Ana Rosa Del Rey Revilla, Antonia Gough, Charlotte Morton and Mark Christian Soo, PACOM
April 19, 2021
South China Sea[1]
Piracy and armed robbery in Asia, especially in the South China Sea, have increased in recent years. This predicament, together with the dispute over maritime sovereignty and the economic instability of certain countries in the region, makes the security of the area an important problem to address. This is the main reason why some companies have chosen to hire private security companies (PSCs) to ensure the safety of their maritime operations in the face of the inability of governments to offer a solution in the short term. While it is possible for these PSCs to become an efficient and effective solution to the security problems that plague the region, the lack of up-to-date regulations of the PSC industry raises the risk of human rights violations in their actions. Therefore, international measures must be taken to ensure the safeguarding of human rights while making PSCs a useful and effective tool to tackle piracy.
In 2020, 97 incidents of piracy and armed robbery occurred against ships in Asia (95 actual, and 2 attempted). This is an increase of 17% in the total number of incidents compared to 2019. This increase occurred in Bangladesh, India, the Philippines, Vietnam, the South China Sea, and the Singapore Strait.[2] In the first quarter of 2021, six piracy incidents were recorded in the Singapore Straits, perpetrators being armed with knives on a number of these occasions. Two incidents were reported off the coast of Indonesia in the same period.[3] This indicates that such areas are not receiving enough policing, and perpetrators of piracy and armed robbery are operating with impunity, as shown by the majority of cases in 2020 being successful rather than attempted. One potential reason for this is that regional states are already pressed for resources as a result of the current South China Sea dispute, so policing their waters has become harder. Additionally, an increase in illegal fishing by Chinese militias is stretching resources thin and more people are resorting to piracy for financial gain.
As a result of this environment, the number of PSCs has increased, and their remit has evolved to specialize in providing a faster and more efficient solution to maritime security, which shipping companies can utilize to complement the security action of governments. However, the contracting of private companies opens up a range of possible abuses that are difficult to control and regulate. The private security sector not only lacks international regulation but also domestic regulation in their home and client countries. In particular, there are divergent opinions on how China performs in this regard. This is due partly to an intelligence gap. On balance, it appears that Chinese PSCs are regulated when active within China, as the government established a legislative framework over a decade ago - the Regulation on the Administration of Security and Guarding Services of 2009 - to regulate Chinese PSCs operating domestically.[4] However, Chinese PSCs, much like the majority of other international PSCs, are far less well regulated when operating outside of the host country’s borders.[5]
Chinese PSCs came into their own during the 2010s following the introduction of the 2009 law mentioned above and the launch of the Belt and Road Initiative in 2013. This initiative comprises the Maritime Silk Road and the overland Silk Road Economic Belt. Tensions felt in affected local communities as a result of the Maritime Silk Road have increased the need for PSCs to protect the interests and safety of Chinese employees, companies, and assets active in the waters. This need is likely to have been further elevated as a result of increased economic and societal instability brought about by the COVID-19 pandemic, as well as increased anti-Chinese sentiment. Accordingly, Beijing has a compelling case to safeguard and protect its assets, and PSCs have provided a favorable solution. The use of Chinese military or naval forces to fulfill this function would not be in line with the official government policy on the nature of the Belt and Road Initiative, and there are multiple other strategic priorities China’s armed forces have. PSCs provide a useful middle ground.
Furthermore, noninterference in other nations’ sovereignty is a longstanding cornerstone of Chinese foreign policy. Diplomatic relations between China and other countries in the region are already strained, so the Chinese government likely wants to minimize the risk of escalation - which is also in the interest of PSCs and of the countries they are linked to or based in. At the same time, PSCs represent for China a useful but deniable tool to advance its claims. Finally, piracy in Southeast Asia takes place on a smaller scale than elsewhere in the world, such as in the Gulf of Guinea or the Gulf of Aden. As a result, PSCs are often a more appropriate deterrent than a country’s naval forces, for example, the People’s Liberation Army Navy. As of 2016, 20 Chinese PSCs were active globally, employing 3,200 Chinese nationals overseas.[6] This represents only a small percentage of the total number of Chinese PSCs active domestically (5,000 by 2017), and China’s PSC industry is estimated to account for only 10% of total spending by Chinese companies on their protection overseas.[7] However these figures are a few years out of date and the industry is growing fast, so the proportion is likely to be higher. The trend appears to be in favor of the increasing number of Chinese companies operating internationally to employ Chinese over other PSCs, tilting the balance in their direction.
