EU’s arrogant’ attitude hinders ship recycling, webinar hears

Paul Gunton

Paul Gunton · 23 July 2020

ShipInsight


Europe’s attitude to southeast Asian ship recycling yards is “unhelpful and potentially arrogant”, according to David Balston, director of policy at the UK Chamber of Shipping (UKCS).

He was speaking during a webinar last week (15 July) organised by the law firm HFW and supported by the UKCS that looked at commercial, legal and practical issues surrounding ship recycling. During the discussion, speakers referred to both IMO’s Hong Kong Convention (HKC), which has not entered into force, and the European Ship Recycling Regulation (EU SRR), which has.

Cycling

Among the EU SRR’s provisions is a requirement that EU-flagged ships must be recycled in an approved yard, of which there are 41 on the most recent list – updated on 22 January – of which none is in southeast Asia. Mr Balston asked why, “if the EU really cared about trying to improve standards in the yards … are we not working with these yards … to drive up standards and safety and environmental standards rather than just cold-shouldering [them]?”

His point was also practical: “without the southeast Asian yards, there simply is not the capacity in other recycling yards to do the required recycling globally each year.”

It is more than a year since I last reported on the HKC and the EU SRR and it was clear from this latest webinar that the concerns I referred to then remain today. One big change is that India ratified the HKC shortly after my previous article was published but, despite that country being a major recycling nation, the convention is still a long way from coming into force. It is this lack of international regulation that the EU uses to justify its own requirements, which include and go beyond those in the HKC.

Details of the yards included on the EU’s list are contained in a graphic on the European Commission’s website and a link from that site opens a list of 39 yards (as at 8 July) from non-EU ‘third countries’ that have applied to be added to the list. Only seven have been successful, six in Turkey and one in the US, while none of the 20 Indian and four Chinese yards listed apparently reaches the standard.

I say ‘apparently’ because although inspection reports prepared by DNV GL on behalf of the European Commission (EC) are available via that link, there are just 15 of those reports. Only six of them relate to Indian yards and none is of a Chinese yard.

I contacted the EC’s Ship Recycling Regulation Team to ask why there are so few reports and was told that more inspections will follow “if and when the coronavirus situation allows it.” The pandemic does not, however, explain why so few third-country yards have been inspected since the list was established in December 2016.

I also invited the SRR Team to respond to the suggestion that southeast Asian yards are ‘cold-shouldered’ and was assured that “all applicant yards are treated in a similar manner, according to the same criteria, as laid down in the Ship Yard Regulation.”

It is worth looking at that regulation, particularly Article III, which starts on page 16 and lists the ‘Requirements necessary for a ship recycling facility to be included in the European List’. One of them is that “it operates from built structures” so, in a follow-up question, I asked the SRR Team to help me reconcile that requirement with a report published by BIMCO in April last year. Its then secretary general and CEO Angus Frew had contacted one of the yards on the list and reported that “they hadn’t even started building the yard yet.” In his view, the list “looks a little like protectionism”.

BIMCO found that only nine of the 26 yards then on the list were “realistically open for ship recycling” of which only three could handle a ship of Panamax size or larger. Last week, BIMCO’s head of marine environment Aron Frank Sørensen told me that the organisation is planning a follow-up exercise and hopes to have updated results in September.

It is reply, the EC’s Ship Recycling Regulation Team insisted that the yards on its list “are all licensed to carry out ship recycling and equipped to perform these activities.”

Besides the yards inspected on behalf of the EC, many others have been inspected by class societies against the standards laid down by the HKC at the request of the yards themselves or shipowners contemplating using them. Although those inspections and certificates are helpful and indicative of improving standards, they are not in themselves sufficient to procure approval by the European Commission, HFW partner Stephen Drury said during last week’s webinar.

One such society is Lloyd’s Register, which does not limit itself to inspecting against the HKC requirements: it also reviews them against the EU SRR. It published an article in January about ship recycling regulations and noted that it had “overseen the upgrade and certification of recycling facilities in India and Turkey, assuring that they meet the requirements of both the Hong Kong Convention and the EU SRR at the point of certification.”

Its website lists the yards it has certified and a quick comparison between that and the list of third-country yards that have applied for EU SRR approval shows that many of them – including some in India – do meet the EU’s standards.

This prompted me to look again at the EU SRR regulation and it seems to have been drafted with the expectation that listing would primarily be based on inspections by independent verifiers, but that the EC reserves the “possibility” of conducting (or commissioning) its own inspections. And those inspections could take place after a yard has been added to the list, which further suggests that they were intended to be used to confirm, rather than exclude, independent reports. The relevant text can be found at paragraph 4 of Article 15 on page 20 of the regulation, via the link above.

