|
UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 834-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE ENVIRONMENT, FOOD AND RURAL AFFAIRS COMMITTEE
Dismantling Defunct Ships in the UK
Wednesday 30 June 2004 MR MARK BROWNRIGG, MR EDMUND BROOKES, CAPTAIN NIGEL PALMER and MR TOM PETER BLANKESTIJN Evidence heard in Public Questions 1 - 65
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environment, Food and Rural Affairs Committee on Wednesday 30 June 2004 Members present Mr Michael Jack, in the Chair Ms Candy Atherton Mr Colin Breed Mr Mark Lazarowicz Mr David Lepper Mr Ian Liddell-Grainger Mr Austin Mitchell Diana Organ Joan Ruddock Alan Simpson ________________ Memorandum submitted by Chamber of Shipping
Examination of Witnesses
Witnesses: Mr Mark Brownrigg, Director General, Mr Edmund Brookes, Deputy Director General, Chamber of Shipping, Captain Nigel Palmer, Director, Government Affairs, BP Shipping, and Mr Tom Peter Blankestijn, Manager, Maritime Policies and Regulatory Affairs, P&O Nedlloyd, examined. Q1 Chairman: Good afternoon. Could I apologise to our witnesses for keeping you waiting. Unfortunately, the Committee has a number of forthcoming attractions and reports on a wide range of subject and I am sure you are very interested to read what we have been up to, but we have to go through the process of approving them before we can publish them and it took a little longer than we had anticipated. Our apologies for keeping you waiting, but nonetheless you are very welcome. For the record, we have before us from the Chamber of Shipping Mr Mark Brownrigg, the Director General of the Chamber, Mr Edmund Brookes, the Deputy Director General, and Captain Nigel Palmer, the Director of Government Affairs of BP Shipping and Mr Tom Blankestijn, the Manager of Maritime Policies and Regulatory Affairs for P&O Nedlloyd. Gentlemen, you are very welcome indeed. Looking at your submission to the Committee, I was struck by the fact that you are almost saying that those shipping companies who appear to be the initial owners of the vessel might not have as much direct interest in seeing through to the end the way that the ship might ultimately be broken up once it is declared as defunct because of the very nature of the dismantling operation and the way that those commercial transactions transpire. Yet you go on in your submission to make it very clear that as an industry you take your responsibilities very seriously indeed. Now, the reason this Committee has got involved in this is following up the short, sharp inquiry we did into the problems that Able UK had in terms of their arrangement initially to deal with American military vessels which (if I do not use the wrong phrase) ran aground because of all kinds of regulatory problems. In the course of that inquiry we learned that some 2,000 single hull tankers within the foreseeable future are going to have to be taken out of service and replaced and we decided that because of the environmental consequences of that we should hold this inquiry. Given my opening remarks and the slightly sort of arm's length position that you have about this, could I just ask how seriously you and your members do take the need to influence the way at the end of the day ships are broken up. Do you feel that you have a continuing responsibility for these matters even though the ownership of the vessel might have passed to a third party on its way to the breakers' yard? Mr Brownrigg: Perhaps I could start and then others could chip in, Chairman. Firstly, if I could say that we welcome the opportunity to come and answer your questions and are delighted to do so. I think the starting point is that a ship is not like another piece of industrial equipment or what have you, it is a unit which underpins and facilitates the carriage of international trade. By definition it does not stay in one country, it moves around the globe and it may well move through different ownerships over its life cycle. So you are not talking about someone who is building something to stay with it or keep with it, or operate it from beginning to end. That said, there are international and a huge range of detailed international regulations which deal with the structure of ships, with their operation, their maintenance and the whole process. There is a concern with quality right from the start. The fact is that if a ship moves from one owner to another during its lifetime it may well not be the original owner who is scrapping or recycling that ship. It is the case that the shipping industry is a global industry in this respect, and indeed so is the recycling industry, so perhaps it is not quite the same as buying a piece of factory equipment. Q2 Chairman: Just for the benefit of the Committee, and perhaps I will look to our colleague from BP to help us through this, what actually is the decision-making process, for example, when BP says, "Right, one of our tankers has come to the end of its life and we think it should be scrapped," what do you do? Just take us through the process that determines how it is going to be broken up. Captain Palmer: I can answer that fairly well. The simple answer is that sometimes we dispose of ships before the end of their economic life because they no longer fit our own requirements, in which case we will sell them to somebody else to continue using them. If a ship has reached the end of its economic life and so we are actually looking then to send it on to be dismantled, then although we may well use brokers as part of the process of disposing of the vessel we take our responsibilities on that very seriously and the history of that - and I was involved with the project of disposing of some of our single hull tankers a few years ago - in, I think, 1994 we put one of our VLCCs to Pakistan for breaking and we were - Q3 Chairman: Could I just stop you. You used shorthand, VLCC? Captain Palmer: Very large crew carrier. I will try not to do the jargon. Okay, a very large crew carrier to Pakistan and we were so disturbed by what we saw there that we were determined that we would not do it that way in the future. So in 1997, when we had some more coming up over the next couple of years, we started a process to actually go around the world looking at all the recycling facilities to find out which ones actually met our own standards for health, safety and the environment. We determined there was a number and then it became an economic decision which one we went to, and in fact we actually went to China as a result of that into a facility there which could meet our own standards on being able to demonstrate and for us to be able to audit throughout the process that they were dealing properly with all the hazardous material, that their staff were being properly protected and that all of the materials were either disposed of in a responsible manner or resold as appropriate, depending on whether they could be reused. So the process for us is fairly simple in that we do take the final resolution of what happens to the unit at the end of its life, if we are the end user, very seriously. So we do not just pass it to somebody else and then forget all about it. Q4 Diana Organ: You have made it quite clear that you have seen a system of breaking up in Pakistan and you said that you were not happy with it. I wonder if you could tell me what it was about what was happening in Pakistan that made you not happy and choose not to use that facility again, and the other is that when you are making a decision about where you go for the disposal or recycling of your ships you led us to believe from what you have just said in reply to the Chairman that environmental issues were top of your agenda. Are you saying that the economics never comes into it? Surely as a business you are looking at that first? Captain Palmer: Two questions. First of all, what