Role of Classification Societies in Shipbuilding : A Primer for Naval Architects & Marine Insurers

1. A brief history

1.1 The first classification society was formed in 1760 in Lloyd’s Coffee House, London. Lloyd’s Coffee House was a centre for the marine business interests of the day and the Register Society was formed by the customers of the coffee house. The society, later to become Lloyd's Register, was started in order to grade the condition of ships to assist charterers, insurers and other interested parties to assess the risk associated with any particular vessel.

1.2 In the early years classification was simply an assessment of the standard of construction and continuing soundness of ships as determined by the surveyors. In later years the experience and knowledge gained from such assessments led to the creation of rules for the construction and maintenance of ships. Classification rules have been under continuous review and development since that time and now address ship structures and essential shipboard engineering systems.

1.3 Subsequent to the introduction of “open flag registers”, such as Liberia and Panama, and the formation of the United Nations body IMCO (now IMO) to develop regulations concerning technical standards in shipping, Classification Societies have provided statutory certification services on behalf of Flag States.

1.4 Today there are over fifty classification societies in the world. However, 90% of the world merchant fleet (by gross tonnage) is classed by the ten members and two associates of the International Association of Classification Societies (IACS) – an industry trade association that facilitates co-operation between societies.

2. Classification Today

2.1 IACS defines classification as follows:
“Ship Classification, as a minimum, is to be regarded as the development and worldwide implementation of published Rules and/or Regulation which will provide for:
1. the structural strength of (and where necessary the watertight integrity of) all essential parts of the hull and its appendages,
2. the safety and reliability of the propulsion and steering systems, and those other features and auxiliary systems which have been built into the ship in order to establish and maintain basic conditions on board,thereby enabling the ship to operate in its intended service.

3. Perceptions

3.1 Although the IACS definition is clear the perceptions of different actors in the industry do vary. Many view classification societies as the industry regulators. In the IACS paper Ship Safety and Pollution Prevention: The Regulatory Regime,4 Mr Smith implies classification is a regulator when he says
“The regulatory regime concerning ship safety and marine pollution prevention is comprised of classification rules made by classification societies and the regulations contained in the international conventions made collectively by Member States at IMO.” (emphasis added)
This perception is reinforced as a result of the statutory work that the societies carry out on behalf of Flag States. However, classification societies are not regulators.

3.2 AMRIE believes that this blurring of definition and perception hinders the debate on the technical aspects of shipping. In order to place the AMRIE position on classification societies in context the AMRIE view on the regulatory regime, and the role of classification, is outlined below.

4. The Regulatory Regime

4.1 In terms of the international shipping industry the authority and principal jurisdiction a vessel falls under is that of its Flag State (subject to any Port State or Coastal State jurisdiction). This is reflected in customary international law as codified in the Untied Nations Convention on the Law of the Sea (UNCLOS).

4.2 Under Article 94 of UNCLOS the Flag State has certain duties including:
“effectively exercis[ing] its jurisdiction and control in administrative, technical and social matters over ships flying its flag”
taking “such measures for ships flying its flag as are necessary to ensure safety at sea with regard, inter alia, to:
a) the construction, equipment and seaworthiness of ships;
b) the manning of ships, labour conditions and the training of crews, taking into account the applicable international instruments;
c) the use of signals, the maintenance of communications and the prevention of collisions”
“In taking the measures called for…[above]…each State is required to conform to generally accepted international regulations, procedures and practices and to take any steps which may be necessary to secure their observance.”

4.3 In terms of technical matters “accepted international regulations” is generally accepted as meaning those produced by the International Maritime Organisation (IMO). The most important of these in the context of this paper is the Convention on the Safety of Life at Sea (SOLAS) – the only convention that specifies classification as a statutory requirement.

