With the introduction of the Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships (the HK Convention) in 2 years' time, what challenges and opportunities are on the horizon with the introduction of another international regulatory regime governing the disposal of end-of-life ships?
These factors were discussed in a recent session we hosted on 14 September as part of London International Shipping Week (LISW), tackling the question of whether the ship recycling industry has met its own perfect storm.
Which Convention should come out on top?
Whilst the HK Convention was designed to be the global standard and its introduction is generally seen as a huge positive for the ship recycling industry, there is a significant lack of legal certainty on which regulatory regime ship owners should in fact follow given the clear tensions between the regimes.
Further, until there is a decision that the HK Convention should prevail over The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal as amended by the "Ban Amendment", (which effectively prohibits the export of ships destined for recycling from any OECD country to any non-OECD country) and the Regulation (EU) No 1257/2013 on Ship Recycling (which only permits ships to be recycled at an EU "approved yard"), owners and recycling yards alike are disadvantaged and there will continue to be circumvention and avoidance by ship owners and operators of those regulations.
Unlike ship owners, which are protected and represented by various ship owners' associations, the international ship recycling industry has no representative association. As a result, ship recycling representation at EU Commission level is necessary. Such representation would assist in ensuring that the HK Convention becomes the single global regime and bring about the 'level playing field' that the HK Convention was designed to implement. Until then, it will remain easy for ship owners and operators to find themselves in difficulty by misunderstanding the three regimes and their complicated interplay.
Where does carbon neutrality come in to play?
Further, what is the role of ship recycling within the carbon neutrality and ESG paradigms? Ship owning companies are increasingly aware of the need to be compliant but are conscious of the associated costs in doing so. Will the push for ESG and need for transparency lead to a polarisation of the recycling industry? In the future, the industry might see a divide between those ship owning companies that can afford to achieve ESG compliance and are therefore able to recycle their vessels in line with the HK Convention and those that cannot afford to recycle their vessels with ESG in mind and who, for financial reasons, may have to choose to elect yards located in countries that have not ratified the HK Convention.
This year's theme of 'reframing risk in a complex market' could not be more pertinent. The shipping sector is evolving rapidly, and with the macro and micro environmental factors at play, shipping has never been at a more crucial juncture.
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