disturbed us in Pakistan was the manner in which the breaking took place, the safety standards of the staff who were working there, the people who were working there and the environmental issues as a result of that. To take the second part of your question, the first requirement for us is that it meets our HSE objective, our health, safety and environmental standards, for any facility. If they meet that, then it becomes an economic decision of which one is the best solution for us. So if you have got two yards, both of which meet our standards and can conduct the operation properly, then clearly we will go for the one that is economically the best result. Q5 Diana Organ: But the facility in Pakistan that you looked at and thought, "No, this is not good enough for health and safety reasons, had you used that previously? Captain Palmer: Not in living memory, no. I think if I go back far enough, I think the last time we went through large demolition processes would have been in the early 1970s when I think Taiwan was the world leading ship breaker in those days. They are no longer in the business at all. Mr Blankestijn: What I would like to add is that it is not only Pakistan, it is India, Pakistan, Bangladesh, the Philippines, where the vessels are actually beached and where there is the unsafe situation for people and for the environment. In our search, when we looked at our ship recycling project, we had a couple of other aspects as well because we wanted a good relationship with the national government to also seek that there are proper waste management structures in place, that as soon as you offload hazardous material that it is treated in the proper way and also there needed to be further investment at the yard facility in order to cope with our requirements. So there were various reasons also for us to choose China because there all these elements were in place, that we could train the staff ourselves, we could have our own supervisors at the facility, that we could deal with the state environmental protection agency within China and it safeguarded us also that what we wanted to do is outside of the standard of the beaches in India, Pakistan and Bangladesh, that what we paid for was indeed done in the proper way and safely. Q6 Mr Mitchell: You say that given the environmental considerations, which you are satisfied on, it is basically a question of price. That must surely load preferences to the Far East, to China you have said, because if you had them dismantled at home you have got what Charles de Gaulle would call the Chen Yi here in this country, all the environmental protests and presumably a lower price for the scrap because there you have got an expanding steel industry in China, or indeed India, whereas it is less necessary here? Captain Palmer: It is a question of what you mean by "home", I guess. We are a UK-based shipping organisation of the BP group. We have ships that we were recycling that were built in Japan, that spent their entire lives trading around the world. If they had ever come to this country, they would only have come on a few occasions and were then finally dismantled in China. Where is "home" for that ship? Q7 Mr Mitchell: So there is no preference for British knackers yards? Captain Palmer: Well, there are no British facilities that could take a ship of that size anyway. Q8 Chairman: The message that is very clear from what you have both said is that in the case of a company that owns the ship and makes the final deal you can exercise the responsibility that you have indicated, but if you dispose of it using third parties can you have influence over how they then subsequently dispose of the vessels? Mr Blankestijn: They will come into the international legislation or guidelines that have been produced within IMO, of which ICS, International Chamber of Shipping, has been also very instrumental on behalf of the industry. The guidelines were put together in such a way that anyone who would buy for twenty-four hours maybe a ship is identified as a shipowner. So he should take the same responsibilities under those guidelines. Another part is that we propose a green passport during the lifetime of the ship, so from the new building up until the final moment that all the hazardous materials are - they make an inventory of these materials, of where they are and the quantities of it so that it can be passed on more easily from one owner to the other. Now, that is not perfect yet, but it is in the process of being further developed within IMO. Q9 Chairman: We are going to come on to talk about that and Ms Ruddock is going to ask you some more detailed questions on that, but just before that what statistics are there available to give us some idea of the number, scope, scale and the size of the ships which are disposed of? Captain Palmer: The industry disposes of somewhere between 500 and 1,000 ships a year. It will vary. The average number is about 700 ocean-going vessels are dismantled every year globally. The number will vary between 500 and 1,000 because when ships go will depend on economic circumstances at that time, and that is roughly equal to the number of ships that are built every year, so it is not a surprise. Ships have a life. So many are built every year. The number grows slightly as well with world trade growth, but it is almost static, so effectively the same number drop off the back end as come in at the front end. Q10 Chairman: As far as the single hull tankers are concerned, has anybody made a projection as to the volume year by year as we go forward as to how many will have to be dealt with? Captain Palmer: Yes, there is, but the vast bulk of those have already gone. I think we have some numbers. Over the next few years the ones that have to be phased out, this is legally when they have to go, in 2004 there are fourteen, in 2005 twenty-nine, none in 2006, five in 2007 and two in 2008 - 2009. So it is not an enormous number. That is the smaller sizes. Q11 Chairman: That is the small size. On that basis that is just over forty. How come we think there are two thousand to go? Captain Palmer: Because a lot of those are not due to be phased out by 2008/2009. Those are the years I have got up to. Q12 Chairman: So whilst there is a larger quantity, it is at some point in the future? Captain Palmer: Correct, but those are mostly in the smaller sectors and the smaller tonnage ranges, many of which are in Europe because they are the small coastal tankers. Q13 Chairman: A final question before we pass on to Ms Ruddock. Are there any specific legal requirements as far as the UK or the European Union which you have to adhere to when you are starting the process of disposal of the ships? Captain Palmer: There is very little legal regulation around this area. Most of the stuff that is in place has been voluntary codes generated by the industry, such as the Ship Recycling Code, which started off as a voluntary process put together by the International Chamber of Shipping by a number of shipowners. Q14 Chairman: That is the one you have put with the evidence? Captain Palmer: Correct, and that then was adopted by IMO, not as legislation but as recommended good practice. Q15 Joan Ruddock: I think you have just answered my first question, which was gong to be that there is no regulatory process here, we are just dealing with voluntary agreements? Both the IMO and the ICS are entirely voluntary agreements? Captain Palmer: Yes. Q16 Joan Ruddock: So the first interesting question will be what proportion of ships that are being dismantled and recycled or not actually are following these guidelines? Have you any idea on that? Mr Brownrigg: It is too soon to say. The guidelines were only adopted last December, following the sequence that has been described. What one can say is that guidelines are available. They are available for the