Breaking bad: Ship recycling and impact of HKC

Indian shipbreakers work at the Sosiya-Alang Ship Recycling yard. Credit: SAM PANTHAKY/AFP via Getty Images

At the end of 2019, India signed the Hong Kong Convention (HKC) for the safe and environmentally sound recycling of ships. While this suggests a move towards better shipbreaking policy, SAS investigates the current issues with the HKC and the promise of a new EU Ship Recycling Regulation (SRR)

Despite India’s accession to the HKC in November 2019, it is worth noting that the convention will only enter into force 24 months after the ratification by the now 15 states. These states represent 40% of the world merchant shipping by gross tonnage, with a combined maximum annual ship recycling volume not less than 3% of their combined tonnage.

“Effectively, the above conditions mean that for the convention to enter force, it is required to be ratified by at least two major recycling nations: India and China, or Bangladesh, or Pakistan, and China and Bangladesh. Any combination involving Bangladesh or Pakistan is not likely in the near future,” said Nicola Mulinaris, communication and policy officer of non-governmental organisation (NGO) Shipbreaking Platform. Though with India’s accession there may be more pressure on China, Bangladesh and Pakistan who have not yet signed or ratified the HKC to do so.

While the HKC is unlikely to come into force in the near future, the adoption of International Labour Organisation (ILO) conventions offers a powerful message to a turbulent industry. While Mulinaris appreciates these conventions, he believes there is a gap between the conventions and the reality on the ground in South Asia. “Recent studies focusing on Alang, India, show that, while in theory, the government of India accepts the ILO guidelines, in practice these are not strictly applied to shipbreaking yards. Political and economic gains are often considered more important than workers and the environment,” he said.

Despite the introduction of the Ship Recycling Code in 2013, as well as several rulings issued by the Supreme Court of India demanding improvements within industry about national and international requirements for safe working conditions, environmental protection, and waste trade laws, conditions in these shipbreaking hubs remain inadequate. Workers do receive minimal training, still, serious injuries and occupational diseases are rarely documented.

Shipbreaking in South Asia remains broadly an informal labour sector with a large gap between the regulations and their enforcement. However, Mulinaris said that the problems lie not solely with the ratification of the HKC but with the HKC itself. He argues that the industry-driven HKC has offered an ineffective stopgap rather than a solution. He questions the logic of shipowners headquartered in the world’s shipping hubs leaving the onus of labour rights and environmental protections on countries known to be unable to fulfil these international or local obligations as any sort of “solution” to the shipbreaking crisis. In effect, he claims that this does nothing but confer legality upon irresponsible practices or make them even more difficult to sanction.

Shipbreaking Platform argues that the lack of political will at the international level to directly hold shipowners accountable or impose obligations on the states – where shipowners are located – is a major factor that hinders any effective international solution to the shipbreaking problem.

If jurisdiction were given to countries where shipping companies are headquartered, it is possible that this may have prevented some of the industry’s pitfalls. For example, given that the HKC relies on the flag-state jurisdiction, it is prone to circumvention by flag-hopping to grey- and black-listed end-of-life flags that are popular for vessel last voyages to South Asian beaches. These are flags known for their poor enforcement of international maritime legislation.

Under the HKC, nothing prevents shipowners seeking to maximise profits by selling older vessels to cash buyers, while avoiding legal, financial, and other risks when sending these ships to South Asian shipbreaking yards. Cash buyers change the ship flags to grey- and black-listed flags and re-register vessels under new names in companies often located in tax havens. This makes them harder to find or prosecute in the case of labour injury or per ‘polluter pays’ systems. European ownership and registration decreases with the age of a ship, and the trend of flagging out from European registries to flag states that poorly enforce international maritime legislation is accentuated at end-of-life. The European Commission (EC) estimates that 40% of vessels make their final trip to a scrapping destination under so-called flags of convenience.

‘Greenwashing’ bad practice

Many Indian shipbreaking yards have sought and been issued Statements of Compliance (SoCs) with the HKC on a business-to-business basis to attract more reputable clients to their shipbreaking yards. Despite the proliferation of these certificates being handed out, which certainly offers the appearance of Indian beaching for shipbreaking becoming ‘greener’, the reality is far different.

