Ship and rig recycling – something something
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Recycling of marine assets
When the owner of a ship, drilling rig or other marine asset forms an intention to sell it for scrapping (whether or not the asset will still be used operationally before the sale), then under international conventions that asset legally becomes waste and its movement and demolition become subject to a number of regulations.
Failure to comply with these regulations may expose the owners, buyers, ship managers, towage contractors and their respective directors and employees to criminal charges as well as significant reputational damage.
Prosecutors in many jurisdictions are taking an increasingly aggressive stance to non-compliance with the applicable regulatory regime. Our extensive experience in this area means that we can help you advise you as to the scope of your obligations and assist you in obtaining any required regulatory approvals.
The Basel Convention
The proposed movement of an end-of-life marine asset is very likely to engage the Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (the “Basel Convention”). Most countries (187 states out of 193 UN members) are parties to the Basel Convention, so that convention is very widely applied. A notable exception is the United States of America, which signed the Basel Convention in 1990 but never ratified it.
The Basel Convention requires the owner or exporter of the asset to provide written notification to the relevant authorities in the states of export, import, and any transit states, and to secure appropriate permissions in advance of any movement of the asset.
The European Waste Shipment Regulation
The EU has implemented the Basel Convention Regime by way of Regulation (EC) 1013/2006 (known as the “European Waste Shipment Regulation”). The European Waste Shipment Regulation is directly applicable in all EU member states and bans the export of waste from the EU for recovery to any location outside of the OECD (and bans the export of waste from the EU for disposal to any location outside of the EFTA).
The Hong Kong Convention
Adopted in May 2009, the Hong Kong Convention is designed to ensure that when ships are recycled at the end of their operational lives, they do not pose any unnecessary risk to human health and safety or to the environment. Although the Hong Kong Convention has not yet come into force, the International Maritime Organisation (IMO) has issued guidelines to assist states with the early implementation of the Convention’s aims.
The European Ship Recycling Regulation
In the EU, Regulation (EU) No 1257/2013 on ship recycling (the “European Ship Recycling Regulation”) seeks to implement the standards of the Hong Kong Convention before that convention actually comes into force. Most of the provisions of that regulation will have come into force by 31 December 2018. From that date most ships flying the flag of an EU Member State will only be permitted to be recycled at one of the ship recycling facilities listed in a “European List” of approved ship recycling facilities published by the European Commission.
How Wikborg Rein can help
The Basel Convention, the European Waste Shipment Regulation and the European Ship Recycling Regulation have introduced complex regimes, the full implications of which need to be considered extremely carefully. Local due diligence is required to understand and manage the often conflicting requirements in states of export, import and transit. 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 numerous recycling projects in Europe, West Africa, Asia and the Americas, and has particular 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.
Wikborg Rein's secure transaction portals
We use secure online transaction portals where our clients and our team can keep track of progress, collaborate, share updates and view documents – all organised in one place. This reduces email overload and increases efficiency, as everyone always has access to a shared calendar, tast allocations and the latest documents, whether they relate to regulatory applications or sale agreement deliverables.