shipping industry, they are available for the recycling countries and it will be monitored within the International Maritime Organisation process over the coming years. Q17 Joan Ruddock: But can you make a guess? What is the kind of cooperation that occurred during the development of these guidelines? Is it thought that the majority are going to follow them or not? Mr Brownrigg: Before I had to others, perhaps I could just say that normally things do not go through the IMO if there is no intention to pay good attention to them. Mr Blankestijn: One thing I would like to add is that for shipowners it is very difficult also to know which facilities can cope with these requirements because most of the facilities are still on the beaches. So there is no other alternative available in capacity to handle this as per the guidelines, so it is almost the chicken and the egg situation of where are the investments for the new facilities versus the shipowners, and then it becomes also much clearer what the commercial elements are of the pricing effects of the labour cost, of the waste management handling, etcetera. As soon as that is more settled then the voluntary is followed more easily. Mr Brookes: Could I add to the comments that were made and come back to the way the process has been developed because this may help you. There are something like thirty-five or thirty-six members of the International Chamber of Shipping and we in the UK are proud to be the founding member. They all contributed to the development of the guidelines (which we have given a copy to the Committee) and led to the International Maritime Organisation's guidelines. All the individual members of those thirty-five organisations take the work of the International Chamber of Shipping and put it out and spread out and spread the message. As has been said to you, it is voluntary but you have heard from my colleagues the way they have picked up even before this and developed it. So we are doing our bit in trying to move the whole process forward, I am not saying to take the moral high ground but to try to put forward a process which is sustainable in all contexts. Mr Brownrigg: Could I add to that, if I may, that it was not just one international association of the size you have heard but in fact a number of sectoral shipowner organisations came together with us too and they are listed in the industry code, which really does mean that the vast majority of the world shipping industry is covered. The Baltic and International Maritime Council, the International Association of Dry Cargo Owners, the tanker owners, the oil companies' International Marine Forum. They are representative of sizeable shipping interests and really do cover pretty much the world fleet except for those who never join these sorts of things. Q18 Joan Ruddock: Okay, so you are obviously hopeful of a positive outcome, but in terms of getting to the point where you can break up safely and recycle we had evidence from you about the green passport. Now, that presumably is something that is already under way. Again, have you any idea how many ships would have green passports and how many ships belonging to UK companies, for example, might have green passports? Mr Blankestijn: It is still future work for IMO because there is no standard yet and preferably if you take something from new build up until, say, the phasing out of the ship it is more easy to administrate a standard document and that it is adhered to. So that is definitely something which needs to be developed and it is being developed at the moment. Captain Palmer: The only thing I would add is that as things move on things change. The issue of hazardous materials. Materials are not hazardous when they are on board the ship. They are there for a reason. Asbestos was used as a fire precaution on ships in the past, it is no longer fitted to ships, and you are coming towards the end of that being an issue with ships because the majority of ships that were constructed with asbestos in place have already reached the end of their lives or are in the process of doing so now. So as time has gone on you have probably less hazardous materials in ships than existed twenty, thirty years ago. Now, that is not to say that in twenty or thirty years' time something that is being used today will not be determined to be hazardous. Asbestos was regarded as perfectly safe in the days when it was put in; it would not have been used had it not been. So the logic of the green passport is to ensure that there is a record with the ship of what is actually contained in it and where it is, which is rather more important perhaps than what it is or indeed the quantity. It is where it is and then ensuring that when you take it to somebody part of your process is to determine that they can actually manage, handle and dispose of that or reuse it in an appropriate manner, protecting their people. The answer to your earlier question is responsible shipowners will follow these guidelines and people who value their reputations will follow these guidelines. Will everybody follow it? Does everybody dispose of their car in this country in a responsible manner? Most do. Joan Ruddock: No, they dump in on my streets in my constituency! Mr Mitchell: There is no international fly-tipping? Q19 Joan Ruddock: One might argue there is. Captain Palmer: That is a question. The ships are valuable assets. They are not fly-tipped to the extent that the materials they contain are actually quite valuable. You are not talking about things that are sold for pennies. There is a lot of steel in a ship and the majority of it is steel, copper and things like that. It is quite right that that should be reused. It feeds the electric arc mills of a lot of the world. Q20 Joan Ruddock: But even though you have not got green passports yet on such a scale you cannot monitor them, nonetheless ships do have hazardous materials taken out of them prior to recycling? Captain Palmer: Yes. Q21 Joan Ruddock: Have you any idea what proportion of ships actually have that removal of hazardous materials before the recycling process? Captain Palmer: I cannot answer for the whole industry, I can only answer for what we did. We took off the ships before they went to China the items that we could take off leaving the ship still in a safe condition to undergo the passage, because you cannot remove everything, and then what was left on board, part of this whole process that we developed with the yard was to know exactly what had happened to everything and that had to be fully auditable. We have photographs of the bricks that were made out of the scale that came out of the bottom of the cargo tanks, for example, and things like that. So we did take it to quite a reasonable extent to determine that it was being done properly. I guess in the context of what you are talking about in this Committee the question really is, is this an industry that can be done properly. I think the answer is, yes, it can be. Does it perform a necessary service? Yes, it does. Seven hundred ships on average a year have to be recycled and reusing those materials is actually the best thing to do with them, not to actually dump them somewhere and hope the problem will go away. Mr Brookes: I would like to add one aspect, to come back to the heart of your question, which was, are the hazardous materials removed. Even in ships which are not processed and recycled in a way in which we would particularly recommend, the hazardous materials are still taken off. The asbestos, the lube oils, the lamp bulbs, the computers, those sorts of things, they are all taken off and recycled, even in India and Pakistan, but they would not be done in the way which we are putting forward to you now. So the materials are taken off even on those ships. Q22 Joan Ruddock: Sure. The clear implication in my question