Dutch environmental crime risks in the ship-breaking industry abroad

Introduction

On 12 September 2019, the Dutch television show Zembla broadcast an item on the scrapping of a polluted gas tanker by an Indian ship-breaking yard. The gas tanker belonged to a Dutch shipping & off shore construction company and was contaminated with mercury in its namesake gas field in Myanmar. According to whistle-blowers, reports have confirmed that the presence of mercury was concealed to avoid the cost of a safe clean-up. Employees at the ship-breaking yard were consequently exposed to mercury fumes during the demolition of the ship.

Social and environmental risks related to ship recycling are a growing concern around the globe. If companies do not take these risks into account, they may be held criminally liable for not preventing injuries that employees working on the demolition may sustain or causing damage to the environment. This article outlines the possible risks that shipping companies may encounter when deciding a course of action for recycling their ships.

It concludes that proper disposal of a ship, be it for scrapping or recycling, is very important. There are two European Regulations that govern the disposal of hazardous waste and ship recycling, respectively, and failure to comply with these regulations can lead to criminal liability in the Dutch courts.

Health and environment risks

Different techniques exist for ship-breaking, with different levels of health and environment risks involved. In developed countries, ship-breakers have to adhere to technical guidelines outlined below. An inventory of hazardous substances is compiled prior to dismantling the ship. The vessel is taken to a dry dock or a pier and secured. There, workers strip the ship down and dispose of all materials in an appropriate manner.

In many developing countries, ships are simply beached instead, and disassembled there. Workers use blowtorches to cut the hull into blocks, which are dropped onto the beach and then cut up again before being sold. Employees are regularly exposed to hazardous substances, and accidents occur frequently. Aside from the health dangers, this way of scrapping a ship is also highly polluting. Research has shown that the process of scrapping a 10.000-tonne ship, at least 120 tonnes of steel becomes molten and disappears into the ocean.

International law

Internationally, multiple initiatives have been developed to combat pollution caused by ship-breaking. The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (the Basel Convention) was adopted by the UN Environmental Program in 1989. This is also relevant for shipping companies, as ships may accrue dangerous levels of hazardous substances in their structures over the years. Amongst other aims, the Basel Convention seeks to restrict transboundary movement of hazardous wastes, except when it can be done in accordance with the principles of environmentally sound management. In 1995, the Basel Ban Amendment was adopted which prohibits the export of hazardous waste from certain developed countries to developing countries - including for recycling. The Basel Convention and the Basel Ban Amendment have both been transposed into European law.

During a convention in 2009, the International Maritime Organisation (IMO) adopted the Hong Kong Convention. This Convention sets standards for ship recycling and holds both the vessel's flag state and the recycling state responsible for enforcing these standards. However, the Convention will not enter into force 24 months after it has been ratified by 15 states, representing 40% of global merchant shipping by gross tonnage, with a combined maximum annual ship recycling volume not less than 3% of their combined tonnage. The Netherlands ratified the Convention on 20 February 2019, becoming the 13th state to do so.

The Hong Kong Convention has been criticised: it does not ban beaching of ships and sets no requirements beyond compliance with national standards. It requires adherence to flag state jurisdiction. This means that vessels can circumvent national standards by "flag-hopping" to end-of-life flags from states with lax maritime standards, such as Palau.

Aside from environmental concerns, concerns regarding the labour conditions have been raised. The International Labour Organisation (ILO) has referred to ship-breaking as one of the most dangerous occupations in the world. It published Guidelines on Safety and health in shipbreaking in 2004. While not legally binding, they have been designed to offer assistance to shipbreakers for the implementation the relevant provisions of ILO standards, codes of practice and other guidelines on occupational safety.

European law

As mentioned, the Basel Convention's standards were transposed in the Waste Shipment Regulation (WSR, known as EVOA in Dutch). It includes a ban on the export of hazardous wastes to non-OECD countries, as well as a ban on the export of waste for disposal. The transposition of the Basel Convention into European law means it is now directly enforceable by national governments, as illustrated in 2018 when a Dutch shipping company was found liable for violating the regulation. It is important to note that the European Court of Justice has ruled that the definition of 'dispose' should not be interpreted restrictively, but all circumstances must be taken into account to assess whether or not the holder of an object or substance intended to dispose of it, while bearing in mind the objective of the directive, to dispose of waste without endangering human health.

