UNIVERSITY OF SOUTHAMPTON, 2014 LAW SCHOOL

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1 UNIVERSITY OF SOUTHAMPTON, 2014 LAW SCHOOL THE STATUS QUO OF SHIP-RECYCLING: AN INQUIRY INTO THE INTERNATIONAL LEGAL FRAMEWORK AND THE CONTRACTUAL ELEMENTS OF THE INDUSTRY DIMITRIOS SIAMOS A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR LLM MARITIME LAW BY INSTRUCTIONAL COURSE WORD COUNT 13,892 THIS DISSERTATION IS ALL MY OWN WORK REFERENCE TO, QUOTATION FROM, AND DISCUSSION OF THE WORK OF ANY OTHER PERSON HAS BEEN CORRECTLY ACKNOWLEDGED WITHIN THE WORK

2 ACKNOWLEDGMENTS I would like to thank my dissertation supervisor Prof. M. Tsimplis, for turning my attention to this significant issue, and for guiding and assisting me throughout this whole process. I must also thank my parents and sister for their patience and endless support in every way and manner for the past five years. And Stathia, you were with me throughout, your patience and spirit kept me going strong. Thank you. ii

3 Table of Contents PRIMARY SOURCES...1 Chapter 1. Introduction...2 Chapter 2. The Basel Convention Background Key Concepts Hazardous Waste and Transboundary Movement Obligations Under Convention Prior Informed Consent (PIC) Illegal Traffic The Basel Ban and the 1999 Protocol to the Basel Convention The questionable applicability of the Basel Convention to ship-breaking.12 Chapter 3. The Hong Kong Convention Key Provisions General Obligations Application of the SRC Flag State Responsibilities Authorised Ship Recycling Facilities Improvements from Basel Shortcomings of the SRC...26 Chapter 4. The EU Ship Recycling Regulation Differences from the SRC...31 Chapter 5. Commercial and contractual aspects of ship recycling DEMOLISHCON RECYCLECON RECYCLECON Definitions RECYCLECON Clauses Chapter 6. Conclusion...48 SECONDARY SOURCES...51 iii

4 PRIMARY SOURCES INTERNATIONAL CONVENTIONS The Basel Convention on the Control of the Transboundary Movements of Hazardous Wastes and their Disposal 22 March 1989, U.N.T.S. 126, 28 I.L.M. 657 (entered into force 5 May 1992) The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (SR/CONF/45, 19 May 2009) BASEL CONVENTION CONFERENCE OF PARTIES Conference of the Parties Decision II/12, UNEP/CHW/COP2/BC-II-12 EU REGULATIONS Regulation (EC) No 1013/2006 of the European Parliament and of the Council of 14 June 2006 on Shipments of Waste [2013] OJ L 190/1 Regulation (EU) 1257/2013 of the European Parliament and of the Council of 20 November 2013 on Ship Recycling and amending Regulation (EC) No 1013/2006 and Directive 2009/16/EC [2013] OJ L330/56 INTERNATIONAL MARITIME ORGANISATION RESOLUTIONS Amendments to the IMO Guidelines on Ship Recycling (Resolution A.962(23)), adopted by IMO Resolution A.980(24) on 1 December Guidelines for the Development of the Inventory of Hazardous Materials, adopted by IMO Resolution MEPC.197(62) on 15 July Guidelines for the Development of the Ship Recycling Plan, adopted by IMO Resolution MEPC.196(62) on 15 July Guidelines for Safe and Environmentally Sound Ship Recycling, adopted by IMO Resolution MEPC.210(63) on 2 March 2012 IMO Guidelines on Ship Recycling, adopted by IMO Resolution A.962(23) on 5 December

5 Chapter 1. Introduction The importance of seaborne trade is undoubtedly paramount for the unhindered and smooth operation of world trade. Approximately 9.2 billion tons of goods were transported by sea in , a figure that has been steadily rising since 2009 despite the global economic recession. Therefore the likening of the shipping industry to the lifeblood of world trade is in fact well founded and as blood performs its function by using the blood cells, so too the shipping industry performs its function through the use of ships. However ships, like blood cells, have a more or less specific life cycle. At the end of their life cycle they are withdrawn from trade and sold for dismantling and recovery of recyclable materials. In 2012 most of the ships sold for demolition were between 20 and 30 years old 2. The majority of ships that are sold for demolition are sent to mainly to non-oecd countries. In specific, the Indian subcontinent has in the past years been host to the majority of ship recycling works. In 2012 over 70% of the tonnage reported sold for demolition was sent to Bangladesh, India, and Pakistan, whilst approximately 22% was sent to Chinese recycling facilities for demolition 3. Due to the growth rates of these countries and their ever-growing infrastructure, these countries are in need of steel. As the recycling of steel is cheaper than the production of steel from ore and given that the structure of ships is usually equal to or more than 90% steel, the recycling of ships provides the industries of these countries with a good source of 1 United Nations Conference on Trade and Development, Review of Maritime Transport 2013, 5 December 2013, UNCTAD/RMT/2013, at p Ibid, at p Ibid, at p

