The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (the Convention) is due to come into force on 26 June 2025, having finally received the requisite number of ratifications in June 2023.
The Convention is intended to address both environmental as well as health and safety concerns in relation to global ship scrapping and recycling practices. However, the Convention is not the only relevant international legal instrument.
Below we consider the different regulatory regimes in place and consider the extent to which they operate in tandem and, in some respects, potentially conflict. We also highlight some industry concerns.
The Hong Kong Convention
By acceding to the Convention on 26 June 2023, Bangladesh and Liberia triggered its entry into force two years later. Bangladesh is the world’s largest ship recycling nation by capacity and Liberia is the world’s second-largest flag state by gross tonnage.
The Convention has 22 Contracting States, which together represent just under 46% of global shipping’s gross tonnage. In addition to Bangladesh and Liberia, the remaining Contracting States are: Belgium, Republic of the Congo, Croatia, Denmark, Estonia, France, Germany, Ghana, India, Japan, Luxembourg, Malta, Netherlands, Norway, Panama, Portugal, São Tomé and Príncipe, Serbia, Spain and Turkey.
The Convention provides for:
- the design, construction and operation of ships in order to facilitate safe and environmentally sound recycling, without compromising the safety and operational efficiency of ships;
- the operation of ship recycling facilities in a safe and environmentally sound manner;
- the establishment of an appropriate enforcement mechanism for ship recycling, incorporating certification and reporting requirements;
- an inventory of hazardous materials specific to each ship;
- a ship recycling plan to be provided by the shipyard for each ship; and
- contracting States to take effective measures to ensure that ship recycling facilities under their jurisdiction comply with the Convention.
The Basel Convention
Ships that have reached the end of their life contain hazardous materials within their structures. The UN Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, which came into force in 1992, requires ship wastes to be managed and disposed of in an environmentally friendly way and aims to minimise the transportation of such wastes. As at October 2023, the Basel Convention has 191 parties and 53 signatories.
The Ban Amendment to the Basel Convention entered into force in December 2019 and prohibits hazardous waste exports from OECD and EU Member States, as well as Liechtenstein, to primarily developing countries. As at October 2023, 103 of the parties to the Basel Convention had indicated their consent to be bound by the Ban Amendment.
The EU Waste Shipment Regulation gives effect to the Basel Convention within EU law by imposing requirements for shipping waste within, to and from the EU. The Regulation sets out the procedure for shipping waste according to the destination, the nature of the waste and the way in which the waste will be processed after shipment.
EU Ship Recycling Regulation
The EU Ship Recycling Regulation was adopted in 2013 and came into force at the end of 2018. The Regulation applies to vessels with an EU flag and requires those vessels to be recycled only in yards included in the European List of ship recycling facilities. In general terms, the Regulation reflects the requirements of the Convention but incorporates further health and safety standards and environmental requirements that exceed those set out in the Convention. The EU Ship Recycling Regulation largely replaces the EU Ship Waste Regulation, although the latter remains applicable to any non-EU flagged ship that sails from an EU port for recycling.
The European Commission has been carrying out an evaluation of the Ship Recycling Regulation, among other things in order to establish whether amendments are required to align the Regulation with the Convention.
In the meantime, in July 2023, the European Commission adopted the EU’s 11th list of approved ship recycling facilities. The EU List now contains 48 ship recycling facilities, including 38 yards in Europe (EU, Norway and UK), nine yards in Turkey and one yard in the USA.
In order to be included in this List, any ship recycling facility, irrespective of its location, has to comply with a number of safety and environmental requirements. For facilities located in the EU, competent national authorities must check that all the relevant conditions are met, and then inform the Commission that the facility should be listed. Ship recycling facilities located in third countries and intending to recycle ships flying a flag of a Member State have to apply to the Commission for inclusion in the European List. The Commission then evaluates and checks how these yards comply with the requirements in the Ship Recycling Regulation and proposes their inclusion in the European List when these requirements are met.
UK Ship Recycling Regulation
The UK Ship Recycling Regulation gives effect to the EU Ship Recycling Regulation in domestic law. Since January 2021, it has been a requirement for UK ships to be recycled at a facility that is on the UK List of approved ship recycling facilities. The UK List includes six UK facilities but otherwise mostly reflects the EU List. It does not contain any South Asian facilities.
Industry initiatives
The Sustainable Shipping Initiative (SSI) was founded in 2010 and has 17 members across the entire shipping chain. Among the founding members are Maersk, BP Shipping and ABN Amro. The SSI’s objective is to improve the sustainability of shipping in terms of social, environmental and economic impacts.
The Responsible Ship Recycling Standards (RSRS) are voluntary principles for financial institutions active in ship financing. They were first presented in 2017 by ABN Ambro, ING and NIBC. As at October 2023, there were 12 parties to the RSRS. The RSRS aim to promote responsible ship recycling and to minimise the dangers associated with hazardous materials on board.
