Economic approach to maritime piracy

An economic approach to the control of maritime piracy is based on the general economic theory of law enforcement that views offenders (pirates) as rational decision makers who would respond to threatened punishments.

Implementation of optimal enforcement policies is impeded by lack of cooperation in the apprehension and prosecution of pirates as a result of free rider problems. In this sense, controlling maritime piracy is subject to similar problems as the prosecution of the global war on terror and the anti-drug war.

The overall economic cost of maritime piracy in 2012 was estimated at $6 billion, down from $7 billion the year before and as much as $16 billion a few years earlier. Spending on on-board security equipment and armed guards increased from about $1 billion to $2 billion between 2011 and 2012. Other economic costs include additional travel days as a consequence of re-routing of ships; increased insurance costs of as much as $20,000 per trip; increased charter rates, as longer time at sea reduces the availability of tankers; the cost of faster steaming through pirate-affected seas; and greater inventory financing costs for cargoes that remain longer at sea.

The efficiency of the pirate organization contributes to its success, both historically and in modern times. Accordingly, present-day Somali pirates have developed supportive “social” organizations that aid them on land and at sea. For example, pirate leaders often require new recruits to swear allegiance to the organization and its leaders until death. In addition, many Somali pirates are ex-coast guardsmen or ex-militiamen, and share a common background and training. As for motivation, there is a common belief among many pirates and their sympathizers that ransoms are like a tax on foreigners who are overfishing Somali waters.

An economic approach to the control of maritime piracy is a direct application of the economic analysis of law enforcement, which is a large field of research within the area of “law and economics.” The approach relies on two fundamental claims: first, that pirates (or any criminals) behave rationally in the sense that they respond to the threat of sanctions when making their decisions about whether or not to commit an illegal act; and second, that the enforcement authority stands ready to enforce the threatened sanctions by expending resources to apprehend and punish those offenders who violate the law.

Optimal enforcement of domestic laws against crime is a credible threat because there is a single enforcement authority (usually a city or state government) that has both the will and the resources to apprehend offenders. In addition, there exists a highly organized criminal justice system aimed at adjudicating criminal charges and carrying out sanctions against convicted defendants. In contrast, enforcement of laws against piracy, because it usually occurs outside of any single country’s jurisdiction, necessitates the cooperation of multiple nations in order to achieve optimal enforcement.

Law enforcement has public good qualities in the sense that actions by any one country to apprehend and punish offenders will benefit all countries whose ships are at risk. Thus, each country has an incentive to “free ride” on the efforts of others. Thus, in the absence of some mechanism (like a treaty) that obliges countries to contribute to the enforcement effort, the level of that enforcement will be too low. If the costs of prosecuting pirates fall exclusively on the country that apprehends them, then countries will have an additional reason to refrain from enforcement, especially if the offender’s acts were not against the apprehending country’s vessels. A related problem is that threats to actually impose punishments may lack credibility, either due to the costs of incarceration, or in some cases, sympathy for the pirates’ cause or grievance. Indeed, there are many stories of pirate’s simply being released after capture.

The U.N. and some countries recognize the inadequacy of current multi-state enforcement of existing international laws against piracy, which has prompted efforts to improve cooperation. Other observers have proposed enhanced remedies. One is use of the International Criminal Court (ICC) to try pirates. However, this would likely require modification of its jurisdiction, given that its use is currently limited to war crimes, crimes against humanity, genocide, and aggression. It would not seem to be a large stretch, however, to include maritime piracy in this list.

A second proposal is to apply the Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation (SUA Convention) to piracy. Although the Convention was aimed at terrorism, some have argued that several of its provisions could be used to improve anti-piracy efforts. ¬†The Convention purports to be directed at unlawful acts that are directed “against the safety of maritime navigation,… [and that] jeopardize the safety of persons and property…” Although piracy would seem to fit these criteria, there seems to be no current efforts to pursue this proposal.

Source: Piracy Studies РUniversity of Connecticut


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