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Those who follow our blog may recall that we keep a close eye on the increasing problems faced by EU based shipowners when their ships are reaching the end of their working lives. See our previous reports here and here.

From 1 January 2019 the amended Regulation (EU) 1257/2013 of the European Parliament and the Council on ship recycling has been in force. This regulation stipulates that EU flagged ships may only be recycled at EU approved yards. As of the beginning of this year only 26 facilities have been approved and 23 of those are in EU member states. Some 27 applications have been made by facilities outside the EU but to date only 2 yards in the USA and 1 in Turkey have actually been approved.

A recent BIMCO report on EU ship recycling has alleged that the rules look like protectionism. Yards in EU member states are apparently allowed entry to the list without fulfilling uniform criteria. The same cannot be said for non-EU yards which have to be inspected by European Commission appointed auditors. The report highlights the significant issue that only 9 out of 26 shipyards on the EU approved list are realistically open for ship recycling and, of those, only 3 are able to recycle larger ships of Panamax-size or larger. Angus Frew, BIMCO Secretary General & CEO commented “The EU list is hard to take seriously. I called one of these ‘recycling shipyards’ a few months ago, and they hadn’t even started building the yard yet. The list looks a little like protectionism and clearly disadvantages European ship owners.”

According to the IMO recycling facilities in India, Bangladesh, China, Pakistan and Turkey still account for 98% of the world’s recycling needs. Some Asian yards have been waiting for more than two years for EU approval despite the fact that they have made substantial improvements in terms of safety and protection of the environment. The perception however is that recycling in these facilities is still problematic and many governments and authorities are reluctant to sanction such steps. We live in a world where there is a huge focus on environmental issues and social media is quick to draw our attention to poor recycling practices. Ship owners are increasingly concerned at the impact that this may be having on them as ships are of course identifiable and traceable back to their owners.

In the meantime the implementation of IMO 2020 emission regulations and the Ballast Water Management Convention will result in many EU flagged ships becoming economically unviable and without any without realistic prospect of finding an authorised facility for recycling. Some Owners of EU flagged vessels may consider reflagging outside the EU to avoid the EU Ship Recycling Regulation altogether. However, as the Seatrade case has shown under Waste Management Regulations, regulators may look into the decision making processes behind such a switch to determine whether the intention of the reflagging was to avoid the obligation to recycle the ship at a yard on the EU approved list. Getting it wrong could lead to criminal prosecutions against the individual decision makers at ship owning companies.

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