Shipbreaking judgment is timely reminder of shipping companies' liabilities

Given recent shipping disasters in Beirut and Mauritius, the judgment is a timely reminder of the law relating to shipping companies’ liability, even if the ship itself has changed hands. 
 

Shipbreaking

 
Shipbreaking is the process by which end-of-life ships are dismantled for scrap. For the purposes of this case, a distinction is drawn between ‘shipbreaking’ and ‘ship recycling’.
 
Ship recycling involves a ship being first contained in an enclosed landing space to prevent spills and leakages from contaminating the environment. The ships are then taken apart using cranes and mechanised equipment. Hazardous wastes are properly disposed of in approved landfills, and health and safety measures are enforced for the workers. Ship recycling yards can be found in countries such as China, Turkey and across Europe.
 
Shipbreaking, on the other hand, is the technique utilised across South Asia; most notoriously in Chittagong (Bangladesh), Alang (India) and Gadani (Pakistan).
 
End-of-life vessels are driven at full speed towards the shore and deliberately run aground (the “beaching method”). Toxins and hazardous materials leak from the vessels and flow directly into the sand, soil or sea, where they are flushed away by tidal movements.
 
Workers then crowd the ship, with the “gravity method” adopted for much of their work. This involves large parts of the ship being cut away manually and allowed to crash over the side of the ship and onto the beach. Workers (including children) then cut the smashed metal using handheld blowtorches or other rudimentary equipment. Health and safety policies and equipment are conspicuous by their absence.
 
Shipbreaking is far cheaper than ship recycling. As a result, shipbreaking yards are able to offer more competitive prices than their ‘greener’ counterparts. The Norwegian Council on Ethics estimates that the difference between ship recycling and ship breaking is as much as US$3-7 million profit per ship for the ship owner.
 
Over the last decade more than 70 per cent of end-of-life vessels have been broken up using the beaching methods. The scale of the industry is apparent from simple Google satellite images of Chittagong.
 
Unsurprisingly, the human and environmental cost of shipbreaking is considerable. The Shipbreaking Platform has documented at least 400 fatalities at shipbreaking yards since 2009 and serious accidents are common.
 
Most ships contain asbestos, and this is broken apart by hand. A European Commission study found that shipbreaking workers had an increased risk of developing asbestos-related diseases and cancer, and at a younger age. The International Labour Organisation has named shipbreaking as among the most dangerous jobs in the world
 
The environmental damage caused by and arising from shipbreaking is extraordinary. As the Norwegian Council on Ethics stated: “several thousand tonnes of hazardous waste are sent annually to a country that has no infrastructure capable of dealing with it in a safe and sustainable manner”.
 
It can be said that the environmental damage, human rights violations and atrocious health and safety records of shipbreaking yards are inextricably linked to the attraction of these yards to shipowners: namely, price. To create a reasonably safe or green working environment would have the inevitable effect of shipbreaking yards offering lower purchase prices and subsequently, less profit for shipowners.
 

The Claim

 
The Claimant, Hamida Begum, is the widow of a shipbreaking worker who suffered a fatal accident while dismantling a defunct oil tanker in Chittagong, Bangladesh. The claim was not brought against the Bangladeshi shipyard or her late husband’s employer, but against the English shipping company which – it is alleged – was responsible for the vessel ending its life in Chittagong.
 
Mrs Begum’s husband, Khalil Mollah, fell to his death while working on the EKTA (ex-Maran Centaurus) (the “Vessel”) in March 2018. Mr Mollah had worked in shipbreaking for about 10 years. He worked between 12-16 hours a day and rarely took holidays or days off. He was paid about 25,000 BDT per month (around £220). He and Mrs Begum had one son, aged about 11.
 
The Vessel had been previously owned by companies within the Angelicoussis Shipping Group, a multi-billion dollar enterprise headquartered in Greece. One company within this group is Maran (UK) Limited, based in London. In a sale brokered in London in August 2017 she was sold for demolition in a deal worth $16m. The buyer, Hsejar Limited, was a brass-plate company registered in Nevis. The deal was guaranteed by a “cash buyer”, Wirana Shipping Limited.
 
Cash buyers exist to take the financial risk of selling a ship for scrap away from the shipowners. However the Shipbreaking Platform notes that cash buyers also provide distance between the shipowner and the beaching yard: “Indeed, one of the most used excuses when a ship owner is confronted with having sold a ship to a beaching yard is: ‘But, I only sold my ship to another owner – that owner alone chose to scrap the ship at a beaching yard’.” 
 