is that these things are taken off in a proper manner? Mr Brookes: In a proper manner, yes. Q23 Joan Ruddock: Otherwise, essentially you are just in break up, are you not, and things come off as they come off, but there are ways of taking things off in a contained way quite separate from the break up? Mr Brookes: Even in Pakistan and India they will deliberately try to take those off to get value from them to recycle them. They have value to them. Even light bulbs will be reused in India and Pakistan and they will find a use for the asbestos. Mr Brownrigg: Almost the entire ship is recyclable, so there is an economic interest, if you like, in those countries to do so. Captain Palmer: I think the big issue with India, Pakistan and Bangladesh is the safety of the people rather than necessarily what happens to the end materials. Clearly there is environmental damage goes on there as well as part of the process, which does not happen in China, but the big issue for us was what happened with the people. This is a personal thing, but I do not believe you should hurt people when you are doing your normal business. Q24 Joan Ruddock: Exactly, and clearly there is both a human cost and an economic cost where things are not done correctly, but what is the cost of doing things properly and following these guidelines and is it acceptable to people in shipping that the shipowners should bear that cost? Mr Blankestijn: What our experience was of course was a one to one relationship and it was not a market mechanism, so therefore it was very difficult to see. It was an investment from both sides. If I were to calculate the process of what I call the pre-cleaning, so taking off and stripping the ship of all its hazardous material, that would maximum cost you about US$30 in Asia. That is per tonne. That is a very minor cost element. If you compare that with the Western factor where labour is much more expensive you would be doubling, tripling the cost, probably. But the most important thing is to make it as smoothly as possible the process before you reach the yard. So the identification of the hazardous materials, locating it, marking it so that also the people who have to work with the dismantling of the vessel and the taking off of the hazardous material can recognise where it is. If you go on the street and you ask people what is asbestos, everybody is talking about asbestos but nobody can recognise it. So it is important for people that they are trained in a proper way and guided on these processes and that is already half of the cost elements involved. Captain Palmer: I do not have much understanding of the way the industry works, but effectively scrapyards pay you on a lightweight tonne of the ship, so it is the weight of the ship effectively. It is not the gross tonnage, it is the actual steel weight and so on of the ship. A ship will vary in weight between sort of 20,000 deadweight and the ship will be about 7,000 tonnes of lightweight, up to about 50 to 60,000 tonnes for a very big one. The market prices will vary quite enormously depending on the economic demand for steel and they will go from a low of round about $100 a tonne that they will pay you for the ship up to 400, I think, today. So it is an enormous variation. So what you get by going to a facility that does it properly are two things. First of all, if they know that you will not go anywhere else then they have a slightly better bargaining position where you will probably agree a lower price and you do not have the opportunity, perhaps, to have as wide a set of people bidding for your ship as might otherwise be the case. So it does cost you because you will not get paid as much as you would have been. Is the cost acceptable? Yes. Well, it certainly is to us. Does every owner take the same attitude? We cannot answer that, you would have to ask them directly, but the actual cost to us was somewhere round about $500,000 per ship. Q25 Joan Ruddock: My final question is about your own body's standard operating procedure. Could you just give us a little idea about what does that cover and what your experience is of actually operating that procedure? Mr Blankestijn: We documented it fairly clearly and it starts off the moment you take the executive decision that you are going to phase out the ship, up until the preparation of the headquarters, making the contact with the yard, the facility, then making the inventory by head office clearly marking the hazardous materials and doing radiation surveys and all kinds of things. Then we hand over all that information to the ship's crew and the ship's crew will then follow that same list and will complement it or add to that because they have more knowledge about the ship than maybe the drawings at head office. Once that is done, say the ship is handed over to the yard, but at the same time at the yard are two supervisors of our company guiding the process of the pre-demolition cleaning. Once that is done, we say for us here it finishes, of the hazardous materials. Then you have the final demolition of the ship, which is then also identified, which is actually cutting the steel. In the meantime, they also talk to the national government in order for the waste management. That is the whole process which covers our operational procedures and if you take that in respect that if you normally sell a ship as a shipowner you do not have any legal obligation whatsoever to further watch it. So it goes rather deep into the whole matter. Joan Ruddock: Thank you. Q26 Chairman: Could I just follow up for the sake of clarification because all your remarks so far have been predicated on the fact that you, as the responsible shipowners seeing the process through, go beyond, if you like, what your statutory requirements are in the way you have described. But looking at the document you have provided to the Committee, the Code of Practice, for example you said in paragraph 2.6: "In such circumstances, the decision on which recycling yard to select rests with the middle buyer rather than the shipowner." What I am not clear about is what influence you may have on third parties who may buy your ships because you know what your policies are but do you actually have any leverage over the disposal methods of third parties? Captain Palmer: I think it depends on the circumstances in which you were selling the ship. If you are talking about a ship that has still got ten years of its life left, then it is a bit like selling a car after you have owned it for three years. You probably do not know what happened to it. But if we are talking about something that is at the end of its life, if we are using a third party to act as an intermediary, which we do because it is easier in some ways, then we will limit the number of yards that they can approach, so they will have to be ones that we have approved and we will have a final right of veto over which yard it is sold so. So those guidelines are general guidelines but not the ones that are in practice to be followed. Q27 Chairman: You talked about the yards, but Mr Blankestijn has just detailed a very specific methodology which has to be followed. Would you also require your third party to adhere to the same rules that you as companies would follow? Captain Palmer: Absolutely, but despite the fact that we might have used a third party to act as an intermediary we would still follow it right through and we would have our own people in there as well. So the use of intermediaries is a mechanism for accessing the trade mark rather than the actual final responsibility for it. Q28 Chairman: You represent two known major important companies. Would it be fair to say that there may be some who would not be as rigorous as you? Captain Palmer: That is quite possible. Mr Brownrigg: I am sure that is the case, but then you have to recall that the code was