BIMCO already has a standard form for the sale of ships for recycling in a responsible manner, RECYCLECON, which incorporates many of the Convention’s requirements. However, the last edition was issued in 2012 and it is anticipated that BIMCO will in due course issue a revised version.
It was also reported in September 2023 that the Ship Recycling Portal had been launched. This has been described as the world’s first digital ship trading platform geared specifically to the ship recycling sector. The Portal is a specialised vessel auction platform designed to streamline the sale of ships by cash buyers directly to yards for recycling. The stated idea behind this initiative is to make the sale and purchase of end-of-life vessels more convenient and efficient.
Regulatory mismatch
There is some industry concern that the requirements of the different international regulations are inconsistent, leading to uncertainty as to what needs to be done to ensure compliance.
Specifically, the provisions of the EU Ship Recycling Regulation do not entirely reflect those of the Convention. For example, there is a lack of uniformity between the two instruments relating to authorisations given under the shipyard certification process. Consequently, shipyards possessing a Certificate under the Convention would not necessarily qualify for the European List of approved shipyards. It is to be hoped that the Commission’s current review of the Regulation results in greater alignment with the Convention.
Additionally, some ships might be outside the EU Ship Recycling Regulation but fall within the EU Ship Waste Regulation (which incorporates the Ban Amendment and therefore prohibits ship recycling in a non-OECD country). As a result, even if the European List were to include a yard in a non-OECD country, ships covered by the Waste Regulation would be prohibited from being recycled there. By contrast, ships coming within the Waste Regulation could be recycled in a shipyard in an OECD country even if that yard was not on the EU approved List.
It is also not clear if and how the Convention will supersede the Basel Convention with regard to ship recycling. This would require the Convention’s provisions to impose environmentally sound waste disposal standards equivalent to those under the Basel Convention but arguably it does not do so.
Adequacy of Approved Shipyard Lists
Differing views prevail as to whether there are enough approved facilities to satisfy recycling demands. The EU has expressed its belief that there is sufficient capacity to meet demand, others disagree. Indeed, key shipbreaking jurisdictions – such as India, Pakistan and Bangladesh – do not feature in the EU (or UK) List. The European Community Shipowners’ Association (ECSA) has requested that the EU have a wider geographical spread of yards included on the List.
Practices Under the Spotlight
In September 2023, a report from Human Rights Watch and the NGO Shipbreaking Platform entitled “Trading Lives for Profit” shone a spotlight on one major ship-recycling state for allegedly cutting corners despite a directive from that State’s High Court mandating health and safety standards and labour rights protections in shipbreaking yards.
There are also examples of European shipowners who have sought to bypass EU regulations on ship recycling by facilitating the disposal of ships to substandard yards via non-EU intermediaries. It has been suggested that all shipping companies conducting operations in the EU be required to publicly report all sales, including to cash buyers, to ensure the traceability of the ship’s beneficial ownership over its lifetime.
The beaching method of vessel scrapping (known as intertidal recycling) unsurprisingly attracts criticism from the environmentally focused NGOs. There have been calls on financial institutions to refrain from being involved in transactions that will involve intertidal recycling. However, the reality is that at present, approximately 75% of the world’s recycling capacity uses this method and the capacity for alternative recycling does not exist. If owners find recycling too expensive, we may see abandonment and scuttling, with the attendant pollution risk and the loss of materials that would otherwise re-enter the manufacturing chain.
While it is easy to view the Hong Kong Convention as an instrument that could have done more, like all international law, its provisions have to be palatable to the signatory states and the constituencies those states represent, otherwise it becomes no more than the unratified output of a diplomatic conference gathering dust on a bookshelf. That is not to say that those that advocate for enhancement should not be listened to, but the pragmatic approach may be to see the Convention as both a departure point, and something dynamic that can be jointly improved upon over time by the stakeholders.
Comment
Shipowners would be advised to consider carefully what and how ship recycling regulations apply to them and should formulate a compliant ship recycling plan. Financial institutions and insurers would also be advised to ensure that they understand the regulatory regime and put in place policies that satisfy both their legal obligations and their environmental policies.
There have been a number of well-publicised breaches of ship recycling regulations in recent years that have resulted in criminal prosecutions and the imposition of fines. The most recently reported of these is a finding by the Dutch Court in July 2023 that a Dutch shipping company and two of its directors had been involved in illegally exporting an end-of-life ship to Turkey for recycling, in breach of the EU Waste Shipment Regulation. Both the shipowner and the directors were fined.
For more information, please contact our Shipping team.
For further information, please contact:
Trudie Protopapas, Hill Dickinson
trudie.protopapas@hilldickinson.com