6 steel at a good price 4. Additionally, the sale of a ship for recycling is an opportunity for the ship-owner to squeeze out that last bit of capital, that may be used to either make the balance sheet of the specific ship more profitable or as capital to finance the building of a new ship that will replace the old one. The sale price is usually dependant upon the light displacement tonnage (LDT), a ship of around 10,000 LDT is worth approximately five million US dollars 5. However, despite the positive aspects of ship recycling for both the ship-owners and the local economies of the recycling states, this activity raises certain important issues. Firstly, there are issues regarding the health and safety of the workers employed in ship-breaking yards in these developing countries. Work related accidents are common phenomena along with long term health related problems for the workers due to exposure to pollutants 6. Secondly, there are issues with regards to the environmental repercussions these activities have on the environment. In most of the recycling yards in the countries of the Indian subcontinent the preferred method for dismantling ships is that of beaching 7. Thus, once the dismantling process of the ship that is laying on the beach begins, the toxic substances and the hazardous 4 NGO Shipbreaking Platform, Annual Report 2013 (NGO Shipbreaking Platform, 2013) available at: < accessed 10 September 2014, at p Jean-Florent Helfre, Controversial Shipbreaking Dismantles Stakeholder Trust (Sustainalytics, April 2013) available at: < accessed 10 September Michael N Tsimplis, The Hong Kong Convention on the Recycling of Ships (2010) 2 LMCLQ 305, at p Which essentially means that the ship is crashed into the shore at high tide and then dismantled at low tide. 3

7 materials contained in the ship and its structure are released into the ground and the atmosphere, as usually there is no containment infrastructure 8. The international legal framework created to face these issues consists mainly of two instruments The Basel Convention on the Control of the Transboundary Movements of Hazardous Wastes and their Disposal 9 and The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships 10. In furtherance of the SRC, the EU also adopted a regulation on ship recycling 11. The purpose of this work is twofold. Firstly, to present the quintessential aspects and requirements of these instruments, whilst critically assessing their positive and negative aspects as well as the interaction between these instruments and whether the later instruments have improved upon the earlier ones. In doing so there will be a critical analysis of the requirements set forth by these instruments as well as a cross examination between them. Secondly, given that in essence ship recycling is a business and as such there are commercial and contractual aspects to it, this work has the following purpose as well. To examine the interrelationship between the international legal regime and the available standard form contracts for the recycling of ships, as well as to what extent 8 Helfre, n. 5, at p The Basel Convention on the Control of the Transboundary Movements of Hazardous Wastes and their Disposal 22 March 1989, U.N.T.S. 126, 28 I.L.M. 657 (entered into force 5 May 1992) (hereinafter the Basel Convention or BC). 10 The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (SR/CONF/45, 19 May 2009) (hereinafter SRC or the Hong Kong Convention, not yet in force). 11 Regulation (EU) 1257/2013 of the European Parliament and of the Council of 20 November 2013 on ship recycling and amending Regulation (EC) No 1013/2006 and Directive 2009/16/EC [2013] OJ L330/56, hereinafter EU-SRR. 4

8 if any, requirements of the most relevant convention, i.e. the SRC, are transposed for voluntary implementation in these contracts. In order to achieve this, there will be a presentation of the most relevant clauses of these contracts along with an examination of whether the requirements of the SRC are transposed into them and to what extent. The structure of this work is as follows. Chapter 2 presents the key concepts of the Basel Convention as well as certain problem areas that exist with its application to ships. Chapter 3 presents the key provisions of the SRC and examines its shortcomings in relation to the Basel Convention and in general. Chapter 4 examines the unilateral effort by the EU to facilitate and expedite the coming into force of the SRC through the adoption of the EU-SRR. Finally, chapter 5 presents the salient and most relevant clauses of the two relevant standard form contracts and the extent to which they incorporate the requirements of the SRC. 5

9 Chapter 2. The Basel Convention Background Although the Hong Kong Convention on the Recycling of Ships 12 has been adopted, there is also the Basel Convention in force since The Basel Convention has mainly the three following purposes. Firstly, to minimise the hazardousness and quantity of hazardous waste generated, secondly, to promote the disposal of hazardous waste as close as possible to their source and finally, to reduce their movement 14. In proceeding with this paper it is essential that we examine in detail the obligations that the Basel Convention imposes as well as if these apply to the ship recycling industry and the Ban Amendment 15 to the convention. 12 The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (SR/CONF/45, 19 May 2009) (hereinafter SRC or the Hong Kong Convention, not yet in force). 13 The Basel Convention on the Control of the Transboundary Movements of Hazardous Wastes and their Disposal 22 March 1989, U.N.T.S. 126, 28 I.L.M. 657 (entered into force 5 May 1992) (hereinafter the Basel Convention or BC). 14 Basel Convention, Preamble. 15 Conference Decision II/12. Available at: < ult.aspx > accessed: 15 August

10 2.2 Key Concepts Hazardous Waste and Transboundary Movement As stipulated by the title of the Basel Convention, it applies to hazardous waste and their transboundary movement. Under Article 2(1) of the convention, wastes are defined as 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 16. Due to the highly technical nature and complexity of defining whether waste is hazardous or not, reference is made in the convention to lists contained in the Annexes of the convention. In specific, wastes listed under Annex I are to be considered hazardous, unless they are void of any of the Annex III characteristics 17. In addition, wastes not listed within Annexes I and III may still be considered hazardous to the extent that they are defined as such by domestic legislation of the party of export, import or transit 18. Furthermore, the Basel Convention provides a quite clear definition of transboundary movement. This is defined as any movement of hazardous wastes or other wastes from an area under the national jurisdiction of one State to or through an area under the national jurisdiction of another State or to or through an area not under the national jurisdiction of any State, provided at least two States are involved in the movement 19. This definition is further clarified by the definition of area as an Area 16 Ibid, Article 2(1). 17 Ibid, Article 1(1)(a). 18 Ibid, Article 1(1)(b). 19 Ibid, Article 2(3). 7