The Claimant case centred around six evidential allegations, summarised by the Court at paragraph 30 of the judgment.
 
Firstly, the Angelicoussis Shipping Group decided to dispose of the Vessel. It is complicated, but possible, to do this safely.
 
The Claimant alleged that the Defendant, even though they were not the legal owner of the Vessel, had control and autonomy over the Vessel’s sale; that they could have chosen to ensure that the Vessel was disposed of safely, but would have had to accept a lower purchase price.
 
Instead, the sale was conducted in a way where the only possible scrapping destination was Chittagong (inferred from the purchase price and quantity of fuel left on board).
 
Finally, the Defendant knew – or, should have known – that shipbreaking in Chittagong involves a foreseeable risk of death or serious injury to those tasked with dismantling the beached ships.
 

The Decision

 
The Defendant applied to strike out the claim on the basis that the Claimant had no real prospect of success. They argued that Maran (UK) Limited was too far removed (in time and space) from Mr Mollah’s death to owe him a duty of care. His death, they argued, was caused by unsafe working practices over which they had no control.  
 
The judge, Mr Justice Jay, rejected these arguments. Taking a broader and purposive approach, Jay J held that the accident resulted from a chain of events which led to the vessel being grounded at Chittagong.
 
He agreed with the Claimant that the Defendant “acted” to send the Vessel to Chittagong, rather than simply “omitting” to ensure that she was scrapped safely.  In English law, the distinction between acts and omissions is a key feature in determining whether a duty of care was owed in negligence claims.
 
The judge then identified that there is an inherent danger in an end-of-life vessel destined for scrapping, unless appropriate safety measures are taken. It is therefore arguable that the Defendant acted in such a way that exposed Mr Mollah to a foreseeable risk of death or injury by a danger which was created by the Defendant:  i.e. the Defendant was responsible for a series of events which led to the placing of a dangerous end-of-life ship in a Chittagong shipyard which was woefully unsuited to dismantling it safely. This, the judge held, is sufficient basis to argue at trial that the Defendant owed the Deceased a duty of care.
 
Jay J held that English law is applicable to the claim pursuant to Article 7 of Rome II (injury arising from, or the result of, environmental damage). Jay J stated that the proximate cause of death (a fall from height) had to be set within the context of the Vessel’s beaching, which damaged the beach and tidal waters. 
 
As Jay J found that the Claimant had a real prospect of succeeding in her claim in negligence the Defendant’s application to strike out was dismissed.
 

Analysis

 
As this was a strike out hearing, the judge did not have the benefit of a full trial. The judge also had to consider the Claimant’s case at its highest and accept allegations of fact as true, unless ‘plainly fanciful’. Any weight placed on the judge’s findings (which, are also subject to appeal) need to be viewed in context.
 
Nonetheless, the judgment is an important marker that Courts are taking note of the risks and dangers inherent in shipbreaking, and are prepared to subject established practices within the shipping industry to close scrutiny.
 
Jay J was able to cut through the complex contractual arrangements of the Angelicoussis Shipping Group, to state that the Defendant (a sub-agent on paper) was “probably legally indistinguishable from that of the [Vessel’s] owner”.
 
Two further elements of the judgment could have repercussions for the scrapping industry. Firstly, Jay J rejected the proposition that the Defendant could not be liable for doing what the majority of the industry does in sending ships to South Asia. Jay found that “if standard practice was inherently dangerous, it cannot be condoned as sound and rational even though almost everybody does the same.” Secondly, it was insufficient that the sale contract included a clause that the buyer would use an ethical shipyard, when it was obvious that this clause was to be ignored.
 
The judgment follows criminal cases in other jurisdictions (such as Netherlands, Norway and Bangladesh itself) where courts have made it clear they are willing to enforce international statutes to prevent the trans-boundary movements of hazardous waste.
 
Ship owners may already be taking note: a shipping industry publication in July noted that cruise ship owners may be willing to take a ‘financial hit’ in order to comply with EU laws by selecting ship recycling for their vessels.
 
The judgment reinforces the principle that shipowners’ liability may continue after they have divested ownership of their ships. This is undoubtedly a positive step, as the recent tragedy in Beirut highlights the catastrophes that can result from ships abandoned by irresponsible owners. 
 
The case continues.

A version of this blog was first published on the Business and Human Rights Journal Blog on 21 September, 2020.