Sell to scrap – can a seller be liable for something that happens during the scrapping process?

Sell to scrap | BDM Blog | BDM Law

At first glance, one might think the answer to this is blindingly obvious. It seems nonsensical for a seller to be liable for a tort committed by the buyer of its ship!

However, the answer is not so straightforward when one considers the complex EU legislation applicable to ship recycling. Ship owners who are intending to scrap vessels at the end of their economic lives (many of which have been foreshortened by the present world economic crisis) need to think carefully before they enter into a sale for scrap arrangement that may see the ship scrapped in a non-approved recycling facility.

Witness the case of the Maran Centaurus. After an interesting life which saw a few incidents (she was notably one of the first ships to fall victim to Somali pirates back in 2009) the ship was sold for scrap in 2017 in a deal said to be worth some US$17M. She was reflagged, renamed and sold on by the scrap buyer to a Bangladeshi breakers yard. During the scrapping process a worker was killed. Sad though that is, it is not unusual for deaths to occur in the demolition process in Bangladesh and India. Safety standards are woeful which has resulted in EU legislation to seek to force EU based owners to scrap their ships in EU approved facilities. This legislation still applies to UK flagged ships and owners, although it may be substantially reduced once the UK officially exits the Brexit transition period.

The widow of the deceased took legal advice and with assistance from Leigh Day (a well-known plaintiff personal injury firm) she brought a claim against the former owners / managing agents Maran (UK) Ltd in the English High Court. Maran is one of the companies within the wider Angelicoussis Shipping Group.

The argument against Maran was essentially that, under the owners’ instructions, they sold the ship knowing that it would end up in an unauthorised scrap facility where there was little regard for worker safety. Maran resisted the claim arguing that the seller of a ship owed no duty in respect of dangerous practices that might later occur in relation to her and over which they had no control. They applied to have the claim struck out on the basis that there was no cause of action. The matter came before Mr Justice Jay in the High Court.

Surprisingly, the judge declined to strike out the claim. In so doing, he regarded it as arguable that the defendants had created a foreseeable risk of harm and that it was arguable that there was a duty of care owed to the worker concerned (1).

It remains to be seen how this case will develop. Leigh Day have made the most of the fact that it is standard practice for ship owners to deal through brokers or intermediaries to dispose of ships at the end of their economic lives. It has also been suggested that scrapping in Bangladesh is more financially advantageous to a ship owner than would be the case if they scrapped in an EU approved facility. At least 24 demolition workers were killed in Bangladesh last year with many more seriously injured. Against this background, the pressure is perhaps on the English Court to take another look at the scope of the law relating to duty of care on the basis that this could make EU based ship owners think more carefully before entering into a “sell to scrap” deal where the vessel could end up in an unsafe demolition yard in South Asia.

We are regularly approached by ship owners on the issue of how to safely dispose of their vessels. See our previous post on this subject here. There are ways to reduce the risks, namely proper due diligence on the Buyer and careful attention to the sale contract terms with suitable indemnities in place. Many owners are also now reconsidering the terms of their insurance cover so that they have P&I cover in relation to the potential exposure caused by disposal of their assets.

We will keep our followers posted on the outcome of the litigation, although it is possible that the case may be settled before the matter reaches a final hearing. It seems however that there may be further claims coming as Leigh Day are no doubt scouting out potential claimants in India, Bangladesh and elsewhere.

    1. Begum v Maran (UK) Ltd [2020] EWHC 1846 (QB)
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