11 under the national jurisdiction of a State under Article 2(9) 20. However, despite the clarity of this definition, issues become complicated on contemplating the application of the convention to ships intended for scrapping, as will become apparent further down in this paper Obligations Under Convention In fulfilling its purpose the Basel Convention places certain obligations upon its parties. The transport of hazardous wastes is prohibited between parties to the Convention and non-parties 21, and it is only allowed between parties to the Convention, simultaneously. In addition, the Convention allows for its parties to exercise their right to prohibit the import of hazardous wastes upon informing the other parties of such a prohibition 22. In further promoting its previously mentioned objectives, the Convention places an obligation upon its parties to prevent the import of hazardous wastes if it has reason to believe that the wastes in question will not be managed in an environmentally sound manner Defined as any land, marine area or airspace within which a State exercises administrative and regulatory responsibility in accordance with international law in regard to the protection of human health or the environment. 21 Basel Convention Article 4(5). 22 Ibid, Article 4(1)(a). 23 Ibid, Article 4(2)(g). 8

12 2.2.3 Prior Informed Consent (PIC) Given that the above mentioned obligations are complied with and no prohibition on import or export has been imposed by the parties, the transboundary movement of wastes, as previously defined, is allowed between parties to the Convention provided they have obtained a Prior Informed Consent notification (hereinafter PIC) 24 and their transport is monitored through the issuance and use of the movement document described under Article 4(7)(c) of the Convention. This PIC process operates as follows. The parties to the Convention are obligated to establish or designate a competent authority or authorities, one of which is to be designated as the recipient of the notification in cases of State transit 25. Furthermore, according to Article 6(1) of the Convention, the state of export is obligated to notify, or require the generator or exporter to notify, the competent authorities of the state of export and of any states concerned of any transboundary movement of hazardous wastes. At this point two further clarifications are required. Firstly, states concerned are defined as states of import, export or transit, whether they are parties to the convention or not 26. Secondly, state of export is defined as a Party from which transboundary movement of hazardous wastes or other wastes is planned to be initiated or is initiated 27. This, as will be discussed further down, may be considered contentious with regards to the application of the Convention to the recycling of ships. The importance of the PIC process is highlighted by the fact that under Article 6(3) of the Convention, the state of export is to refuse the generator or exporter to 24 Ibid, Article 6(1). 25 Ibid, Article 5(1). 26 Ibid, Article 2(13). 27 Ibid, Article 2(10). 9

13 proceed with the transboundary movement of the waste unless and until it is in receipt of written confirmation that the notifier has received written consent from the state of import and until the notifier has received proof of the existence of a contract between the exporter and the disposer demonstrating that waste will be managed in an environmentally sound manner 28. Additionally, with regards to transit states that are parties to the Convention, they too are obligated to respond to the notifier and unless they provide their written consent the movement of the waste cannot commence 29. Notification is also a prerequisite for transit states that are not parties to the Convention Illegal Traffic The importance of the PIC process is further highlighted by the fact that under the Convention, transboundary movement of hazardous wastes without notification and consent of the states concerned, this movement is to be deemed illegal 31. This is also the case when consent is obtained through falsification, misrepresentation or fraud 32. Additionally, the movement of waste is to be considered illegal if it is not in material conformity with the documents and when it results in dumping of hazardous or other wastes contrary to the provisions of the Convention 33. The Convention also requires its parties to consider illegal traffic, as therein defined, as a criminal offence Ibid, Article 6(3). 29 Ibid, Article 6(4). 30 Ibid, Article 7. No mention is made however to the rights of non-party transit states. 31 Ibid, Article 9(1)(a) and (b). 32 Ibid, Article 9(1)(c). 33 Ibid, Article 9(1) (d) and (e). 34 Ibid, Article 4(3). 10

14 Where there has been an incident of illegal trafficking of hazardous wastes the Convention imposes further obligations on its parties so as to remedy it. In specific, where due to the conduct of the generator or exporter of hazardous wastes there has been illegal traffic, there is a responsibility by the State of export to take back such wastes, or arrange for them to be otherwise disposed, always in accordance with the Convention 35. Moreover, in the case where the transboundary movement of the waste is initiated in accordance with the PIC process, if the contract cannot be completed according to its terms then the State of export is obliged to take the waste back within 90 days The Basel Ban and the 1999 Protocol to the Basel Convention In 1995 the Conference of the Parties to the Convention (COP) through Decision II/12 37 agreed on the Basel Amendment It is known as the Basel Ban Amendment, as it completely bans the export of hazardous waste from OECD countries to non-oecd countries when they are destined for final disposal and as of 31 December 1997 even when they are destined for recycling. The reason behind this decision was the concerns of the parties to the Convention with regards to the lacking recycling facilities and processes in developing countries. Notably, the Basel Ban is 35 Ibid, Article 9(2). 36 Ibid, Article 8 37 Conference Decision II/12. Available at: < ult.aspx > accessed: 15 August

