With all good intentions

IN the summer of 2000, Turkey introduced the Turkish International Ship Registry (TISR), its second ship register. Prior to its establishment, there had been a lobby from Turkish shipowners for a more advantageous registration scheme which would offer an alternative to offshore flagging, which had traditionally been effected in Malta. Yet, despite high hopes that the TISR would promote, strengthen and enlarge the Turkish fleet by attracting overseas tonnage, to date it has only served to re-register existing Turkish tonnage, with just one foreign vessel entering its books.

The initial legislation for the new registry was put in place in December 1999, and an accompanying directive was enacted in June 2000, thus opening the registry's books for business. Vessels registered in the TISR fly the Turkish flag and enjoy the privileges of those vessels registered in the original Turkish register, with the exception of cabotage trades. Together with other requirements, the 51 per cent Turkish nationality requirement was removed for the TISR and, to qualify, the shipowning company may be a wholly foreign- owned entity provided it is established as a company within Turkey.

So why has the TISR failed to attract foreign tonnage, given that it affords the principal tax incentives available in other offshore registries and accompanying Turkish-flag freight incentives from the government? There appear to be four main reasons - the bareboat restriction, cabotage rules, Turkish company establishment bureaucracy, and the minimum Turkish crew requirement.

Bareboat restriction

The TISR does not permit entry by bareboat charter party. Indeed, the TISR legislation seems to regard bareboat chartering simply as a means to change flag. The Turkish national registry does allow entry via bareboat charter, albeit by a complicated and bureaucratic application process. It seems ironic that one of the aims of the TISR was to attract foreign tonnage under the Turkish flag, yet it has failed to do so by not permitting entry by bareboat registration. Since the inception of the TISR, there has been a large volume of enquiries from owners speculating about whether they can enter the TISR by bareboat charter.

Cabotage rules

Any legal entity established with at least 51 per cent Turkish nationality shareholding and with a Turkish majority on the board of directors (under Article 823 of the Turkish Commercial Code) is entitled to benefit from Turkish cabotage trades, regardless of whether the vessel in question is registered in the national or international registry. However, according to a restriction created by the TISR legislation, vessels which do not qualify under Article 823 are not able to benefit from cabotage rights. This situation, therefore, removes any incentive for a foreign owner to register in the TISR in order to engage in cabotage trades. Typically, oil majors and owners enquiring about trading inshore in Turkey have been prevented from doing so with their own fleet.

Turkish company formation

Perhaps the most onerous requirement of the TISR is that the owning entity must be established in Turkey - a time-consuming and bureaucratic process. Such an obstacle is not present, for example, in the Norwegian International Registry, which requires that only technical or commercial management of the vessel be Norwegian. Given the present economic conditions in Turkey, where foreign investment is sorely needed, it is hoped that the methods of establishment for foreign enterprises are relaxed in the near future.

Turkish crew requirements

The TISR also requires that vessels registered on its books be captained by a Turkish national. There is a further stipulation that those vessels owned by Turkish nationals or entities, which comply with Article 823, have a crew which is at least 51 per cent Turkish when operating outside the cabotage trades. This may be seen as defeatist to joint venture projects based on a Turkish partner and a formerly foreign-flagged vessel.

It comes as a disappointment that the TISR is effectively the new Turkish national registry. Despite the fact that the Turkish government, in its affreightment tenders, continues to offer freight bonuses to Turkish-flag carriers, this and other incentives appear to be insufficient to tempt foreign tonnage into Turkey.