4.4 The SOLAS convention lays down provisions concerning maritime safety. It is the most comprehensive and widely ratified text of its kind and lays down requirements for the construction of ships, fire protection and extinction, life-saving appliances, radio communication and requirements for the carriage of grain and dangerous goods.
SOLAS Part A-1, Regulation 3-1 states:
“In addition to the requirements contained elsewhere in the present regulations, ships shall be designed, constructed and maintained in compliance with the structural, mechanical and electrical requirements of a classification society which is recognised by the Administration in accordance with the provisions of regulation XI/1, or with applicable national standards of the Administration which provide an equivalent level of safety.”

4.5 In is worth noting that although classification is laid down as a requirement it is not mandatory. An administration may use its own national standard if it wishes, although no such standard currently exists.

4.6 In summary, Flag States are the regulators of technical standards working within the framework as codified by UNCLOS and standards defined by international conventions developed under the auspices of the IMO. In terms of structural, mechanical and electrical requirements they can choose which standards they accept and apply, although in practice, they use those of a classification society.

5. Classification

5.1 The primary sources of independent technical expertise in shipbuilding lie with the Classification Societies. Their role is well defined by IACS above – they develop technical standards, i.e. rules, for the construction of ships. They will approve designs against their standard, conduct surveys during the construction of a vessel and issue a certificate to say that the vessel meets the requirements of their standard on delivery. They prescribe regulations requiring periodical surveys and upon satisfactory completion of such surveys endorse the vessel’s classification certificate to indicate that the vessel still meets the required standard. For all these services, fees are charged based on the size and complexity of the vessel.

5.2 Regulators, port states and other interested parties can then accept the certificate as evidence of the standard of the vessel if they so choose.

5.3 In general, shipyards and shipowners pay for the work of Classification Societies. At the new construction stage the owner specifies which Classification Society is to be used, but the contract for the services provided is usually with the shipyard. Upon delivery the owner then has a contract with the Society for the provision of services, including classification related and statutory surveys (see below). The fees charged for these services represent a very small proportion of the costs involved in such projects.

5.4 Most Classification Societies are not for (distributed) profit organisations that exist for the benefit of the industry they serve. Committees that represent the industry, consisting of representatives from ship owners and operators, builders, insurers, charterers and other relevant parties govern such societies. A small number of societies, however, are limited companies with shareholders.

5.5 It is useful to highlight what the societies are not. As discussed above they are not regulators, neither are they enforcement agencies - they have no authority. There are no punitive measures they can take against a ship owner. If the vessel does not meet the required standard as laid out in the rules, and the owner will not carry out remedial work, the classification certificates will be withdrawn - nothing else. Also, they are not responsible for the maintenance of ships - the certificates issued, or in the case of a periodical survey endorsed, indicate that at the time of survey the vessel met the prescribed standard.

6. Statutory role

6.1 In addition to the technical matters addressed by classification, vessels must comply with the technical requirements laid out in the adopted IMO conventions. As outlined above, ensuring such compliance is the responsibility of the Flag States and some do carry out this function, approving plans and conducting surveys themselves. However, many Flag States do not have an administration with sufficient capability or resource to do so and delegate this task to a recognised organisation, usually a Classification Society. The large Societies have authorisations, to varying degrees, from more than 100 Flag States to carry out plan approval, surveys and certification in accordance with international conventions and codes on their behalf. The only non-technical authorisation delegated to Classification Societies is for the ISM code.

6.2 Some argue that, in these circumstances, the responsibility for ensuring compliance is transferred to the Classification Society. However, it should be noted that authorisation agreements do include clauses with regard to Flag State supervision and audit of recognised organisations - acknowledgement of retained responsibility. The AMRIE position in this regard is that the responsibility for safety at sea with regard to the construction, equipment and seaworthiness of ships remains with the Flag State as defined under UNCLOS Article 94. However, this does not absolve the Classification Society of the responsibility to carry out their work in a professional and diligent manner, ensuring that when a certificate is issued - stating that a vessel complies with a pertinent regulation - the vessel does indeed comply. (Nor in a more general sense does it obviate the practical need for Port State control)

6.3 As discussed in the previous section the societies are not enforcement agencies or responsible for maintenance. This position is further demonstrated by the fact that they do not have the authority to withdraw statutory certificates they have issued – this can only be done with the specific authority of the Flag State.