15 not yet in force, however it has come into force in the European Union through community legislation 38. In addition to the Basel Ban amendment, a liability Protocol was adopted in This Protocol was adopted so as to counter the concerns of the developing countries party to the Convention, with regards to their lack of resources when facing issues of dumping or accidental spills 40. However, the Protocol has not yet come into force as at the time of writing only 13 states are signatories to it 41. These two developments to the Basel Convention prove that the regime established by the Convention has moved from a monitoring system to a system attempting to limit the amount of wastes transported and simultaneously provide with a compensation scheme for damage suffered by any transports The questionable applicability of the Basel Convention to ship-breaking Based on the above mentioned obligation and requirements set forth by the Basel Convention there will be an attempt to examine the extent to which the Convention may be applied to ship-recycling/breaking and the problems that may arise in doing so. In specific, there are issues with regards to the application of the definition of waste to ships and with the application of the term state of export to ships. 38 Regulation (EC) No 1013/2006 of the European Parliament and of the Council of 14 June 2006 on Shipments of Waste [2013] OJ L 190/1, at p Basel Protocol on Liability and Compensation for Damage resulting from Transboundary Movements of Hazardous Wastes and their Disposal Ibid, Article 2(2)(h) 41 The Protocol shall enter into force on the ninetieth day after the date of deposit of the twentieth instrument of ratification, acceptance, formal confirmation, approval or accession. Ibid, Article Tsimplis, n. 6, at p

16 As seen previously, the definition of waste according to the Convention is an object disposed of, intended to be disposed of or required to be disposed of 43. As such, it seems probable that a ship would fall under this definition. In addition, ships and their machinery, equipment and piping will usually contain or be contaminated with hazardous wastes listed under Annex I of the Convention 44. This also brings into consideration the application of the Basel Ban prohibiting their export from OECD countries to non-oecd countries, especially given the fact that most of the shipbreaking yards are found in non-oecd countries 45. Furthermore, according to the definition of disposal under Article 2(4) and the further definition under Annex IV paragraph B of the Convention, shipbreaking/recycling falls under entry R4 Recycling/reclamation of metals and metal compounds" 46. However, although it becomes apparent that vessels are to be considered waste and that their disposal falls under the ambit of the Convention, the underlying issue here is at what point in time is a vessel to be considered as waste intended to be disposed of. Given that vessels reach the place of scrapping under their own power, due to the widely used beaching practice, and that in most cases ship-owners in an effort to maximise their profit attempt to squeeze in as many chartered voyages as possible prior to scraping the vessel, it is not clear at what point in time the intention to dispose 43 Basel Convention, Article 2(1). 44 Tsimplis, n. 6, at Darren Wall and Michael Tsimplis, Selling ships for scrap (2004) 2 LMCLQ 254, at p Basel Convention Annex IV, Paragraph B, R4. 13

17 of the vessel becomes apparent, thus placing it under the definition of waste. The Convention, as it was not designed with the scrapping of vessels in mind, does not provide with any guidance, clear or otherwise, on this matter. In this respect, Ulfstein claims that as long as the decision to scrap has been taken, even though the vessel may still have scheduled voyages to perform it is to be considered as waste and that only when the decision to scrap is taken in the distant future should the vessel not be considered as waste at the time of the decision 47. Although arguably, there is some logic behind this reasoning, such an attempt to imply into the Convention a timeframe with regards to the status of the vessel does not provide with the certainty required for the Convention to operate properly. Ulfstein does however support that an intention to scrap a vessel may be deduced from a series of legal/physical actions taken by the owner. Such as actions may include taking the vessel out of traffic, not renewing its certificates, deleting it from its registry or most importantly entering a recycling or scrapping contract for the vessel 48. However, a ship-owner in an attempt to denounce his intention to scrap, provided he has not entered into a scrapping/recycling contract, may delay all such actions until the vessel is in the high seas or in territorial waters of the State where the vessel is to be scrapped. Thus, as it will be established further on, circumventing the Convention. 47 Geir Ulfstein, Legal Aspects of Scrapping Vessels: A Study for the Norwegian Ministry of Environment (9 March 1999) at 7. Available at: < accessed 15 August Ibid, at p

18 This issue turns our attention to the issue of defining the state of export for vessels. As previously mentioned the state of export is defined as a Party from which a transboundary movement of hazardous wastes or other wastes is planned to be initiated or is initiated 49. This definition is important as it directly affects the effectiveness of the PIC process, the duty to re-import and the illegal traffic provisions of the Convention 50. In order for these articles to be effective, the state of export definition must be interpreted to mean where the physical action of moving the waste, starts or is planned to start 51. However, due to the previously mentioned difficulty in defining the moment upon which the vessel is to be considered waste and given the movement of the vessel from port to port and thus from state to state it becomes equally difficult to apply the state of export term as defined in the Convention to vessels. On a theoretical basis one could conclude that the last port of departure of a vessel after the decision to scrap/recycle the vessel has been taken is the state of export 52. As the Convention was not drafted with vessels in mind, the above constitute interpretations as to how it applies to vessels. In conclusion, even if one were to consider the Convention applicable to vessels and overlook certain vague aspects, it may be circumvented by ship-owners. As Tsimplis notes, this may happen in two ways. Firstly, when the decision to scrap is taken while a vessel is in the high seas there is no state of export, thus avoiding the application of the Convention and the Basel Ban. Secondly, even if it is argued that the flag state may be the state of export the ship-owner may circumvent its requirements either 49 Basel Convention, Article 2(10). 50 Ibid Articles 6, 8 and Ulfstein, at p This however creates jurisdictional issues with regards to the responsibilities of the flag state and the port state. For more information see Ulfstein at pp