Multiple Chinese PSCs are active in Asia’s maritime region, however, they mainly serve Chinese clients.[8] Chinese PSCs providing private maritime security include HXZA, Hua Xin Security Services, Zhongjun Junhong Security Group, Hanwei International Security Services, China Security Technology Group, and DeWei Security Group.[9] These PSCs provide a range of services, including armed and unarmed escort services for ships and fishing vessels, anti-piracy operations, risk-mitigation plans for vessels, personnel safety training, geographical tracking, kidnap resolution, and security consulting. This is likely because their personnel speaks Chinese (increasing communication efficiency), they play into Chinese nationalism (advertising themselves as a trusted PSC that will act in China’s interests), and because Chinese companies may want to keep economic growth within China. One reason for Chinese PSCs leaning towards Chinese nationalism is that China’s regulation favors and encourages PSCs with an element of nationalism.[10]
On the other hand, foreign clients may not want to hire Chinese PSCs because of their guiding principles and nationalistic tendencies, which may result in a PSC serving Chinese interests over the client’s. This makes them potentially biased in their activity, which is a concern when contracting them. Chinese PSCs primarily serve and protect Chinese assets, meaning they may prioritize protecting Chinese assets over making a profit or doing effective business. This can act as a deterrent for foreign companies seeking PSC services because their business interests may not be considered the top priority. However, other PSCs that do not explicitly serve their home country would prioritize the business interests of their client over the country they are registered in and associated with. Therefore, it is in the interests of companies working in Asia’s maritime region to consider the political allegiance of PSCs, as this may impact the service they provide.
Despite the above considerations, non-Chinese shipping companies may lean toward hiring Chinese PSCs for a multitude of reasons. Chinese PSCs are a fraction of the price of their British or American equivalents. Well-established foreign PSCs are often far too expensive for Chinese and non-Chinese companies operating in the region.[11] Chinese PSCs have a much greater potential for providing cost-effective services. Furthermore, Chinese PSCs’ regional know-how in maritime security, and better cultural “fit” potentially make them the best companies to deal with security problems in the region.[12] They may make it easier to work in Asia and especially in the South China Sea. This is likely because of China’s role in the Belt and Road Initiative that results in companies wanting protection. Since many of them are based in China, they may prefer to hire Chinese PSCs rather than non-Chinese. For non-Chinese vessels or assets that require protection, they may be tempted to contract Chinese PSCs due to their influence in the region both economically and politically. Many Chinese PSCs have close links with the Chinese state-owned companies wanting protection in the region.[13] However, the hiring of Chinese PSCs by non-Chinese companies may come with political and reputational risks arising from the connection of some PSCs to China’s People’s Liberation Army (PLA). For example, the head of Zhongjun Junhong Security Service is a former colonel of the PLA.[14] As such, hiring that company or similar PSCs would create ties to China which, albeit unofficial, should be a consideration for clients.
However, given the tensions existing between China and other countries regarding sovereignty over certain maritime areas of Southeast Asia, the employment of Chinese PSCs may (inadvertently) increase tensions in the region. For instance, China may employ PSCs as proxies to protect its interests over disputed reefs or maritime areas in the South China Sea. This would present the significant advantage of deniability - as the Chinese Coast Guard and Navy would not be directly involved - and is consistent with China’s use of ‘maritime militias’. Other countries and non-Chinese companies may perceive China as using these companies to assert its sovereignty in the area. The possibility that some countries, notably China, may employ PSCs as a tool to promote their geostrategic goals, may turn a win-win scenario of maritime security into a zero-sum geopolitical game that would contribute to instability in the region. The most probable scenario entails Chinese PSC personnel using force to repel fisherman or even maritime law enforcement units from disputed areas. Even if the PRC would not be directly involved as a state, the incident would still likely result in a diplomatic spat and possibly into an armed confrontation.
Several international non-Chinese PSCs, most notably G4S, Control Risks, and Blackwater, have responded to the increase in demand for deployment of Chinese PSCs in the Southeast Asian region by setting up regional offices in China and Hong Kong. While their presence is due to the inherently international nature of maritime traffic in the region and contributes to the fight against piracy, there are political risks to consider with the use of foreign PSCs as well. Since China (and potentially others) are using fishing vessels and ‘maritime militias’' to advance their claims in the South China Sea, there is the risk of an incident involving these PSCs and Chinese nationals. This would likely become a diplomatic standoff that, in turn, could potentially lead to a conflict.
