC made the first warning, reporting that “some shipping companies have complained that the laws will force them to quit the UK because they would have to pay UK rates to foreign-based seafarers who do not have the burden of British living costs.”
Prior to the Equality Act, shipping companies operating UK-flag ships have been able to engage seafarers from outside the UK at wages that are below UK scale. This differential pay had been sanctioned under section 9 of the Race Relations Act 1976, and made no exceptions for EU or other nationals. Workers recruited outside the UK could lawfully be paid lower rates than UK nationals on the same ship. But to the dismay of UK shipowners this exemption was not retained by Labour in the new omnibus Equality Act it passed in 2010.
On June 9, 2010, Coalition shipping minister Mike Penning released a Labour-commissioned review of the options of either (1) outlawing differential pay or (2) allowing it but without application to EU or European Economic Area nationals. The review, by an outside consultant called Susan Carter, with no experience of shipping, concluded that differential pay should no longer be allowed.
Her conclusion met with strong reaction from the shipping community. The UK Chamber of Shipping, in its response, entitled “Ill-informed and ill-considered report threatens UK-flag deep-sea fleet” described it as displaying “a breathtaking ignorance of the nature of the shipping industry.”
It has since been estimated that the combined potential increase in annual labour costs to UK shipowners is in the region of $412 million.
Lloyd’s List added on June 17 that “The industry’s common sense view is that making the UK the only flag of any significance to require all seafarers to be on the same salary irrespective of nationality would deal a severe blow to the Red Ensign.”
Penning, sympathetic to UK shipowners, was quoted as saying that the act, as drafted, “would decimate the fleet.”
This echoed the Chamber of Shipping’s view, which predicted that implementation would spell the demise of the Red Ensign, and that UK-registered ships would immediately switch to a cheaper option. The Chamber then proposed differential rates of pay related to the cost of living in seafarers’ home countries, but despite a legal opinion that this would be acceptable to the EU, the idea was not accepted by the government.
On January 27, 2011, following a complaint from the UK’s National Union of Rail, Maritime and Transport Workers (RMT), the European Commission requested the UK government to amend its legislation allowing for differential pay of non-UK seafarers. The government had two months to comply, failing which the commission could decide to refer the UK to the EU Court of Justice.
Penning, in response, pledged to do the “absolute bare minimum” to comply with the EU requirements and to legislate in a way that minimised the potential threat to the UK flag, which he was responsible to protect.
On May 13, 2011, Penning issued a statement saying that: “As the law currently stands, section 9 of the Race Relations Act, 1976, provides that it is not unlawful for seafarers to be paid different rates of pay on the basis of their nationality if they were recruited outside Great Britain.”
This includes seafarers from EEA States and designated States … with particular bilateral agreements with the European Union. The European Commission has been investigating a complaint that UK law does not comply with European Law and in January this year it issued a reasoned opinion on that basis. In order to meet its Treaty obligations, the Government is obliged to bring UK law into line with European law.”
He added that “The international nature of the shipping industry requires further clarity in specifying to which seafarers, working on which vessels, operating in which waters … the Act applies… the Act is also wide enough to legislate in respect of differential pay. The Regulations will, if approved, provide that it is not unlawful to offer to pay or pay different rates of pay to seafarers … if a person applies for work as a seafarer or is recruited as a seafarer outside Great Britain.”
On August 1, 2011, the Equality Act was implemented as it applies to shipping . A satisfactory solution for all had not been found, however, as it was no longer lawful to have differential rates of pay for EU nationals, no matter where they were recruited. The regulations treated ships like landbound factories, prohibiting discrimination against EU nationals on UK-flag ships trading wholly or partly in UK.
But it also meant that market rates that had been negotiated previously were no longer permissable. The new Equality Act, an encyclopaedia of all British equality legislation, totally misunderstands the nature of shipping and how it has to compete internationally in the space between nations. And while, the unions, particularly the RMT that had intervened in Brussels, lauded the day, they may yet come to rue it.
On September 23, after a polite few weeks’ interval, Peter Shanks, president and managing director of Cunard Line, came out talking of weddings, telling The Financial Times that “It’s no secret that weddings at sea are now very big business… However this business is currently denied to us, as our fleet is registered in the UK, and we have for some time been examining our options.