19 by re-flagging the vessel or by selling the ship to a company based in a non-oecd country 53, which is a common practice in the ship scrapping/recycling industry. 53 Michael N Tsimplis, Recycling of EU ships: from prohibition to regulation? (2014) 3 LMCLQ 415, at p

20 Chapter 3. The Hong Kong Convention Even though the Basel Convention has its place and is of utmost importance in regulating and minimising the international trade of hazardous waste, as it has been established, it is not clearly applicable and enforceable in ship recycling procedures. Due to these gaps in regulation and international legislation, the Marine Environment Protection Committee of the IMO (hereinafter MEPC) pursuant a mandate given by the Assembly of the Organisation, drafted an international convention tailor-made to suit the specific requirements and idiosyncrasies of ship recycling. Thus, The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (hereinafter SRC) was formally adopted 54 on the 15 th of May 2009 in a diplomatic conference held in Hong Kong. The purpose of the SRC is to create a legally binding instrument establishing regulations spanning throughout the life cycle of a ship, cradle-to-grave, from design and construction until such time as she is recycled 55. The SRC has not as of yet entered into force 56, however it should be noted that according to Article 15(2) of the SRC it does not prejudice the obligation and rights of its parties with regards to other relevant conventions 57. Thus, once the Basel Convention and its protocols come into force, the SRC would operate in parallel to the Basel Convention Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships 19 May 2009 SR/CONF/ Saurabh Bhattacharjee, From Basel to Hong Kong: International Environmental Regulation of Ship-Recycling Takes One Step Forward and Two Steps Back (2009) 1(2) Trade, Law & Development 193, at p See SRC, Article 17 for entry into force requirements. 57 SRC, Article 15(2). 58 Tsimplis, n. 53, at p

21 3.1 Key Provisions General Obligations Under the SRC, the parties to the convention are obliged to fully and completely implement it, to co-operate with other parties so as to effectively implement and enforce the SRC and to continuously develop technologies and practices promoting environmentally sound recycling of ships 59. In addition, the SRC makes a direct effort to clarify that parties to it have the right to establish more stringent measures so as to further promote the safe and environmentally sound recycling of ships 60. The more straightforward interpretation of this section is that it simply clarifies that the SRC sets the minimum required standards 61, as long as these measures are consistent with international law Application of the SRC As the SRC is tailored towards the needs of ship recycling, it applies to vessels flying the flag of a party state 62 and to ship recycling facilities operating under the jurisdiction of a Party to the SRC 63. Ships under the SRC are defined as vessels of any type as long as they have operated or are operating in the marine environment 64. Therefore one could argue that structures that have not operated in the marine environment but only in internal waters are excluded 65. In addition, the SRC 59 SRC, Article 1(1, 3, and 4). 60 SRC, Article 1(2). 61 Tsimplis, n. 6, at p SRC, Article 3(1)(1). 63 Ibid, Article 3(1)(2). 64 Ibid, Article 2(7). 65 Tsimplis, n. 6, at p

22 distinguishes new ships from existing ships 66 ; as it will be seen different provisions apply for each category. Furthermore, there are certain exclusions under the SRC regarding the vessels to which it applies. Firstly, the SRC does not apply to ships of less than 500 GT operating only in internal waters for the entirety of their operational life 67. Secondly, the SRC explicitly excludes from its ambit military ships and any other type of party owned ship operated only on non-commercial governmental service 68. Notably, none of these exceptions are provided for in the Basel Convention. This however may be attributed to the fact that the Convention was not created with ships in mind. In any case should the Convention and the SRC both come into force there could be a conflict, as the latter does not prejudice any right and obligations undertaken by parties to other agreements, i.e. the Convention SRC, Regulation 1 (3) and (4). 67 Ibid, Article 3(3). 68 Ibid, Article 3(2). 69 Tsimplis, n.6, at p

23 3.1.3 Flag State Responsibilities Under the SRC, flag states are primarily responsible for two issues, the preparation of the inventory of hazardous materials (hereinafter IHM) and surveying, certifying ships flying their flags. As far as the IHM is concerned, the SRC requires all ships to carry on board an IHM, the difference being that as far as new ships 70 are concerned this requirement applies immediately 71, whereas for existing ships 72 a grace period of 5 years is provided (from the time the SRC enters into force), within which they are to produce such an inventory, or if they are to be recycled earlier than 5 years, at their time of recycling 73. In both cases however, this IHM is to be maintained and updated throughout the operational life of the ship 74. The IHM is to be issued, verified and updated by the flag state of the ship concerned 75. This provision is enforced through the Port State Control inspections undertaken in any port of another Party, inspections being limited to the request of a valid IHM, lacking which a detailed inspection may be undertaken 76. The IHM is to be ship-specific and consist of three parts. Part I, containing a full list of all the hazardous wastes 77 to be found in the structure or equipment of the ship, their location and approximate quantities, as well as whether the ship is in compliance with Regulation Parts II and III of the IHM are to be 70 SRC, Regulation (1)(4). 71 Ibid, Regulation (5)(1). 72 Ibid, Regulation (1)(3). 73 Ibid, Regulation (5)(2). 74 Ibid, Regulation (5) (3). 75 Ibid, Article Ibid, Article As listed in Appendices 1 and 2 of the SRC. 78 SRC, Regulation (5)(1)(1) and (2). As previously mentioned, the SRC attempts to regulate the entire life cycle of ships with regards to hazardous wastes. Thus 20

