Ship Recycling
Problems of beaching and reflagging/flagging out
“Beaching” entails that a ship due for scrapping is simply sailed onto a beach for demolition and dismantling. The demolition works is often undertaken by extensive use of manual work and has been subject to massive criticism due to dangerous and hazardous working conditions, and because hazardous waste is not handled in an environmentally responsible manner.
South Asian shipbreaking yards have purchased the majority of the world's obsolete tonnage for demolition for years. The beaching method is mainly used in India, Pakistan and Bangladesh. None of these countries are members of the OECD. Exportation of end-of-life vessels from the EU for scrapping in these countries is therefore prohibited. This does prevent ship-owners from selling the vessels to be beached is South Asia, but beaching is under increasing scrutiny from European courts and institutional investors as illustrated by two recent Dutch cases Seatrade and Holland Maas.
Seatrade case
In 2018, a Dutch court ordered ship-owner Seatrade to pay fines ranging between EUR 50,000 (USD 61,700) to EUR 750,000 (USD 924,000) for selling four ships to an intermediary (a so-called “cash buyer”), who would scrap the ships at beaching yards in India and other countries offering beaching facilities. Furthermore, two company executives were banned from exercising the profession as director, commissioner, advisor or employee of a shipping company for one year. The prison sentence, previously sought by the prosecution, has been waived amid the company’s lack of a previous criminal record which was accepted as a mitigating factor.
Seatrade’s defense was, inter alia, that the decision to scrap the ships was taken while the ships were located outside the territorial waters of the EU. According to Seatrade, the WSR was not applicable to the recycling of operational ships; alternatively, that ships could not be classified as waste under the WSR. The court, however, found that both the owner of the ships and the two executives had acted in violation of the WSR. The Court examined the internal email exchanges, as well as exchanges between the accused and the shipbrokers prior to and during the last voyages of the ships. It concluded that when the ships left the ports of Rotterdam and Hamburg in 2012, the intention was already to demolish the ships, which makes the ships categorised as waste, despite the fact that they were still seaworthy, certified, insured and operational. The fact that three of the ships were still in commercial service and carried a cargo during part of the voyage to their final destination did not affect this conclusion. And since the ships were a combination of non-hazardous and hazardous waste and must, therefore, be regarded as hazardous waste.