Tradewinds – Sparks fly as P&I clubs reject ship scrapping cover

(Written by Jim Mulrenan)

20 February 2013 - The mutuals are telling Brussels to think again over who will foot the bill to meet improved standards of vessel disposal

Protection-and-indemnity (P&I) clubs may be heading for a new conflict with Europe over efforts to make them foot the bill for greener and safer ship scrapping.

European legislators and regulators are being told to think again about the clubs providing end-of-life insurance for ships to fund improved demolition standards.

The International Group (IG), the organisation linking the 13 leading P&I mutuals, is warning that insurance for recycling ships is very different from the liabilities currently covered by the clubs.

The mutuals are opposed to moves to involve them in funding vessel demolition and are particularly against a European Parliament proposal to extend provisions of the third maritime-safety package and the related insurance directive to require a recycling plan to be included on a ship’s insurance certificate.

The idea of a levy on insurers to fund recycling was raised in European Commission (EC) consultations in 2008 but appeared to have been dropped until the European Parliament began to develop legislation based on the Hong Kong ship-recycling convention, but with a few added bells and whistles.

The thinking in Brussels has moved on and now appears to be that ship recycling will join such risks as oil pollution and passenger liabilities where clubs would be expected to issue blue cards guaranteeing insurance cover is in place.

“This was a bad idea in 2008 and it has not got any better since,” said the IG’s Andrew Bardot.

The IG has taken specific exception to a series of amendments tabled by Italian European Parliament member Vittorio Prodi, aimed at promoting an insurance solution to the challenge of improving ship-scrapping standards.

Insurance opposition

“There is no reason we should provide insurance for the sort of liabilities envisaged — damage to the environment or to people, resulting from unsound recycling. That is not something the clubs or their shipowner members have any control over so it is entirely inappropriate to be seeking that sort of cover from marine-liability insurers,” said Bardot.

“What should be regulated properly is the underlying recycling industry and this is an attempt to get someone else to pay for that.”

The International Chamber of Shipping (ICS) has already accused the European Parliament of moving away from an international approach to implementing the Hong Kong Convention for the Environmentally Sound Recycling of Ships by developing its own regulations.

The NGO Shipbreaking Platform lobbying consortium, which links a number of campaign groups, wants any European ship-recycling initiative to not only apply to ships registered in Europe but, through the port-state-control (PSC) system, to all vessels making European calls.

Amendment tabled

One of the amendments tabled by Prodi would apply European recycling rules to “all ships, flying a European Union [EU] member state flag or otherwise, to have insurance in place when such ships enter a port under the member state’s jurisdiction”.

“Why should a Hong Kong Chinese shipowner pay to fund an EU initiative on ship recycling. Shipowners would not want to have risks of improper recycling mutualised. It is illogical, has no attraction for P&I clubs or commercial insurers and is completely unworkable,” said Bardot.

In a submission to legislators in Brussels, the IG is calling for the European Parliament to reject the Prodi-tabled amendments and the entire concept that P&I insurance is a viable mechanism for improved ship scrapping.

There are a whole series of other issues arising from Europe’s ship-scrapping initiative, including tracking vessels so that owners cannot easily avoid their responsibilities by selling ships before demolition.

NGO Shipbreaking Platform alleges that a European ship was “dumped” on the beaches of South Asia every day last year, with the 365-vessel tally of demolished ships up from 210 in 2011.