24 added prior to the recycling of the ship. The former listing operationally generated wastes and the latter containing stores 79. Notably, IHM certificates may only be issued to ships flying the flag of parties to the SRC 80, however, a no more favourable treatment clause for ships flying the flags of non-parties is provided. 81 The second part of the responsibilities of the Flag States require them to survey and certify ships flying their flag according to the regulations found in the Annex to the SRC 82. Regulation 10 of the SRC provides that the following surveys are to be conducted. Firstly, an initial survey prior to the ship being put in service or before the issuance of the International Certificate on the IHM 83. Secondly, renewal surveys at intervals specified by the Flag State, but not exceeding five years 84. Thirdly, additional surveys ensuring compliance with the SRC requirements and proper amendment of the IHM following significant changes or repairs to the ship 85. Finally, a survey prior to the ship being recycled should be carried out in order to verify that the IHM complies with the requirements of the SRC, that the Ship Recycling Plan (SRP) includes the information contained in the IHM and that the Ship Recycling Facility that is to proceed with the recycling of the ship is validly authorised under the SRC 86. Once this final survey is successfully completed, the Administration issues an Regulation 4 requires Parties to prohibit the installation of hazardous materials, as listed in Appendix 1 to the SRC, on ships flying their flags, as well as the use of such materials when a ship, regardless of flag, is in a port, shipyard, ship-repair yard or offshore terminal of a Party. 79 SRC, Regulation 5(4). 80 Ibid, Regulation 12(4). 81 Ibid, Article 3(4). 82 Ibid, Article Ibid, Regulation 10(1)(1). 84 Ibid, Regulation 10(1)(2). 85 Ibid, Regulation 10(1)(3). 86 Ibid, Regulation 10(1)(4). 21

25 International Ready for Recycling Certificate (IRRC) 87. With regards to the IRRC, the Parties are also required to report to the IMO a list of ships flying their flag for which this certificate has been issued, as well as a list of ships that have been recycled within the Party s jurisdiction 88. However, although this is a helpful practice, it would have been more helpful if information on whether ships were deregistered for the purpose of recycling were required. This requirement, as is submitted by Prof. Tsimplis would have made it easier to trace registration changes with the intent of avoiding the SRC 89 Thus, it is submitted that the IHM and the relevant surveys and certification are intrinsic to the operation and success of the SRC, as through this scheme hazardous materials and their use will be thoroughly monitored, thus assisting in the minimising of the use and production of hazardous wastes Ibid, Regulation 11(11). Administration is defined as the Government of the State whose flag the ship is entitled to fly, or under whose authority it is operating, SRC, Article 2(2). 88 SRC, Articles 12(4) and (5). 89 Tsimplis, n.6, at p Tsimplis, n. 6, at p

26 3.1.4 Authorised Ship Recycling Facilities In addition to the obligations of the Flag State, the SRC imposes certain obligations on the recycling state. According to Article 6 of the SRC, state parties under whose jurisdiction a Ship Recycling Facility (SRF) 91 operates have to ensure that such facilities are in fact authorised according to the regulations of the SRC 92. With regards to the authorisation of SRFs, the regulations of the SRC impose the following obligations on recycling states. Firstly, they are required to establish legislation to the effect of ensuring that SRFs are not only operated in a safe and environmentally sound manner, but that they are also designed and constructed in such a way 93. Secondly, contracting states are to establish SRF authorising mechanisms 94 in accordance with IMO guidelines 95 as well as inspection, monitoring and enforcement mechanisms 96. Finally, contracting states are obligated to designate competent authorities whose role is to audit and authorise SRFs and communicate the audit results to the IMO 97. Once a Ship Recycling Facility is authorised by the competent authority, it is issued with a Document of Authorisation to conduct Ship Recycling (DASR) 98. The DASR contains contact details and is accompanied by a supplement. Article 1 of the 91 SRC, Article 2(11). Ship Recycling Facility is defined as an area that is a site, yard or facility used for the recycling of ships. 92 Ibid, Article Ibid, Regulation 15(1). 94 Ibid, Regulation 15(2). 95 Ibid, Regulation 16(1). 96 Ibid, Regulation 15(3). 97 Ibid, Regulation 15(3) and (4). These responsibilities may however be delegated to recognised organisations. Regulation 16(2). 98 Ibid, Appendix 5. 23