developed with these other international groupings and BIMCO alone, the first one I read out, I think has 70% of the world's fleet in membership, so the breadth of support for these practices, albeit of a voluntary nature and recommendatory nature, I think sends that message. Now, of course it does not necessarily compel it at the end of the day, but it sends the message. Q29 Mr Lepper: Are there countries or companies which are not signed up to the International Chamber of Shipping? Mr Brownrigg: Oh, yes. Thirty-five or thirty-six countries are signed up to it, but if you take the list that is in 1.2 of the industry code that was sent to you, these really do cover a huge proportion of the world fleet, whether it be in the tanker sector, the dry bulk carrier sector, across the board in the case of BIMCO, etcetera. Captain Palmer: It raises an issue, which is why IMO has been so important in getting those guidelines through because it is the only body which acts globally and there are one hundred and sixty odd members of IMO, which represents virtually every country that is involved in maritime activities. The necessity to get those codes adopted by IMO was precisely that reason, to try to get a wider cross-section than just those who were members of the ICS. Q30 Diana Organ: Could you see a time when under the guidelines for the IMO there might be a penalty against a shipowner, a fine if they are not seen to be keeping to the guidelines, because at the moment it is only voluntary? Mr Brookes: Could I take that from a regulatory perspective. The IMO produces guidelines, statutes, regulations governing the operation of a ship. Those guidelines only have the force of law when they are implemented by the member states of IMO, such as the United Kingdom is. So it would be the United Kingdom which might choose to have its own legislation in that respect, having implemented an IMO statute. Mr Brownrigg: I think this is fairly early stages in the legislative process. I am not just thinking of this one but any maritime legislation. Sometimes they begin as guidelines and move on into stronger instruments and sometimes they stay as guidelines because that is a more practical expression of the need in that context and it may be a little too early, I think. What one wants to do is look ahead to the implementation of those guidelines and the IMO monitoring of that process. Q31 Mr Lazarowicz: As we know, the movement of hazardous waste between countries is controlled by the Basel Convention. I understand there is some disagreement or argument as to whether or not it was meant to apply to shipping at all. Can you tell us why this confusion over the status of the Basel Convention in regard to ships destined for dismantling has arisen? Mr Blankestijn: The Basel Convention was of the opinion that the hazardous materials - some of these materials are on the red list of Basel - made the whole ship hazardous and that is the way of thinking of Basel, where they say if you then decide the ship for its last voyage for recycling then it becomes export. With that we disagree because we do not think that a piece of hazardous material on board the ships makes all the ships hazardous. A ship is not hazardous waste, the ship generates waste, and that is a crucial point. Now, of course there is some pressure from environmentalists who want to prove the point that the whole industry of ship recycling has to change. That is why the issue is pushed so much on Basel at this stage. That is no complaint, it is a given fact at this moment. But what will that do to shipowners? It is easily to be circumvented because you can not declare your ship for the last voyage. You sail into international waters and then the Basel Convention does not apply any more. So what presently is then available, how it is looked at from our perspective is that Basel does not make it practical for what you want to achieve. That is why it is so important, and it is what is being promoted, that Basel, IMO and ILO should sit together and look at their individual guidelines and make them complementary to each other. As this is a global issue, you have to look at it as a global issue and not look at it as singly, the word "export", but look at it from a practical point of view. Mr Brookes: Could I add one point to this, please. A ship cannot sail unless it has all its relevant certificates in place. That means all the hazardous materials that we are concerned with have to be on that ship to enable the ship to be in full working order until it arrives at where it is going to be recycled. The alternative is to remove all those materials somewhere else and tow the ship as an empty hulk around the world, which is (a) impractical, and (b) probably very dangerous. So the ship is still a living object with all its certificates in place; it is not a scrap item until it arrives at the final point of destination, and that is one of the issues which the Basel Convention does not apply, which is why there is this current misunderstanding. Captain Palmer: We would argue that a ship is not per se a hazardous item, it is a large unit which contains some materials that when they are taken out are potentially hazardous if they are not managed properly. It is not quite the same thing as having, I do not know, a container full of asbestos and shunting it around the place trying to get rid of it in the least acceptable place. Q32 Mr Lazarowicz: I think, Mr Blankestijn, you were talking about discussions taking place. Is that the joint working group of the IMO? Mr Blankestijn: The joint working group, which is planned for the end of October or November this year. Q33 Mr Lazarowicz: I do not know a great deal of how the international maritime legal process works. Are these working parties bodies that report within a reasonable period of time? When do we expect to have some outcome from these discussions? Mr Brookes: Provided it comes to some conclusions, that will report to the Basel Convention and the International Maritime Organisation, hopefully in early 2005, and that can then be incorporated into revised IMO legislation and that will go through the system at IMO to effectively give it the force of law. We are talking about discussion of that and then it will be subsequently implemented into national legislation in the countries of the IMO. Captain Palmer: The speed that legislation moves through the IMO is not in the hands of the shipping industry, it is in the hands of the nation states that are members of the IMO and some of them can be done very quickly, as has recently been seen with the international security and the ISPS code, which has gone through in a remarkably short space of time, as against the HNS Convention, which has been sitting there for ten years unratified. Q34 Mr Lazarowicz: At this stage, what do you assess are the prospects of getting any successful resolution of the disagreement? Mr Brookes: I think there is a good prospect because I think as a result of the discussions, the publicity, a real issue has been identified. We have explained to you the misunderstandings to those who are not as well briefed as, say, everybody in this room and therefore there is determination in IMO and the other bodies to come to a conclusion swiftly, and it can do so, as the previous Secretary General of the IMO has proved recently. Q35 Mr Lazarowicz: Notwithstanding the fact that there is this discussion under way or about to begin in concrete terms, we do of course have the EU Waste Shipment Regulation in force, I understand, at the moment. Mr Brookes: Yes. Q36 Mr Lazarowicz: What impact has this had on the recycling of vessels in the EU and what impact in particular has it had on EU-flagged ships being dismantled in developed countries? Mr Brookes: None that I am aware of. Q37 Mr Lazarowicz: Has it had an effect on recycling of ships