Overview:
Palau has officially terminated the operator of its Open Ship Registry after months of oversight failures, sanctions-linked financial freezes, and reputational concerns, triggering a heated debate in Congress over who should control the registry during the transition.
By: L.N. Reklai
KOROR, Palau (December 29, 2025) — Palau has terminated the operational management of its Palau Open Ship Registry, ending a long-running arrangement with International Shipping Bureau Management Ltd. (IML) and its designated implementing companies after concluding the registry was no longer functioning adequately, according to government actions and legislative discussions this month.
The registry, created under 7 PNC Chapters 6–13, has been operated by IML and its designees — P.C. IKE Palau International Ship Registry Inc. and Palau International Ship Registry Ltd. — under a contract signed in 2011 and amended in 2018.
The government issued a notice of termination in September 2025 citing oversight failures, reputational harm linked to Palau-flagged vessels, blacklisting, sanctions-related bank account freezes, and chronic late payments. That notice was briefly withdrawn in November to allow for an audit. Following the review, Palau renewed the termination on Dec. 16, 2025, determining the registry’s operations no longer met required standards.
As the termination moved forward, the House of Delegates on Dec. 18 added to the Senate Bill 12-22, SD1, HD2, which amends bonding requirements for construction of public projects, a rider amendment that would authorize the president to enter into a six-month, procurement-exempt contract to operate the registry, provided that at least 50% of revenues accrue to Palau.
Delegates further added a policy rider expanding presidential authority during a contractual lapse. The rider allows, with presidential approval, the minister to appoint a ship registry administrator or special agent and authorizes the president to delegate by contract responsibility for registry-related fees, including international membership costs. It also permits a six-month, procurement-exempt contract if needed to keep the registry operating, after which normal procurement rules would apply.
Sen. Eldebechel said the Shipping Registry Act passed by the 8th Olbiil era Kelulau led to the creation of the Palau International Shipping Registry (PISR), a joint operation between the Palau government and the Padilla brothers, with administration by Panos Kirnidis. Revenues are generated by vessels paying to fly the Palau flag and are shared between Palau and PISR, he said.
Congress received a letter from President Surangel Whipps Jr. three months ago stating that businesses associated with the Padilla brothers had been sanctioned by the U.S. government, resulting in frozen assets and revenues tied to PISR. As a result, the president ordered the termination of the contract, the senator said.