The Freight Shipping Industry
Who is Responsible for a Shipping Vessel? Ownership and Scrapping
The United Nations Convention on the Law of the Sea (UNCLOS) stipulates that the primary responsibility for vessels lies with the flag state of the vessel. Consequently, this means that each merchant vessel must be registered under the flag of a specific state. The flag state of the vessel is responsible for the inspection of the vessel and compliance with safety, pollution prevention, crew certification and international standards.
There must be a link between the state on whose behalf the vessel is sailing and the vessel's flag state. But in reality, flag registers, which do not stipulate the registration of shipping companies, benefit from convenient financial benefits and lower taxes. All this is partly regulated by private companies, 'helping' shipowners to change their flag to a more advantageous one when they want to. It also helps shipowners to obtain lower taxes and lighter regulatory burdens. According to UNCTAD data, almost 73% of the world's fleet sail under flags of the states other than the actual owner of the ship. This is why there is a great deal of dissonance between the countries where the real shipowners are located and the flag states exercising regulatory control over the international fleet.
The choice of the flag state where the ship makes her last voyage to be scrapped calls for special attention. In most cases, vessels sail to the beaches of South Asia instead of ship recycling facilities elsewhere. No wonder many end-of-life ships are already wearing the flags of Asian countries. In addition, most of these flags are already blacklisted in the Paris Memorandum of Understanding (MOU). These flags also usually indicate poor compliance with international maritime standards. Several of South Asia's beaches offer a 'last voyage' package, which includes quick registration and no nationality requirements to be met.
If a ship had to be recycled in European ports in compliance with all the required environmental and toll requirements, it would be quite expensive and disadvantageous for many private companies. According to the data published by the NGO Shipbreaking Platform in 2019, 674 ocean-going vessels and offshore units were sold for scrap metal. Of these ships, 469 large tankers, bunkers, floating platforms, cargo and passenger ships were dismantled. They are mainly delivered to three coast lines: Bangladesh, India and Pakistan, accounting for almost 90% of the total gross dismantled worldwide. The platform's data show that in 2018, 744 large ocean-going vessels were sold to scrap yards, of which 518 were dismantled. In 2017, 835 large ocean-going vessels were scrapped, of which 543 were cracked on the beaches of Bangladesh, India and Pakistan. Statistics for the last three years show that overall figures are declining for both scrapped and cracked vessels. Bangladesh still has a favourable landfill for end-of-life ships full of toxic substances, and profit is the only decisive factor for most shipowners who sell their ships for scrapping.
For developing countries at risk of poverty, these transactions are profitable. Many countries in the world that own large merchant vessels would have to pay a lot of money for scrapping, as they would have to comply with international environmental pollution requirements and other conditions. In developing countries, though, these ships are dismantled on local beaches without complying with environmental pollution regulations or worker safety requirements. Every year these ship breaking centres employ workers without specific knowledge, equipment and safety standards, even children. Local authorities turn a blind eye to the number of people injured and killed each year who work in ship-breaking yards. Old shipowners do not have to worry about this and do not have to comply with strict international agreements. Last year, at least 30 workers were killed and even more seriously injured in ship breaking work. These ship-recycling facilities claim that the work there is safe, but they are not included in the list of EU approved ship-recycling facilities.
International regulations that seek to improve ship recycling practices should fall outside the jurisdiction of the flag state. A lack of political will at international level has so far prevented shipowners from being held liable for ship recycling, but the solution must be global. Policymakers should take effective measures to redirect ships to places approved by the EU. The fact that old ships are registered under flags that are known to have poor implementation of international maritime law raises serious doubts about the effectiveness of such legislation, which is based solely on the jurisdiction of the flag state.
However, it should be borne in mind that the EU Ship Recycling Regulation has been applicable since 1 January 2019 and requires EU-flagged vessels to be recycled in one of the currently approved facilities in the world, included in the EU list. There are 41 such facilities on the list. These facilities meet high standards of environmental protection and worker safety, ensuring sustainability for ship breaking yards.