in the EU to any significant degree in terms of the present practice? Mr Brookes: No. Q38 Mr Lazarowicz: Finally, if the working group were to come up with an outcome which reflected your views on the status of the Basel Convention, would that not have an impact on the status of the EU regulation? Mr Brookes: I would have to read the EU regulation again. I do not know every line, I am afraid. Mr Blankestijn: That is a very difficult question to answer. What is actually missing is the legal framework in all three guidelines presently, ILO, IMO and Basel. There is a possibility and the Dutch and the Canadians are working out a proposal to IMO and Basel at this moment where the reporting system of hazardous material of Basel is kept as a whole because there is importance in that, where say the IMO structure is also taken in place and try to bring that together. Now, if that proposal comes then that could be the legal framework for IMO and Basel to proceed in a quicker way. Q39 Mr Lazarowicz: I suppose what I am getting at is if the EU regulation is based upon one interpretation of the Basel Convention requirements and that is not what eventually becomes agreed amongst the parties then we could have a situation, perhaps, in which there is no EU regulation in place until such time as the EU changes its legislation in line with the outcomes of the working group? Mr Blankestijn: All I would like to add is that this is, in our opinion, a global issue and we should try to solve it globally, otherwise we get competition between EU and other states where there easily could be a threat of, say, trying to circumvent the EU regulation again. So we have to come to this as a global solution. Mr Lazarowicz: Thank you. Q40 Mr Mitchell: Did I hear you say that there are no dismantling facilities in the UK? Captain Palmer: No, there are none that could take ships of that size. We were talking about dismantling a very large crew carrier. Q41 Mr Mitchell: That is just the VLCCs? Captain Palmer: Yes. I am not quite sure what the biggest ship they can take in the UK is, but it is not very big in comparison if you are talking about oil tankers, no. Q42 Mr Mitchell: This issue which we discussed earlier, which is the American Navy vessels going to Hartlepool, could that be the basis of a beginning of a British dismantling industry? Captain Palmer: I think the sizes of ships they are talking about taking there, once again are at the smaller end of the range, but nonetheless they are a reasonable size and certainly there are plenty of ships that will be coming up for recycling in the next few years in Europe. I think one of the things you need to look at as to whether that industry would be viable would be whether it can be done at a cost which is reasonable and whether it can be done safely and properly. I think the issue of the safely and properly one is one that clearly is not one that I can answer but I would see no reason why it could not be done safely and properly here. The cost one is an interesting question. There are other facilities in Europe. There are facilities in Holland, I think, there are facilities in Turkey and there are facilities in Spain that dismantle vessels. A lot of it comes down to whether it would be economically acceptable, firstly as to what price they can do it at, but secondly you look at the voyage length that the ship would have to travel. Are people going to send small coastal vessels out to the Far East for dismantling? The answer is probably, no, if there are available facilities closer to home because it is not an economic thing to do. In the case of large international trading ships, that is rather different. They are probably out that way anyway when they reach the end of their lives; they are their normal trade routes. So the question of could there be a viable industry, well, I guess that will depend on the cost structure that it can produce but there is logically no reason why there could not be. Q43 Mr Mitchell: But it would not be of great interest to you? Captain Palmer: It might be for some of our smaller coastal tonnage, yes. Q44 Mr Mitchell: Only the smaller vessels. At the moment you do not send those smaller vessels to what facilities exist in Holland or Spain? Captain Palmer: Correct. Well, we have got some coming up later this year which we will be looking at where they are going fairly shortly. Q45 Mr Mitchell: Okay. So is the argument between dismantling ships in developed countries compared with dismantling them in less developed countries like India, Bangladesh or China primarily one of the capacity that they can take? Mr Blankestijn: The way I see it, it is what is the market, how is the market divided, and I think Captain Palmer already said the smaller vessels - the economical turning point - which will not all the way sail to Asia, while the bigger commercial ships will, but that is the commercial ships. On the other side there is still the segment of ships that are a problem, which no longer sail because they do not get the certificates, and that is of course a category. Another category is governmental ships, which in the case of Hartlepool is a matter and they have another economical value. So you look at the market segmentation in relation to the facilities at hand and those should find their market mechanism. Q46 Mr Mitchell: Right. There is no virtue for the bigger ones in being dismantled close to home, as it were? There is less of a voyage. Mr Blankestijn: If I mention to you the cost element, say triple the cost factor probably here versus Asia, then for the bigger tonnage economy scale - Q47 Mr Mitchell: Okay. So the two arguments are the size of vessels they can take and secondly uncompetitiveness? Captain Palmer: Yes, assuming there was the same health and safety framework in both cases. So you have eliminated one area of contention, which is that we would require wherever it was done that it can be done properly. The next question then is an economic decision of which is the right place to go, and capacity. Q48 Ms Atherton: But you would not be eliminating that there is the same level of environmental issues or that the corporate social responsibility, say, of the wages that are paid to the people who are doing the work would be the same, so you are not likening like with like, are you? Captain Palmer: No. That is the same with a number of issues. There is a number of industries which move to different parts of the world depending on the cost of the labour market. It is a labour intensive industry dismantling ships. That does not mean to say that facilities cannot and do not exist commercially viably in Europe; there is a number of them there at the moment. Q49 Ms Atherton: But not for the very, very big ships. Is there anything in the developed world that could actually take these very big ships? Could one of the P&O ferries be dealt with in a developed country? Captain Palmer: Oh, yes. Q50 Ms Atherton: And the bigger tankers, could they be dealt with? Mr Blankestijn: If the facility is there then it can, yes, but as I said, it is a matter of price and this is in a global situation. Q51 Ms Atherton: I am sorry, I am not following. Are you saying to me that if I had a multi tens of thousands of tonnes, big tanker that stops every ten miles type of ship that I could opt to go to an environmentally responsible, socially responsible in terms of its employee relationships company in a developed country I could do that tomorrow? Mr Brownrigg: If the facilities exist. Q52 Ms Atherton: That is what I am asking you, are those facilities there? Mr Brownrigg: No, they do not tend to exist - Captain Palmer: There are two parts to your question. The first one is, they do not exist. Q53 Ms Atherton: They do not exist? Captain Palmer: There are none that can take ships of that size, that I am aware of. But the second