27 supplement certifies that the SRF meets the design, construction and operation requirements of the SRC and that it meets the requirements of listed in regulations More importantly, article 2 of the supplement specifies the capabilities of the SRF. In specific, the size limitations of the ships that the facility is authorised to accept for recycling purposes 100, as well as a detailed list of hazardous materials 101 and whether the SRF is competent to remove, store and process these materials, and if yes with what limitations 102. Moreover, in cases where the SRF is unable to process a specific hazardous material after it has been removed, it is obligated to describe in the SRP where the material in question is to be processed 103. Furthermore, authorised Ship Recycling Facilities are only allowed to accept ships that either comply with or meet the requirements of the SRC 104. Similarly, they are only allowed to accept ships for recycling that they are authorised to accept and to this end the facilities are required to avail their authorisations for inspection by the shipowner wishing to recycle their ship 105. However, as Prof. Tsimplis notes, there is an omission in the regulations of the SRC, which opens up a loophole. In specific, the possibility of non-authorised recycling facilities operating within a contracting state is not, explicitly or implicitly, excluded, nor is there a restriction for authorised facilities to employ non-authorised facilities for the final disposal of materials that the former are not able to dispose of Ibid, Supplement, Article Ibid, Article 2(1). 101 Ibid, Note 4. As specified in Appendices 1 and 2 and Regulation 20 of the SRC. 102 Ibid, Article 2(2). 103 Ibid, Note Ibid, Regulation 17(2)(1). 105 Ibid, Regulation 17(2)(2) and (3). 106 Tsimplis, n.6, at p

28 3.1.5 Improvements from Basel Given that the SRC is a bespoke instrument, designed specifically for the needs of the ship recycling industry by the most competent authority, the IMO, then by default one would assume that it offers more advantages than the generic Basel Convention regarding movement of waste. The first apparent improvement from the basis of the Basel Convention is the fact that the SRC encompasses a life cycle, or cradle-to-grave, approach. As previously described, the SRC attempts to regulate the design, construction, operation and maintenance of ships whilst establishing the requirement of the IHM so as to reduce as much as possible the use of hazardous materials, thus potentially and hopefully eliminating such wastes from being generated in the future through recycling procedures 107. Secondly, so as to comprehensively tackle the issues of the ship-recycling industry, the SRC takes a dual and more comprehensive approach. It is a legally binding instrument on ship recycling, the first of its kind, regulating ship standards with regards to ships, whilst obligating ship-recycling facilities that wish to operate within this framework to operate, and be managed, in a safe and environmentally sound manner Bhattacharjee, n.55, at K.P. Jain, J.F.J. Pruyn and J. J. Hopman, Critical Analysis of the Hong Kong International Convention on Ship Recycling (2013) 7(10) International Journal of Environmental Sciences 519, at p

29 Thirdly, the requirements set forth under Article 12 of the SRC for State Parties to report to the IMO a series of information 109, is to be seen as a positive aspect of the SRC and as a step forward from the Basel Convention, as this requirement will help create a detailed inventory thus facilitating the monitoring of end-of-life ships Shortcomings of the SRC Despite the fact that the SRC is, as it has been established, a step forward towards achieving the goal of environmentally sound management of ship recycling, it will be documented that it is nothing more than precisely that, a step towards the right direction and not a mission accomplished. In presenting the deficiencies of the SRC, certain provisions or lack thereof will be compared with some of the provisions of the most comparable legal instrument, the Basel Convention. First, and foremost, as previously noted the SRC excludes from its ambit certain ships. Specifically, we observe that warships as well as government-owned ships engaged in non-commercial activities are excluded, as well as ships engaged exclusively in activities within the jurisdiction of the ships flag state 111. With the first exception, one may argue that it has been added to the SRC so as to not raise issues regarding sovereign immunity or security issues, especially regarding warships. Similarly, there is also the counter-argument that due to the great quantities of hazardous materials that are to be found in warships, they too should be included in 109 Amongst which: a list of authorised SRFs, an annual list of ships that have been issued an IRRC, an annual list of ships recycled in a State Party jurisdiction and violations of the SRC. SRC, Article Bhattacharjee, n.55, at p SRC, Article 3(3). 26

30 the SRC 112. However, regarding the exception of vessels employed exclusively in domestic waters, one may wonder what the reasoning behind this exception is 113, especially given the fact that the exception is not accompanied by a requirement for such ships to be recycled within the same jurisdiction as they have been operating. In addition, as noted by Bhattacharjee, the recycling process of a ship and the environmental impact thereof has little or no connection to the use of the ship during its lifetime 114. Secondly, the SRC does not provide for either notification, or a consent requirement of the recycling state, or indeed of any of the transit states by the state of export or by the Flag State. Thus essentially undoing what was established under the PIC procedure of the Basel Convention by not establishing a direct State-to-State reporting system 115. Furthermore, the position of the state of export under the Basel Convention is, in broad lines, taken by the Flag State under the SRC. As previously explained, in the PIC procedure of the Basel Convention the state of export is required to notify the state of import as well as the transit states of its intention to export hazardous wastes. With regards to ships, it has been argued that the state of export is the port from which the ship that is to be recycled sails. However, there is no such responsibility imposed upon the state of export in the SRC. Here, the control mechanism springs into action at the point the ship-owner declares to the flag state the intention to scrap 112 Bhattacharjee, n.55, at p Ibid. 114 Ibid. 115 Ibid. 27

