Palau Shakes Up Ship Registry Amid Oversight Crisis
KOROR, Palau (December 29, 2025) — In a significant move, Palau has officially terminated its contract with International Shipping Bureau Management Ltd. (IML) to manage the Palau Open Ship Registry. This decision follows months of operational failures, financial sanctions, and growing reputational concerns surrounding Palau-flagged vessels. The termination has sparked intense discussions in Congress regarding the future control of the registry during this transitional period.
Termination of Management Contract
The Palau Open Ship Registry, established under 7 PNC Chapters 6–13, has been under the management of IML and its affiliates, including P.C. IKE Palau International Ship Registry Inc. and Palau International Ship Registry Ltd., since a contract was signed in 2011 and later amended in 2018. However, the Palauan government issued a notice of termination in September 2025, citing a series of oversight failures and the negative impact on the nation’s reputation due to issues like blacklisting and sanctions-related financial freezes. The notice was temporarily withdrawn in November to facilitate an audit, but following the review, the government reaffirmed the termination on December 16, 2025, concluding that the registry’s operations no longer met necessary standards.
In response to the termination, the House of Delegates took action on December 18 by amending Senate Bill 12-22, SD1, HD2. This amendment allows the president to enter into a six-month, procurement-exempt contract to manage the registry, ensuring that at least 50% of the revenues generated will benefit Palau. Additionally, the amendment expands presidential authority during the transition, enabling the appointment of a ship registry administrator or special agent, and allowing for the delegation of responsibilities related to registry fees and international membership costs.
Congressional Response and Future Implications
Senator Eldebechel highlighted the historical context of the Shipping Registry Act, which led to the establishment of the Palau International Shipping Registry (PISR) as a collaborative effort between the Palauan government and the Padilla brothers, with administration by Panos Kirnidis. The revenue model relies on vessels paying to fly the Palau flag, with profits shared between Palau and PISR. However, complications arose when President Surangel Whipps Jr. informed Congress that businesses linked to the Padilla brothers faced U.S. sanctions, resulting in frozen assets and revenue streams tied to PISR. This situation ultimately prompted the president to terminate the management contract.
As Palau navigates this critical juncture, the focus remains on ensuring the effective operation of the ship registry while addressing the underlying issues that led to its current predicament. The upcoming months will be crucial as the government seeks to stabilize the registry and restore its reputation in the international maritime community.