One is to stay as we are and forgo our share of this lucrative business; a second is to designate a ‘wedding ship’ and change that ship’s registry alone; and the third is to maximise the opportunity and re-register all our ships. I must stress that at present no decision has been made.”
Shanks made no mention of the disastrous effect the Equality Act 2010 might have on UK shipping.
Cunard Line was the last UK-based cruise line to fly the UK flag as first Princess and then P&O had abandoned the UK for Bermuda some time before. P&O perfomed 371 weddings in 2008, the last year they seem to have statistics for. But this could hardly be the real reason behind leaving UK registry.
That’s about one wedding a day – at £1,100 each, the P&O Cruises starting price, that’s insignificant over a fleet of four or five ships. Even at £10,000 each, it’s not a great deal in the scale of things. And do Cunard passengers strike one as being the ideal candidates for weddings at sea? So although first Princess and then P&O had been making money on them, weddings would seem not really to be the main issue here.
But had Cunard come out in a negative way against the new Equality Act it would have been on a hiding to nothing. As well as appearing to be against equality, it might have appeared to be anti-European, or worse yet been portrayed in the vulgar press with the typical hoary tale about employing slave labour.
Even though it might have looked suspicious, much better to come out in favour of doing something positive, hence weddings at sea, with which its sister lines already had some experience. However, the announcement has done no good for Cunard’s relationship with its most loyal clientele, many of whom are up in arms over the deflagging and threatening to boycott.
The Equality Act 2010 will now force owners of UK-flag ships to pay UK wages to Portuguese, Poles, Romanians and other Europeans. It will not apply to non-Europeans such as Indians and Filipinos, but it may yet apply to Russians and Algerians.If the annual wage bill on a container ship could be £400,000 higher if foreign sailors’ pay is raised to UK levels, what might it be on a cruise ship?
The Chamber of Shipping in its 2010/11 Report stated that around 260 UK-registered ships engaged in international trades were operated by members and that 230 would be reflagged if differential pay were outlawed. Even if differential rates of pay were still to be allowed for non-EU seafarers, the Chamber projected that 200 ships would de-flag.
On October 19, the other shoe finally dropped – Cunard let it be known that all three Queens would be transferred to Bermudian registry. Queen Elizabeth is switching registry to-day in Amsterdam, Queen Victoria on Thursday in Piraeus and RMS Queen Mary 2 on Thursday, December 1st, in St Lucia.
The transfers will all occur in foreign ports. On the ships’ sterns will now be painted Hamilton instead of Southampton (and if they need new letters there is a sufficient overlap between the two that they will only have to buy an “I” and an “L” for each ship). More seriously, this will mark the first time in 171 years that Cunard will not have a single ship registered in Great Britain.
One odd thing about this exercise is that this is not really a reflagging exercise at all, as the three Queens will continue to fly exactly the same Red Ensigns that they have flown all along. The Bermuda merchant flag was changed some time ago to remove the Bermuda shield from the fly and the British version was recognised officially in 2002.
The reason for this is quite obvious as the shield depicts a sinking ship, Sea Venture, which foundered on the reefs of Bermuda with its first settlers in 1609. (There was a time in the 1960s however, when, for tax reasons, part of the Canadian fleet actually flew the “sinking ship” version. Before Canada adopted its own flag in 1965, it was difficult to distinguish the Bermudian flag from the Canadian one, both being Red Ensigns with shields in the fly).
What the Queen might make of this change of registry would be interesting to know, but of course she is also the Queen of Bermuda, a British overseas territory with the UK responsible for defence and foreign affairs. The Queen has christened two of the three Queens, RMS Queen Mary 2 on January 8, 2004, and Queen Elizabeth just over a year ago, on October 11, 2010, not to mention RMS Queen Elizabeth 2 before them.
Cunard and weddings aside, the UK register is no longer as competitive as it was. With big owners such as CMA CGM and Evergreen Line, among others, having taken advantage of its tonnage tax provisions, will Cunard be the start of an exodus? Ironically, this move leaves the P&O Cruises Australia fleet, hardly ever see the UK, as the only important cruise ships on the UK register. Meanwhile, Bermuda is a great place to park your ships and control your costs while the UK cleans up its registry problems with the EU and becomes competitive again.