31 the ship 116. This differentiation between the two conventions may lead to the creation of a loophole in the international ship-recycling legal regime, when and if the Basel Ban and protocols and the SRC come into force 117. The loophole is that by declaring a ship to be waste whilst on the high seas, under the SRC, a ship-owner essentially avoids the controls that the state of export has 118. By substituting the state of export with the Flag State the enforcement capabilities of the Basel Convention are diminished. A possible strengthening of the term state of export, under the SRC, so as to better apply to ships 119, would have had a far more fruitful result. 120 Thirdly, although under Article 10 of the SRC 121 party States are required to prohibit, through adopting relevant national laws, violations of the SRC and impose sanctions for such violations, the severity of these sanctions is left to the discretion of the legislative bodies of the States that create such legislation. This, when compared to the unequivocal criminalisation of illegal traffic under the Basel Convention 122, may be considered as a step backwards from the general spirit that these two conventions embody. Finally, as previously noted, under Article 4(5) of the Basel Convention party States are explicitly forbidden from trading with non-parties to the Convention, whether the trade be to export hazardous or other wastes to non parties, or to import them from 116 Tsimplis, n.6, at p Ibid. 118 Ibid. 119 And not simply be the last port of sail once an intention to recycle has been established. 120 Tsimplis, n.6, at p SRC, Article 10(1) and (3). 122 Basel Convention, Article 4(3). 28

32 non-parties 123. On the contrary, the SRC contains no such restriction with regards to trade between parties and non-parties. This differentiation may become a hindrance for the ratification of the SRC by major recycling states as there will be no guarantee that they will enjoy the benefits of ship-recycling contracts of ships flying the flags of party States so as to incentivise them to invest in upgrading their facilities. Additionally, not becoming parties to the SRC will not be an obstacle for such States to procure ship-recycling orders 124. Based on the evaluation provided, one may conclude that whilst as a whole the SRC is the best available option with regards to the specific needs of the ship-recycling industry it is not the most comprehensive or environmentally conscientious approach. 123 Ibid, Article 4(5). 124 Bhattacharjee, n.55, at p

33 Chapter 4. The EU Ship Recycling Regulation On the 20 th of November 2013 the European Parliament and the EU Council adopted Regulation 1257/2013 on ship recycling 125. Due to the tardiness of the ratification process of the SRC and the strict criteria 126 set in order for it to come into force, this regulation was created so as to expedite and facilitate ratification of the SRC in the EU and in third countries as well 127. The EU bases the adoption of the Regulation on the preservation of the right of parties to the SRC to take stricter measures 128 so as to promote the goals of the convention 129. The Regulation came into force 20 days after its publication in the journal of the EU 130. It will apply either 6 months after the combined maximum annual ship recycling output of the ship recycling facilities included in the European List constitutes not less than 2,5 million light displacement tonnes (LDT) 131, or on the 31 st of December , whichever is earlier Regulation (EU) 1257/2013 of the European Parliament and of the Council of 20 November 2013 on ship recycling and amending Regulation (EC) No 1013/2006 and Directive 2009/16/EC [2013] OJ L330/56, hereinafter EU-SRR. 126 SRC, Article EU-SRR, Preamble, Paragraph SRC, Article 1(2). 129 EU-SRR, Preamble, Paragraph Ibid, Article 31. It was published on the 10 th of December 2013, thus Regulation has been in force since the 30 th of December Ibid, Article 32 (1)(a). 132 Ibid, Article 32 (1)(b). 133 But not earlier than 31 December

34 4.1 Differences from the SRC Given that the EU-SRR, adopts purposes similar to the SRC 134 and aims to facilitate its ratification, for the most part it uses definitions and imposes obligations as expressed in the SRC. In specific, it provides for the same exceptions as the SRC with regards to its application 135. Certification and survey requirements are the same as under the SRC, i.e. initial, renewal and final surveys are the same for ships and the certificates issued are the same as well, namely the ready for recycling certificate 136, the inventory certificate 137 and the statement of compliance 138, which is a certificate that is issued, for the same purpose as the IHM certificate, to ships flying the flags of third states. However, there are some significant differences from the SRC, which highlight the stricter character of the EU-SRR. The Regulation adopts a different definition of SRFs 139. The lack of the word site from the EU-SRR definition may have two repercussions. On the one hand it excludes from compliance with the Regulation facilities that are sites and not yards or facilities, albeit that it is not clear what type of infrastructure would be required for a site to cease being considered as such 134 EU-SRR, Article 1: The purpose of this Regulation is to prevent, reduce, minimise and, to the extent practicable, eliminate accidents, injuries and other adverse effects on human health and the environment caused by ship recycling. 135 EU-SRR, Article 2(2). Does not apply to warships or other government owned or operated ships not engaged in commercial service, to ships less than 500 GT and to ships that operate throughout their lifetime in waters subject to the jurisdiction of the Member State whose flag they are flying. 136 Ibid, Article 3(1)(22). Similar to the IRRC. 137 Ibid, Article 3(1)(21). Similar to the International Certificate of the IHM. 138 Ibid, Article 3(1)(23). 139 SRC, Article 2(11): Ship Recycling Facility means a defined area that is a site, yard or facility used for the recycling of ships. EU-SRR, Article 3(1)(7): ship recycling facility means a defined area that is a yard or facility located in a Member State or in a third country and used for the recycling of ships. 31