The first company to issue a SoC to a beaching yard was the Japanese classification society ClassNK, and the first four beaching yards that received SoCs were Priya Blue, Kalthia, Leela, and Shree Ram. They are respectively linked to the main cash buyers Best Oasis, Wirana, GMS, and NKD. These yards are located along the Indian beach of Alang-Sosiya and received SoCs in 2015. Since then, there are reportedly more than 80 yards that claim to have one such certification. Many of these SoCs have been handed out by ClassNK, Italian classification society RINA, and the Indian Register of Shipping. RINA has been the first and, so far, the only classification society to certify a yard on the Bangladeshi beach of Chattogram.

None of the aforementioned class societies invited to assess compliance with the HKC have been mandated to act as a recognised organisation by the Indian state. Current SoCs issued to beaching yards are offered on the basis of check-listing whether the yards can fulfil the requirements under the HKC as interpreted by these classification societies without looking at the actual practice of the yards.

While the HKC and Indian law require that environmental monitoring is carried out at the yard in order to receive an SoC, Mulinaris revealed, “Many yards in Alang-Sosiya use the same company to conduct environmental monitoring. A closer look at the findings of this company reveals that the monitoring is of poor quality.”

Further, many of the pollutants that have been found in high concentrations on the beach in Alang-Sosiya, according to reports in the journal Ecological Economics, are not even detected. Consequently, the evaluation neglects the degrading environmental conditions. SoCs, therefore, offer no guarantee that conditions at the yard are safe and environmentally sound.

Alternatives to the HKC

Mulinaris added that part of the impetus behind the sudden push by shipowners and cash buyers to adopt the HKC is the higher standards set by the new European Union Ship Recycling Regulation (EU SRR). To be included in the EU SRR, any ship recycling facility, irrespective of its location, has to comply with a number of safety and environmental requirements. Facilities operating in the European Union are approved by their national authorities for listing.

The European Commission assesses applications received from the ship recycling facilities located in the developing countries. This offers a guarantee that local enforcement of labour laws will be at least monitored.

While the EU regulation brings forward the requirements of the HKC, it also includes additional conditions, such as disallowing the beaching method, and provisions related to downstream toxic waste management.

Moreover, while some yards may have achieved what appears to be a surface compliance with safety and environmental requirements – such as cementing the dry beach area where secondary cutting is conducted, installing drainage systems, and improving their hazardous waste storage procedures – little has been done to address concerns about the primary cutting on tidal mudflats. Two yards in India, which applied to be included on the European list of approved ship recycling facilities, have been found not to comply with the EU SRR requirements. This suggests it is upholding more stringent standards than the HKC.

EU-listed ship recycling facilities are subject to a higher level of scrutiny: it requires independent third-party certification and auditing, and NGOs are allowed to submit complaints should they have concerns that a listed facility is not operating in line with the EU SRR.

However, a major shortcoming of the EU SRR is that shipowners can circumvent the law by simply swapping their EU flag to a non-EU flag. Major European shipowner Maersk has already threatened to flag-out from the Danish ship registry to allow the use of non-EU approved shipbreaking facilities on the beach in India.

EU shipowners account today for about one-third of the end-of-life tonnage beached in substandard yards in Bangladesh, India, and Pakistan. Mulinaris argues that as the single largest market “selling end-of-life ships for dirty and dangerous shipbreaking”, the European Union must acknowledge its responsibility in a need to regulate ship recycling. As such, proper implementation of the EU SRR entails making sure that shipowners are directed towards the use of EU-approved recycling facilities and do not simply flag-out to circumvent the law.

A solution could lie in a report written jointly by Ecorys, class society DNV GL, and Erasmus University School of Law. The report, published by the EC in July 2016, suggests introducing a financial incentive to enhance safe and environmentally sound ship recycling, wherein contributions for a ship recycling license are collected from all ships visiting EU ports, regardless of their flag. Such incentives offer a compelling way forward. With no sign of the HKC receiving the support it needs from China, Bangladesh, or Pakistan to ensure its entry into force, the way forward is unclear.

EU-led regulation may raise the bar for safer and more environmentally sound ship recycling, but as long as shipowners are not held accountable for the yards they send their ships to, workers and the environment will continue to pay the price.