Combatting waste crime

Shipowner Holland Maas Scheepvaart Beheer was was fined 780,000 EUR (USD 887,000) and also paid a settlement of 2.2 million EUR (USD 2.5 million) for sending a vessel to an Indian shipbreaking yard in 2013. The vessel, the HMS Laurence, was sold to a cash buyer. It departed from Italy and ended up in Alang, India, where it was broken under conditions that cause serious damage to the environment and pose an extensive risk to the health of workers and the local population. It was reported that the vessel was carrying toxic materials within its structure.

The settlement equalled to what the seller earned by selling the ship to the beaching yard. The Prosecutor stated that it had accepted the settlement, as the company has announced that it will take measures to avoid scrapping vessels on beaches in the future. The ruling of the court followed a criminal investigation involving multiple EU countries. Moreover, in 2015, the captain of the HMS Laurence was sentenced by the Dutch Maritime Disciplinary Court to a six-month conditional suspension of his master’s navigation license. Beaching the vessel was in breach of the captain’s duty of care to the environment, according to the Disciplinary Court.

Not only the Netherlands is taking a leading position on tackling the illegal trafficking of ‘toxic ships’. More investigations are carried out in other European countries, including the Harrier case in Norway concerning the ship which was detained by the Norwegian authorities on suspicion of being on the way to a beaching yard in Pakistan. And also the investigation carried out by DEFRA of the North Sea Producer, which was allowed to leave the UK in 2016 based on claims that it would be further operationally used. Its import to Bangladesh and consequent beaching and breaking was even declared illegal by the Supreme Court of Bangladesh in 2019.

The activity of criminal prosecutors, environmental agencies and the NGOs puts pressure on the ship-owners which introduce their sustainable recycling policies and commit to the safe and clean recycling of their fleet off the beach. The group of responsible ship-owners was joined by Dutch Boskalis and WEC Lines BV, German Hapag Lloyd, and Scandinavian companies Wallenius-Wilhelmsen and Grieg. Moreover, the cases such as Seatrade and Holland Maas affect second-hand sale and purchase contracts, where sellers include substantial restrictions (and warranties) on resale scrapping.

At the same time, ship-owners, once they understand the provisions of the two European regimes of the WSR and of the SRR, they might be tempted to avoid their requirements by reflagging/flagging out, or by delaying their final voyage to the recycling yard until the ship is away from E.U. waters, and/or maybe by selling on the basis of “as-is where-is.

Reflagging/flagging entails changing flag in order to avoid strict legal requirements. In contrast to the WSR, which only applies for ships that are geographically located within Norway/EU (even the non-EU flagged vessels), the SRR in principle includes all ships sailing under EU/EEA flag, regardless of where the ship is located. More precisely, except for Article 12 SRR [obligation to have on board an inventory of hazardous materials that complies with Article 5(2)], obligations (in particular for ship recycling) apply only to ships flying the flag of an EU Member State. The flag of the vessel is therefore of a high importance and also the reason the European ship-owners may simply choose to reflag their ships prior to the decision to recycle, to be able to recycle the ship at a shipyard in India, Bangladesh, China, Pakistan, or Turkey.

The SRR does not contain any prohibition against reflagging/outflagging a ship a priori to the decision to recycle. However, such attempt to avoid the strict rules contained in the SRR might be considered crime if owners of EU-flagged vessels decided to re-flag outside the EU to avoid the SRR and the vessel is recycled in a non-listed yard shortly afterwards. Then the enforcement practitioners should scrutinize the decision-making process to determine whether the change in registration was to prima facie avoid the obligation to recycle the ship at a yard included in the EU List, similarly to practice in illegal fishing. For example, in November 2019, the Danish Environmental Protection Agency has asked Maersk to explain why the company out-flagged four ships from Denmark which were then shortly thereafter scrapped on the beaches in the Indian coastal region Alang. Since Article 6(2) of the SRR states that ship owners must ensure that ships are only recycled at ship recycling facilities included in the European List, the ship owners may, therefore, find themselves with extra due diligence obligations of establishing whether the buyer intends to scrap the vessel at one of the approved yards. It is unlikely that turning a blind eye would constitute a successful defence to liability.