Liability Warning as Vessel Decommissioning all at Sea

One of the industry’s leading marine insurance lawyers has warned that the lack of proper rules on the decommissioning of vessels threatens an environmental crisis.

Iain Butterworth, Member of the Forum of Insurance Lawyers’ Environmental SFT and Solicitor at Thomas Miller Law, told that the slump in shipping was already having an effect and the shipping sector is already seeing moves to dispose of unwanted tonnage.

The COVID crisis has badly hit the cruise sector and last month Carnival Cruises announced it was to scrap 13 of its vessels as demand remained in the doldrums. Mr Butterworth warned that while the cruise sector was suffering so was the wider industry and it led to fears that owners would seek to use facilities in nation states which were quite happy to ignore safety and environmental standards to reduce costs.

“There are a number of areas in the world where vessels can be broken up using cheap labour and with it poor safety standards,” he explained. “The likelihood is that it will be the older vessels which will be set for decommissioning  and we are expecting there will be a significant rise in the short term as owners seek to reduce costs in the face of lower freight, cargo and passenger levels.”

He added that such is the potential for a large number of vessels that the industry may well see a repeat of previous shipping slumps where vessels were simply stored in sheltered bays around the world where they wait for scrapping facilities to become available or remain there for such an extended period they sink with the resultant damage to the environment.

“If you have an asset that will not generate income a decision will need to be made,” he explained. “It is not necessarily an age issue rather the question as to where the vessel can be employed in a way in which it can generate a profit.”

The global shipping sector has been aware of the issue and work on standards for the scrapping of vessel has resulted in the creation of the Hong Kong Convention to tackle the problem of poor standards. However, the convention has yet to be ratified as it is still short of the necessary adoption by flag states which control the requisite level of the world’s tonnage.

“If the work is carried out without the required standards the threat to the environment from fuel, heavy metals, paint and lube oil can be significant.” said Mr Butterworth. “We have already seen evidence in some emerging nations of heavy metal pollution in the sands around the coast, in the water and significant air pollution. There is also the question of residues of cargos which can also affect the environment.”

He added that the safety of the cheap labour was often neglected but that owners may face legal action if they hand the vessel over knowing that the decommissioning process will be handled in a substandard manner which results in death of injury.

“Owners may well hand the vessel to an intermediary, but more than often they will be aware of the fact the vessel will be dismantled in a country where there are few if any standards around safety or environmental protection,” said Mr Butterworth. “We have recently seen a case where a worker suffered a fatal incident and the owner is now being sued as there is a allegation they were aware of the lack of standards at the site where the decommissioning was taking place.

“Given the Hong Kong Convention has yet to be ratified the processes are controlled under national laws and in some countries, they remain extremely lax.”