part, which I would take issue with you on, would be to say that those countries that we do deal with, in China, are not doing exactly those things you are talking about, which is treating their staff properly, paying them properly in relation to their own economy, looking after their welfare and doing all those other things. I think that is a very incorrect perception of how it is done in those places. Q54 Ms Atherton: I am trying to find out the answers. I am trying to stimulate you to come back - Captain Palmer: That is fine. Well, I did. Q55 Ms Atherton: You are prepared to say that you are satisfied with the standards despite criticisms that have been made by organisations? Captain Palmer: Correct. The criticisms that have been made of Bangladesh, Pakistan and India I would have some sympathy with. If those same criticisms were extended to all of the facilities in China, I would not have the same degree of sympathy with it because I do not believe that is correct. Q56 Ms Atherton: One last question. If I was thinking of setting myself up as a company dismantling these multi-thousand tankers that we have talked about, what would be the competitive elements they would need to actually encourage you? What would be the differentiation between China and Bangladesh that you might find attractive as a company? Captain Palmer: Well, a lot of it would be on their ability first of all to be able to do it in the timeframe required, to be able to demonstrate all those things to a company like ours that we have discussed, to be able to do it competitively. A lot of it is to do with scale. It rather depends what scale you are operating on. Most things are more effective if they are done on a large scale. That is certainly true in ship building and it ought to be true at the other end of it as well. So I think it is not impossible and, as I say, there are European yards that do that today. So the question is whether the UK could be competitive in comparison with people operating clearly in very similar legislative frameworks in Holland and Spain, for example, two fairly close EU countries. Mr Blankestijn: And the facility here could use more modern techniques, which they would not even think of investing because the labour costs are much cheaper. So there are elements which are even more environmentally friendly if you do them in a very hi-tech way. We are talking about percentages differences probably. Captain Palmer: It is quite interesting comparing China with India and Pakistan because labour costs are much higher in China than in Pakistan for the work that they are doing. They use a lot more mechanisation in China to do the work, which is actually one of the attractions of it to us, than in the other cases where they use a far higher human element, which clearly involves more risk. Q57 Alan Simpson: Just sticking with Candy's question, when you say there are no dismantling facilities in the UK, if you take the other countries and the divisions you have identified between China, Pakistan and Bangladesh, where does the investment money come from to raise the environmental standards? Captain Palmer: In China I can give a good example. There were existing facilities. Some of them were originally shipbuilding yards which actually converted themselves into dismantling facilities. They saw it as actually being something in which they could differentiate themselves in the market to actually attract customers like us and they actually see the investment that they have made in their facilities as being one that gives them a market advantage when they are looking to socially responsible shipowners for facilities to go to. So they are commercial ventures. They are doing it on a private investment basis. Mr Blankestijn: But also supported by the government because the Chinese government is now in the process of certifying yards and giving them green lights for import licences for certain vessels, or not letting them, or completely closing down those facilities within a period of time. So what the industry started the government is not taking over by more or less safeguarding the guys who were taking their responsibility in their facilities to make sure that they stay in business and not being competed out of it by the ones that do not do those things. Q58 Alan Simpson: Presumably you would welcome that rating? Mr Blankestijn: Very much, yes. Q59 Alan Simpson: Does that get followed by you as an industry on the basis of saying, "These are the standards that we will only approve for dismantling and recycling," because it seems to me that you have a choice in fact? Since you are paying, there is a choice to be made about where you would direct your purchasing choices to. Captain Palmer: It would obviously be in our interest for every yard in the world to be operating to exactly the same standards, the highest possible standards, so that we could then simply make an economic decision on where to do it and not have to actually look at some of those other issues. So clearly there is a benefit in that process. Is it a particular issue for us? Well, actually, no. The average age of our fleet now is two and a half years, so it is not something we are going to have to worry about for a few years. Q60 Alan Simpson: Okay. Can I just come at it from a different angle. You have talked a lot about the Basel Convention. What impact do you see the Stockholm Convention having on the industry because in a sense that was one of the points that we had started from, the implications that that Convention will have, particularly in relation to the disposal of hazardous substances that you will find on ships, including PCBs? Captain Palmer: I cannot give you an answer to that. Mr Brownrigg: Do you want us to consider it and come back? Q61 Alan Simpson: Yes. It would be really helpful since the Convention will apply from this year. It would be helpful if we could get clarification. Just coming through to the question of where the responsibility should lie with the dismantling of ships at the end of their lives. You took us through a picture which I just want to be clear I have got right. The IMO set the guidelines in terms of the standards and responsibilities that you have. Those guidelines only become legally enforceable when they are adopted by governments, but in terms of the changing of the guidelines you were saying that that is also open to governments to change because governments are the driving forces in doing so? Mr Blankestijn: Yes. Q62 Alan Simpson: So would you be in a position to come back to us as a Committee and say what exactly would be the guidelines that you would want a UK government to be advocating to be adopted, incorporated or changed in relation to that IMO framework? Mr Brookes: We were very much party to the development of the International Chamber of Shipping's guidelines which have been taken through to IMO and are now in place there. There are only a few tweaks and whistles and bells, there is no fundamental difference. So that is what we would be happy to see go forward in the way you have said. Captain Palmer: Just to clarify the process that the IMO works under and how these guidelines came about, the guidelines originated back in the mid-90s by us and a number of other companies getting together who were concerned about the issue and clearly the pressure that then came on the industry from about 1997 onwards with the NGOs getting interested in the issue resulted in those guidelines being finally produced in the form they are in. They were then lodged with IMO, who have adopted them as guidelines. Now, if they were to become international legislation they would have to go through the IMO process of a proposal being put forward at one of the committees of IMO by one or a number of nation states, who are the only people who can actually put forward proposals. If IMO