Noting the criticisms regarding the perceived shortcomings of the Hong Kong Convention, the European Union decided to address these head-on. The European Ship Recycling Regulation (SRR) came into effect on 1 January 2019. The SRR requires ships that sail under a European flag to be recycled in ship recycling facilities that have been approved by the European Commission and are included on the European list of approved recycling facilities. Currently, only 4 ship recyclers outside the European Union - in Turkey and the United States - have been approved. This means that ships sailing under a European flag can only be demolished by a company that has been included on this list.

Several Indian companies also applied to be on the European list, but so far none have been approved. On two separate occasions, in July and September this year, workers died in accidents at two of the yards that applied for approval from the EU. These yards did have Statements of Compliance with the Hong Kong Convention, which demonstrates that the European requirements go further than those in the Convention. Additionally, these Statements of Compliance may not be sufficient to ensure proper health and safety standards for labourers or the environment.

Dutch law

The obligations under the Waste Shipment Regulation have been criminalised in the Dutch Environmental Protection Act (Wet Milieubeheer). If intent can be proven, the offence is considered a crime and there is a maximum punishment of 6 years imprisonment, or a fine of maximum €83.000. With regard to legal entities, a maximum fine of €830,000 can be imposed per offence. If this amount is thought not to be appropriate, a fine of a maximum of 10% of annual turnover can be imposed.

If only culpability is proven, the offence is considered a misdemeanour and can be punished with 1-year imprisonment or a fine of maximum €20.750. It is important to note that if a corporation is held liable for a concurrence of offences, the fines can be stacked.

One instance of this was in the Seatrade case in 2018. This was an unprecedented case in which the court ruled that a few actors involved with a large Dutch shipping company were criminally liable for breaching the Waste Shipment Regulation. Four ships were shipped from the ports of Rotterdam and Hamburg to India, Bangladesh and Turkey for beaching and scrapping, with the intent to do so established prior to their departure from the European ports. The court ruled that this meant the ships were designated as waste within the meaning of the Waste Shipment Regulation. Additionally, the ships contained materials and/or substances that were considered hazardous according to the Regulation, which meant that the company violated the prohibition of exports to non-OECD Decision countries. It is important to note that not all of the ships were still under the Dutch flag when they were beached and scrapped. This means that changing the flag of a vessel to a flag of convenience may not protect a company from criminal liability under European law. The directors were both fined €50.000 and were disqualified from any profession related to a shipping company for the duration of 12 months. The corporations that owned the individual vessels received fines of €100.000 each, and three divisions of the shipping group that were convicted for co-perpetrating the violations received fines of €750.000 each. In total, the shipping group was fined €2,550,000.      

Another risk for prosecution under Dutch law is section 173a of the Dutch Criminal Code. This article criminalises intentionally and unlawfully releasing a substance onto or into the soil, the air or the surface water. This is punishable by a maximum prison sentence of 12 years and a fine of up to €83.000 if the act poses a risk of fatal injury and danger for human health, and a maximum 15-year sentence with the same maximum fine if the act results in loss of life.

Important to notice is the fact that the criminal law of the Netherlands shall apply to any Dutch national who commits outside the territory of the Netherlands, an offence that is regarded as a serious offence under the criminal law of the Netherlands, as laid down in section 7 of the Dutch Criminal code.

Current issues

1 January 2019 was a significant date for more than one reason. As of this date, China has stopped allowing the recycling of international ships at its yards. This means that the ships that previously were demolished there will now need to find a new destination.

In 2018, 518 out of 744 ships were scrapped on the beaches of Bangladesh, India and Pakistan. None of the shipbreaking yards in those countries have been approved by the European Commission.

Out of the European Union member states, Greece is the worst offender when it comes to beaching vessels. In 2018, it beached 57 of the 66 total ships it had scrapped. German ship owners beached all its vessels in India, Pakistan or Bangladesh.

Conclusion

Criminal liability for failure to comply with European regulations governing ship recycling is a realistic risk for shipping companies. International legal norms have been transposed into enforceable legislation, which means that environmental and social concerns can no longer be ignored.

For the Dutch system, last year's Seatrade Group-cases are relevant, as it was the first time a company was held liable for exporting functioning vessels to non-OECD countries. This means it is likely that the Dutch prosecutors will seek to prosecute similar cases in the future.