The rapid increase in growth of PSCs in the Chinese context means that many aspects surrounding their regulation and governance remain unresolved. For example, the country is yet to fully decide what model Chinese PSCs will take - either closer to the Western model where PSCs are often independent of the state, use force as a last resort, and operate with more transparency, or more in the direction of the Russian approach with almost zero accountability and greater intertwining with the state. It is also possible that China will move to become a hybrid mix of both models. The Chinese government is not keen on giving companies free rein, but at the same time is likely to be highly aware of the international community’s negative sentiment towards China more generally. Furthermore, challenges are posed to PSCs by the lack of training and expertise of some Chinese PSCs. While their quality varies and is often dependent on the context, many possess less familiarity with the intricacies of the local regions where they are working.[15] This may, however, be less applicable to their operations in the Southeast Asia region, than in overseas areas like Africa or Central Asia. Western PSC operators are well trained following a comparatively longer time in the business than China, meaning that many of their Chinese counterparts lag in operational skill. While the reputation and quality vary somewhat, Chinese PSCs’ operational, education, and language skills are often no match for many British and American companies operating globally. The skillset of PSCs in the West currently outpaces those in China overall. One of the most complex challenges faced by the industry are the as yet unsolved complications surrounding PSC rights to carry lethal weapons and what impact this has on perceptions of Chinese PSCs by countries in the region.[16] Employing PSCs does not only bring challenges though. There are many opportunities presented by the industry, for example providing work to the large number of Chinese veterans who may struggle to find meaningful employment after leaving the armed forces.[17] Chinese PSCs employ from a wide range of military and law enforcement backgrounds, such as armed police, Chinese special forces, the marines, and the naval special warfare brigade.[18]
In terms of regulation of the PSC industry, the International Code of Conduct Association (ICoCA) is a regulatory body that provides a code of conduct for PSCs globally. However, not all PSCs are ICoCA members, which makes it hard to regulate the industry. Many PSCs are not members of the ICoCA due to its lack of necessity in the industry because they will still be hired regardless of joining the regulatory body. This puts the onus on clients to enforce membership of the ICoCA before a contract is signed to force PSCs to find value in joining. HXZA is the only Chinese maritime security company to hold ICoCA certification globally.[19] This holds them accountable for human rights abuses. Implementing ICoCA certification on an industrial scale could help improve the services provided by maritime PSCs. By doing so through proper regulation, human rights abuses by private contractors will be deterred, piracy and armed robbery will likely decrease in Asia’s waters, and clients in the region will be able to more effectively meet their goals. Effective use of PSCs has the potential to play an important role in avoiding contribution to already tense relations in the area. Improving the training of PSCs about the threat and tactics used by piracy and armed robbery groups will reduce the number of attempted and actual attacks. This could involve identifying the likely locations that piracy occurs, and being prepared for when attacks take place.
The Montreux Document, which was first established in 2008, outlines the current legal framework for the regulation of PSCs as well as private military companies (PMCs).[20] Although the document helps ensure its member companies follow a legal framework, it is not binding and many companies have not signed it. Additionally, the framework is too broad because it does not specify the international nature of the private security and military industry, and thus includes domestic security providers such as companies that provide security guards for shopping centers. The insufficiency of the Montreux Document is also exemplified in its exclusive application to PSCs and PMCs in armed conflict. This further increases its inadequacy in regulating PSCs, as shown in the case of maritime security because armed conflict is not always present. Therefore, when shipping companies are considering the contracting of PSCs in Asia’s maritime region, this lack of regulatory scope should be considered.
Another piracy threat reduction technique for shipping companies operating in Asia could be to create a cooperative group of PSCs in the region that respond to attacks in the maritime zones of Bangladesh, India, Philippines, Vietnam, the South China Sea, and the Singapore Strait. This cooperative multi-company agreement could safeguard the security of the region using PSCs that maintain constant protection of the waters, rather than individual companies hiring PSCs for their personal use. All PSCs contracted in this agreement could be held accountable using a standardized code of conduct like the principles enforced by the ICoCA. This would likely significantly reduce the incidence of piracy and armed robbery and act in the interests of all shipping companies.
China, as well as other PSC-sending nations, must ensure their PSCs are sufficiently regulated and professionalized, as failing to ensure this leaves PSCs and the respective governments open to reputational damage or diplomatic incidents. If greater regional cooperation becomes possible, PSCs will be able to further increase their efficiency and positive impact on the security of vessels. Creating an international legal framework with proper supervision would greatly help ensure that PSCs transparently perform their tasks. Formulation of clearer rules around the use of force, and more specifically the use of weapons, is critical. External observers and countries with more experience of PSC governance can support China and host countries in the South China Sea region with these endeavors. Specifically for China, greater transparency is needed within the PSC industry as many knowledge gaps remain. Transparency is particularly relevant, as the line between state and non-state is blurred in China. The country and its PSCs should sign the International Code of Conduct for Private Security Providers, which is open to both states and private companies. The non-binding nature of this agreement should motivate China to sign it as the first expression of goodwill. Any future decisions about the regulation of PSCs must be decided between countries so that disputes can be avoided. All PSCs and countries operating and hosting them, including China, should make a greater commitment to better regulate the actions and capacities of PSCs. This could provide a good starting point for improved relations between nations in the South China Sea and Southeast Asian regions.
