Seatrade and its directors were fined up to 750,000 euros and the directors have been banned from working in the industry for a year. The public prosecutor also sought prison sentences for the directors, but the court did not impose these.

The decision sets a precedent in the Netherlands. It makes it clear that shipowners who sell vessels for demolition in South Asian scrap yards in breach of the EU Waste Shipment Regulation risk facing criminal liability...Importantly, the case reflects the political climate and the greater interest shown by European countries in environmental issues and may be followed by other European countries.

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Cases of illegal demolition of vessels are currently being investigated by national authorities, such as the UK and Norway. In Norway for example, the vessel the MV “Tide Carrier” was arrested by the Norwegian environmental authorities, and these have been investigating its owners for illegally selling the vessel to a South Asian yard for demolition.

International law and demolition of end-of-life vessels

  1. Any shipowner considering selling an end-of-life vessel for demolition should first consider whether the sale complies with the Basel Convention. An end-of-life vessel will likely be considered as “waste” under the Basel Convention, since waste is defined broadly to include ‘substances or objects which are disposed of or are intended to be disposed of or are required to be disposed of by the provisions of national law’. Therefore, a sale of a vessel for demolition is likely to be considered a ‘transboundary movement of waste’ under the Basel Convention.
  2. Shipowners should be aware that if there is anything onboard the vessel that could be considered ‘hazardous’ waste under the Basel Convention or under the national laws of the destination country of the vessel being scrapped, the country of import and any countries of transit will need to be notified of the movement of waste. In addition, the countries of import and transit will need to give their consent for the movement of waste.
  3. The Hong Kong Convention of 2009 has still not been ratified by enough countries so the Basel Convention remains the main international regulation.While an increasing number of yards have been obtaining certificates and statements of compliance with Hong Kong Convention, shipowners should be mindful that this is not yet in force, so they should not decide on demolition yards solely based on a yard’s statement of compliance with Hong Kong Convention.

EU rules and the demolition of end-of-life vessels

  1. The Dutch case concerned the illegal sale of a vessel in breach of the EU Waste Shipment Regulation. EU Shipowners with vessels trading in EU waters are advised to consider whether the sale of the end-of-life vessel complies with the Regulation, which applies also to vessels of all flags that trade within EU waters – not just EU-flagged vessels.
  2. Under the Regulation, demolition of vessels moving in EU waters is likely to be considered as ‘waste’, which is defined as ‘any substance or object which the holder discards or intends or is required to discard’.

Shipowners should note that it is enough for an intention to discard the end-of-life vessel to arise for the vessel to be considered ‘waste’ under the Regulation. If the intention to discard arises when the vessel is in EU waters, it is possible that the intention to scrap the vessel will make it ‘waste’ for the purposes of the Regulation. If the end-of-life vessel leaves an EU port destined for demolition in another country, the sale of the vessel is likely to be considered a shipment of waste; whether within the EU, exported from the EU to a third country, in transit through the EU to a third country, or imported into an EU state from a third country.

3. Under the Regulation, the shipment of waste for disposal is prohibited from EU countries to non-EU, and non-OECD countries. The shipment of hazardous waste for recovery from EU to non-EU and non-OECD countries is also prohibited.

4. There may be the possibility that the end-of-life vessel is a ‘green-listed’ vessel destined for recovery. If it is destined for recovery in an OECD country, it will be subject to the written notification and consent procedure under the Regulation. If the vessel is ‘greenlisted’ waste destined for recovery to a non-OECD country, such as India, Pakistan or Bangladesh, it is important to check whether such countries have notified their position with the EU authorities as to the requirements of the import of such waste.

5. EU Shipowners with vessels trading in EU waters should therefore be aware that sales of vessels for demolition in a non-OECD country may be considered as shipment of waste for disposal, and therefore be prohibited by the Regulation.

Ship Recycling Regulation

While the Hong Kong Convention is not yet in force, EU has adopted the “Ship Recycling Regulation”, which effectively implements the Hong Kong Convention. The Ship Recycling Regulation, which is effective, but not yet applicable, applies to EU-flagged vessels. These vessels may be recycled only in safe and sound ship recycling facilities included in the European List of ship recycling facilities, which currently contains 18 shipyards, all located within EU. The EU has also seen applications from yards in India, Turkey, China and the US to be approved and included on the European List.

Conclusion

  • Recent increased investigations and criminal charges against Seatrade emphasise the need for shipowners to be extremely careful when selling ships for demolition.
  • A voluntary alliance of banks in northern Europe and Scandinavia has been encouraging their shipowner clients to declare their policies on scrapping to encourage best practice of demolition of end-of-life vessels. Given banks’ reputational risks, this may become an even more important consideration in future financings for shipowners. Shipowners should seek legal guidance on the laws applicable to their particular proposed sale before executing this sale.