If that is right, then the European Commission could – and perhaps should – accept class society inspections as the basis for acceptance. If it were to do that, the list would swell overnight and include a number of southeast Asian yards.

I understand from Lloyd’s Register that at least some of the Indian yards it has audited and confirmed as meeting the EU SRR standards have applied for inclusion on the European List. LR has not been privy to any correspondence between the EC and the yards but it is clear to me that all those applications have been unsuccessful.

I am not a lawyer, but to my layman’s eyes this situation does not seem to be in line with the spirit of the EU SRR. If the EC is, in practice, applying selection criteria additional to those set out in the regulation, the industry needs to be made aware of it.

I asked the SRR Team if any yard has applied on the basis of an independent inspection and whether it will always exercise its option of conducting its own inspections, making it pointless for yards to submit their own reports. In reply, it confirmed that although yards have to provide a report by an independent verifier, “the commission has systematically been carrying out its own inspections.”

Finally, I need to refine a detail I mentioned at the start of this article. While it is correct that there are 41 yards on the latest published list, that list is out of date: there are currently only 40 approved yards and that may fall to 38 by the time the next update is published.

This is because of the UK’s Brexit process, which saw the UK leave the EU on 31 January 2020 and start a transition period until the end of the year during which all EU regulations will continue to apply. After that, “the EU Ship Recycling Regulation … no longer applies in the United Kingdom,” according to a statement issued by the European Commission on 8 June.

That statement itemises the UK’s four EU-approved recycling yards and the dates when they will no longer be included on the EU’s list. One of them – Swansea Drydock – passed that deadline on 2 July and the commission’s SRR Team has confirmed that this brings the current total down to 40. The next yard to fall off the list will be Northern Ireland’s Harland & Wolff, whose listing will end on 3 August, followed by Able UK on 6 October. The fourth yard, Dales Marine Services, has an expiry date of 2 November 2022 but its listing will automatically lapse at the end of this year.

If these yards wish to continue to be approved to continue recycling EU-flagged ships, they will have to reapply along with Indian, Chinese and all the other ‘third country’ facilities and I contacted each of them to understand their plans.

At Dales Marine Services, its decommissioning operations manager Brian Robertson told me that the yard has “every intention” of reapplying but that it cannot do so until after the end of the transition period. That may also be the case for the other three yards, since the SRR Team told me that it has not received a new application from Swansea Drydock.

Mr Robertson also told me what will happen when the yard reapplies: it will have to undergo a full inspection and assessment and “it will be interesting to see if they are any different” from those it originally passed. Since the SRR Team has assured me that all yards are treated equally, the inspections should be the same but, if that is that case, “why are we paying to have it done?” Mr Robertson wonders.

I will check how quickly the new inspections are arranged for the UK yards: a ‘level playing field’ approach would suggest the UK yards should line up behind the other 24 third-country yards currently awaiting inspections and any queue-jumping could be held up as demonstrating that European yards receive favourable treatment. This situation may also provide an opportunity to challenge the EC to accept an independent inspection report to support a successful application.

Although the EU SRR will no longer apply in the UK, it will survive in some form after the nation’s transition. During the webinar Mr Balston considered the impact of Brexit on UK maritime policy and said that “all the indications are that the UK government will continue to comply with all EU maritime regulations at least for the foreseeable future.” Otherwise, “it’s going to make life very difficult as a small island off the coast of Europe.”

Anisha Franklin, an associate at HFW, confirmed that there is a UK statutory instrument that is set to enter into force at the end of the transition period that will carry over some of the provisions of the EU SRR into UK law. There will then have to be a UK list of approved recycling facilities and UK ships will have to be recycled at one of those.

This list could – and, in my view, probably will – incorporate the EU list of approved yards (see Article 16, paragraph 2 of the regulations) – but I hope the UK authorities will take the opportunity to include southeast Asian yards that have already demonstrated they meet the same standard. I am sure this would be welcomed by UK shipowners but may act as a spur for the European Union also to recognise their efforts.

As for UK yards planning to reapply for inclusion on the EU list, they will surely hope the commission does not take an “unhelpful and potentially arrogant” approach to this particular third country.

Watch the HFW/UKCS webinar here.

Do you have experience of yard inspections under the EU SRR regime? Should the European Commission accept class society inspections to approve yards for inclusion on its list? Tell me what you think now.

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