Ship and rig recycling

The sale and movement of vessels and drilling rigs for demolition and recycling is a highly regulated area, which engages a number of international rules including:

  • The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal;
  • The European Waste Shipment Regulation (Regulation (EC) No.1013/2006); and
  • The European Ship Recycling Regulation (Regulation (EU) No.1257/2013) (which seeks to implement the standards of the Hong Kong Convention in advance of that convention coming into force, but also controversially seeks to modify the application of the Basel Convention regime in the EU).

These have introduced complex regimes, the full implications of which need to be considered extremely carefully by any party involved in sales or acquisitions of vessels and rigs for recycling, and/or the movement of such vessels or rigs to recycling facilities.

It is important to note that a ship may constitute waste within the meaning of the Basel Convention notwithstanding it may still be in commercial service and carrying cargo.  The recent decision of the District Court of Rotterdam in the Seatrade matter (District Court of Rotterdam judgment of 15 March 2018 in criminal case number 10/994550-15) confirms, unsurprisingly, that the position is exactly the same under the European Waste Shipment Regulation.

The cost of compliance with the Basel Convention and the European Waste Shipment Regulation is often small; the cost of non-compliance, however, is potentially very high:

  • Criminal prosecution of the owners of the ship or rig;
  • Criminal prosecution of any others (whether natural or legal persons) involved in the transboundary movement of the ship or rig—this may extend for example to directors, employees and agents of the owners and/or to the owners' contractors (for example, towage contractors and ship managers, and the vessel's master);
  • Maritime disciplinary proceedings against the master;
  • Owners may be forced to incur the cost of taking the ship or rig back to the original place of export;
  • Breach of representation or warranty in any financing, insurance or other contractual documents;
  • Reputational damage.

Compliance is therefore critically important.

Local due diligence is required to understand and manage the often conflicting regulatory requirements which apply, in the states of export, import and transit, to the movement of vessels and rigs to recycling facilities.  Owners and other parties involved in ship or rig recycling projects need legal advisers who are experienced with all aspects of the Basel Convention regime, the practical issues arising in connection with Basel notifications, and the idiosyncrasies of the application process in a range of jurisdictions.

Our team has assisted clients in over 50 recycling projects in Europe, West Africa, Asia and the Americas, and has particular unparalleled experience in:

  • General advice regarding shipments of waste;
  • Local due diligence;
  • Drafting and negotiation of agreements for sale and recycling;
  • Drafting and negotiation of supervision agreements;
  • Management of applications to regulators in jurisdictions of export, transit and import;
  • Liaison with regulators;
  • Drafting and negotiation of bank and corporate guarantees to regulators;
  • Drafting and negotiation of bi- and tri-partite towage contracts;
  • Assistance in disputes under agreements for sale and recycling;
  • Assistance in connection with investigations/prosecutions of alleged breaches of waste shipment legislation.

For further information or any assistance you may require in this area, please refer to this article or contact Partner Renaud Barbier-Emery or Senior Lawyer Ina Lutchmiah.