Palau Takes State Control of Ship Registry After Sanctions

The government of Palau has decided to nationalize the Palau Open Ship Registry following sanctions imposed on the private company that previously operated the flag.

Palau’s Ministry of Public Infrastructure and Industries (MPII) confirmed that the registry continues to function as normal under direct government oversight, with all services now managed by the Bureau of Marine Transportation.

Since December 15, the bureau has taken responsibility for vessel registration, statutory certification, regulatory supervision, and flag state administration. Authorities stressed that there has been no disruption to services during the transition.

The decision follows amendments to Palau’s Maritime and Admiralty Act, which grant the government full operational control of the registry. Officials said the change was driven by challenges linked to the registry’s former corporate structure after the private operator was subjected to international sanctions. These sanctions raised concerns related to governance, risk exposure, and operational stability.

Palau stated that the legislative updates are intended to support a “gradual and orderly transition” while ensuring uninterrupted and efficient delivery of registry services. The government added that the move was designed to mitigate risks associated with the sanctions while retaining institutional knowledge and technical expertise within the registry.

Authorities also emphasized that the takeover should not be interpreted as criticism of individuals involved in the registry’s former management. The government said its actions are limited to corporate governance matters and “do not reflect on the professional integrity or experience of Mr Panos Kirnidis”, the former chief executive of the Palau International Ship Registry.

Hayes Moses, director of the Bureau of Marine Transportation, said that daily operations of the flag remain unchanged despite the shift to state administration.

“Our priority is to ensure continuity of service and the effective administration of the Palau flag,” Moses said. “All registry services continue to be delivered in accordance with established procedures and international standards.”

Palau’s ship registry is generally viewed as a second-tier open flag with a mixed reputation within the global maritime sector. It is frequently used for vessels on their final voyage to demolition yards. Compared with top-tier registries that consistently demonstrate strong performance, Palau ranks lower in the International Chamber of Shipping’s flag state performance table.

The ICS table evaluates flags using objective measures such as Port State Control records, ratification of key IMO and ILO conventions, and regulatory engagement. It is intended to help shipowners assess the credibility of a flag state and encourage improvements where performance is lacking.

Regional Port State Control data supports this assessment. According to the 2024 Paris MoU annual report, Palau-flagged vessels recorded a detention rate of 11.5%, well above the average of roughly 4% and higher than larger registries such as Panama or Liberia.

Although Palau remains a legally recognized and valid flag state, these indicators place it closer to the gray zone. It is acceptable for many commercial operations but often requires closer scrutiny by charterers and financiers, particularly for higher-risk trades.