as a whole chose to go forward with it - and that is on a one country, one vote system - then it would go ultimately to a diplomatic convention, a diplomatic convention would argue over it and they would produce a piece of international legislation with certain requirements around it of how it should be ratified and it would then go through that process, at which point it becomes international law and then the member states of IMO are obliged then to enact it in their own legislation. So that is the full international legislative process. Mr Brownrigg: I think I would put a slight gloss on that. That was referring to the development of conventions. This is already an IMO instrument. It is already an international legislative instrument but it is in the form of guidance and the guidelines are issued in a recommendatory fashion very often because that is the nature of the substance they are dealing with. But this has within it, as we have said before, a direct request to the IMO committees in question to keep this under review, with a review to further developing the guidelines in the future, to consider the appropriate means to promote the implementation of the guidelines including a review of the progress made in achieving their intended purpose and to continue cooperating with the international labour organisation and the appropriate bodies of the Basel Convention in this field an encourage the involvement of other stakeholders. So what is in process here is a system of taking what has been adopted in guidance form at this stage and looking forward in the light of practical experience, and that is a positive way of looking at it. Q63 Alan Simpson: Let me just get you to run that through again against one of the comments that Joan Ruddock made earlier. You threw in an answer that a vessel is not like a car and where did old cars go, and Joan said, "They get dumped at the end of my street." If you can picture a scenario of a vessel abandoned at the end of her street and you ran that checklist past her or any other resident, "This is being kept under review. We urge people to come out with appropriate guidelines," they would tell you to bugger off. They would say, "Get this bloody thing off my street, find out who's responsible and charge them." In a way, I think what as a Committee we have a right to ask of you is, if we are to address the problems globally presented by those who would dump end of life vessels on beaches in poor and powerless countries or pull the plug on them in deep waters, how does the responsible part of the shipping industry want governments like our own to take effective action now that is interventionist? Mr Brownrigg: Just to take a second take on the comparison you have just made, this is not a fly-tip that is under a single council's or a single county's jurisdiction. This is a piece of legislation in guidance form which is adopted for 160 countries. It is at a different level than your comparison, if I may say, and I think you have to be guided by experience and by practical experience on this. The fact is, there was nothing in place four years ago. There is now guidance that was developed by the international industry, with the breadth that I have mentioned beforehand. The international industry took that to the international maritime legislative authority and said, "Please do something with this," and that has happened. So I think we are in a process and there is a process of review into the future to learn from experience and I do not think that should be downplayed. Q64 Alan Simpson: No, I am not downplaying it. I understand that. As a Committee, we are having this inquiry partly because all of a sudden we have been presented with the reality of the recycling issue in relation to the ghost ships. We then realised that in fact the numbers in the pipeline are far greater than any of us had been aware of and that we need to have guidelines in place that essentially are able to take action against not the most responsible part of the industry but against the irresponsible part of the industry. My question to you is still the same, what action would you be asking this Committee to recommend to the UK Government that it takes forward again into the IMO guideline or legislative process? Mr Brownrigg: I will give a one sentence answer and then others can jump in because they clearly want to. I think we would want strong support by the UK Government for the international guidance that has been adopted. Now, that may sound trite but for 160 countries to be looking at this with a view to implementation is something that will take time. So I think what we want is essentially a strong line from the UK Government in support of what has been achieved to date. Mr Brookes: Could I add, Mr Simpson, you mentioned about pulling the plug, obviously to sink it at sea. That is not in the commercial interests of anyone because, as Captain Palmer has said, ships have value, tens of billions of pounds, even as scrap steel. If they go to a land beach. We have talked about land beaching in India now. So the answer is, we then want this guidance to ensure that we maintain the high standards we have outlined to you and persuade people to raise the standards of China, to which both Nedlloyd and BP Shipping send their ships. Q65 Alan Simpson: Okay. My final question on that then is, recognising that even at that end point there is economic value of the material that can be salvaged, we are left with questions about the liability for hazardous waste that is contained in abandoned ships and I think given that we can very easily identify a situation where a ship was built in the UK for a US company that is operating from the Philippines and registered in Liberia, who should have the liability for the hazardous wastes that are illegitimately recycled in an abandoned vessel? Captain Palmer: I will just reinforce the point that Edmund made, that I do not think anybody abandons ships. Ships are sold to recycling facilities. They are not abandoned. When people refer to them going on the beach in India, they are not just dumped on the beach, these are actual yards. They just use the beach as their bit of land that they dismantle on. So they are not abandoned. Who is responsible? At the end of the day, if you are operating a recycling facility which is going to do that job properly then if there is a process of licensing recycling facilities as exists, as Tom has described, in China then clearly it is the responsibility of the regulatory authorities in the place where that is taking place. As a shipowner, it is my responsibility to make sure that I actually give it to a place that actually does manage it properly and that I am satisfied that I go through a due process of audit to ensure that they have done their job in the way that they professed they were going to at the time we agreed they could have it. So I believe it is a joint responsibility is the simple answer to your question. I think it is the responsibility of whichever is the country that has that recycling facility to ensure that it is done properly and that it is done safely and in an environmentally sound manner and it is the responsibility of owners, certainly it is my view, to make sure that they only sell it to places that can do it properly and that they make sure that they do do it properly. Does that answer your question? Alan Simpson: Yes. Chairman: Gentlemen, thank you very much indeed. You have given us a comprehensive overview and a good formal start to our inquiry in this area. We thank you very much indeed. If there are any subsequent points which occur to you that you would like to respond to - I think the one on the Stockholm Convention was the key point and we would be grateful for a further response from you in due course. Thank you very much indeed for coming before the Committee. |