The Counterterrorism Group (CTG) PACOM team recommends that maritime and shipping companies remain up-to-date with and aware of potential political risks existing in the areas they operate in. This is and will continue to be, of particular importance in the South China Sea, Taiwan Strait, and Singapore Strait. The maritime and geopolitical security situation in the area is tense and constantly evolving. Please see other CTG reports for information on this. CTG also recommends that shipping industry leaders only hire PSCs that are compliant with existing legislation both on the national and international level. Companies employing PSC services must be sure to carefully weigh up the cost, experience, (regional) expertise, nationality, and reputation of individual PSCs when deciding which to use. CTG recommends that legal and regulatory developments in this growing and evolving industry be monitored closely by relevant stakeholders and that globally binding regulation is created to govern PSCs, including greater standardization at the national level. This is likely to take time to achieve, so in the meantime, countries should share best practices to set more homogenous national standards for PSCs. Businesses and state-owned Enterprises must coordinate and discuss any developments with governments, as these will directly impact the shipping and maritime businesses that use PSCs. All countries must create legislation applying both to their PSCs acting abroad and in their jurisdictions. Please contact us for further assistance.
________________________________________________________________________ The Counterterrorism Group (CTG)
[1] South China Sea by Google Maps
[2] Piracy and Armed Robbery Against Ships in Asia Annual Report: January-December 2020, Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP), December 2020, https://www.recaap.org/resources/ck/files/reports/annual/ReCAAP%20ISC%20Annual%20Report%202020.pdf
[3] Gulf of Guinea remains world’s piracy hotspot in 2021, according to IMB’s latest figures, International Chamber of Commerce, April 2021, https://iccwbo.org/media-wall/news-speeches/gulf-of-guinea-remains-worlds-piracy-hotspot-in-2021-according-to-imbs-latest-figures/
[4] Regulation on the Administration of Security and Guarding Services, State Council of the People’s Republic of China, 2009, http://www.lawinfochina.com/display.aspx?lib=law&id=7779
[5] China’s Use of Private Companies and Other Actors to Secure the Belt and Road across South Asia, Asia Policy, April 2019, https://www.nbr.org/wp-content/uploads/pdfs/publications/asiapolicy14-2_where_the_belt_meets_the_road_rt_apr2019.pdf
[6] Chinese Security Companies in Great Demand as Overseas Investment Surges, Wenting Xie, Global Times, June 2016, http://www.globaltimes.cn/content/990161.shtml
[7] Who Guards the Maritime Silk Road?, Texas National Security Review, June 2020, https://warontherocks.com/2020/06/who-guards-the-maritime-silk-road/
[8] Ibid.
[9] Ibid.
[10] Chinese Private Security Moves Into Central Asia, The Diplomat, July 2019, https://thediplomat.com/2019/07/chinese-private-security-moves-into-central-asia/
[11] Chinese private security companies go global, Financial Times, February 2017, https://www.ft.com/content/2a1ce1c8-fa7c-11e6-9516-2d969e0d3b65
[12] Who Guards the Maritime Silk Road?, Texas National Security Review, June 2020, https://warontherocks.com/2020/06/who-guards-the-maritime-silk-road/
[13] The Growth, Adaptation and Limitations of Chinese Private Security Companies in Central Asia, The Oxos Society, October 2020, https://oxussociety.org/the-growth-adaptation-and-limitations-of-chinese-private-security-companies-in-central-asia/
[14] Chinese Private Security Moves Into Central Asia, The Diplomat, July 2019, https://thediplomat.com/2019/07/chinese-private-security-moves-into-central-asia/
[15] Market Opportunities and Political Responsibilities: The Difficult Development of Chinese Private Security Companies Abroad, Armed Forces and Society, April 2020, https://journals.sagepub.com/doi/pdf/10.1177/0095327X18806517
[16] Chinese Private Security Contractors: New Trends and Future Prospects, The Jamestown Foundation, May 2020, https://jamestown.org/program/chinese-private-security-contractors-new-trends-and-future-prospects/
[17] Ibid.
[18] Who Guards the Maritime Silk Road?, Veerle Nouwens, Texas National Security Review, June 2020, https://warontherocks.com/2020/06/who-guards-the-maritime-silk-road/
[19] Pillar profile - HXZA, China, International Code of Conduct Association, September 2020, https://icoca.ch/pillar-profile-hxza-china/
[20] The Montreux Document on Private Military and Security Companies, International Committee of the Red Cross, June 2020, https://www.icrc.org/en/publication/0996-montreux-document-private-military-and-security-companies