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TO OUR READERS AND BUSINESS ASSOCIATES IN THE INDUSTRY:

GMS RESPONSE TO RECENT “KVEIKUR” DOCUMENTARY

 

As economist Alan Greenspan once suggested, people are entitled to their own opinions, but not their own facts.  It is critical to bear this in mind as one watches the recent Icelandic “Kveikur” documentary titled "Where Eimskip ships go to die", produced by the Icelandic television and radio network “Ríkisútvarpið (RÚV)”

Unfortunately, the insatiable appetite for NGOs seeking media attention from news and media outlets chasing ratings seems to be once again the fuel feeding the misinformation and falsehoods that have been reported by the Icelandic media in this so-called "documentary" regarding two vessels that were recently sold by Eimskip. 

In the poorly researched and misinformed 30 minute documentary, so-called "journalists" who are on the hunt for sensationalized stories to garner viewer ratings, have carelessly "reported" false information in an effort solely to motivate interest through "tabloid-style" journalism and storytelling.  It is no surprise, they have also included references to an earlier debunked BBC news story which inaccurately reported on ship recycling and recruited the notoriously ill-informed and highly aggressive NGO Shipbreaking Platform, in an effort to paint a picture more akin to a fictional show rather than an actual non-fiction news story. 

At GMS, our company operates on three foundational principles and values of professionalism, integrity, and performance. We conduct our business based on FACTS, not fiction. With these principles and values at the forefront of our work, we consider it our duty to confront the Icelandic journalists' inaccuracies in the Kveikur program.   

FALSE ACCUSATIONS - It is essential to first address a general theme throughout this "documentary" that implies EIMSKIP somehow acted illegally or criminally when they sold two of their container ships that were eventually recycled.  It is crucial to understand that these ships, which were Faroe Islands-flagged and later converted to Liberian flag, were lawfully sold to legitimate ship owning entities as further trading deals.  The sales of these assets were based on standard MOAs (Memorandum of Agreements) and had absolutely no reference point to recycling.  Although not legally relevant as these ships were sold for further active trading, neither the Faroe Islands nor Liberia falls under the EUSRR (European Union Ship Recycling Regulation) for the recycling of ships. 

Right after delivery of the vessels, the ships were put on charter, trading in northern Europe. The vessels remained on time charter and operated until the end of their minimum redelivery periods. 

The devastating economic effects of COVID-19 have been felt worldwide, and the container market has been one of the hardest-hit sectors in the shipping community. As a result of the massive reduction in container cargo movements during the late spring, the assets in question were redelivered.

After failing to find employment for the ships, owners put the ships in the market for further resale. At least one of the ships was committed to buyers but failed on subjects. Subsequently, owners had to sell the ships for recycling at a much lower price than the assets' anticipated residual value. Frankly, EIMSKIP was fortunate to find a trading buyer and monetize the assets' full trading value for its shareholders when it did, and EIMSKIP's management should be APPLAUDED for acting in the best interests of the company and their stakeholders at the time.  

Neither Eimskip nor the owners of the vessels had engaged in any illegal or criminal activity whatsoever, although the Icelandic documentary and the NGO Platform's comments in this regard falsely direct the viewer to assume that some level of illegal activity had taken place.  Such statements could be viewed as defamatory.

DISTORTED SAFETY CLAIMS - The program also incorrectly frames the number of deaths in Alang and its safety record, claiming that there are "dozens of injuries weekly" and that there are "no hospitals" in the area.  GMS already clarified and debunked these falsehoods in its earlier response to the BBC documentary referred to and cited in this program. Although even one death is unacceptable by any measure or standard, our goal is to foster a recycling industry with ZERO casualties.  With this said, it is also essential to bear mind that in the USA alone, there are over 20 industries and sectors that have death rates higher than the ship recycling industry in India.  In fact, based on a recent Business Insider news article using information from the US Bureau of Labor Statistics, the death rate of the Indian ship recycling industry compared to US industries would fall somewhere between construction equipment operators (ranked #20) and professional athletes (ranked #24). 

The documentary also falsely claims there are "no hospitals" in the area; however, there are THREE 24 hour hospitals in Alang alone.  Locations and details of these three hospitals can be easily observed through a simple Google search—something producers of the film failed to fact check, let alone physically come to Alang to visit the site themselves.

NEGATIVE BIAS & AGENDA - The program has an obvious bias towards supporting the European Union Ship Recycling Regulation (EUSRR), and the EU approved yards which are included as part of the EUSRR.  The producers suggest that the Hong Kong Convention (HKC) is not "formally recognized" and that no recognized certifying agency supports or follows its mandates.  This is, in and of itself, wholly inaccurate and one of the many clear examples of the program's underlying bias agenda, as the program also failed to mention that the United Nations specialized agency that developed the HKC for regulating international shipping, called the IMO (International Maritime Organization), did so as a means to regulate globally the "Safe and Environmentally Sound Recycling of Ships." The HKC has now been ratified by 15 countries, many of which are from Europe, including European maritime nations such as Germany, Denmark, Norway, and the Netherlands.  Further to this, four leading IACS (International Association of Classification Societies) members currently give Certificates of Compliance, after conducting physical audits, to Indian based recycling yards that qualify. This list includes well-known international members such as Class NK, RINA, LR, and IR. 

It is also important to note that the internationally formed “Ship Recycling Transparency Initiative (SRTI)” members' policies on ship recycling, recognizes, supports and adheres to the Hong Kong Convention. 

Furthermore, the program ignores the fact that the HKC was primarily created and developed by the international community to ensure that it adequately guided and allowed for the inclusion of southeast Asian based recycling yards, given that their participation has always been deemed critical to the success of ANY large scale international ship recycling regulations.  The initial architects of the European regulations intended for their efforts and guidelines to serve as a means to help usher in the HKC itself more quickly. These facts and many more are omitted as they do not suit the journalists and the NGO Platform, as they inconvenience and contradict their biased narrative and agenda.

STEREOTYPED BIAS NARRATIVE (The West vs. India) - In an effort to diminish and degrade the HKC and to portray the recycling methods utilized in South East Asia in a negative stereotypical way, the program focuses on the "gravity method" of recycling, insinuating that it is "unique" only to South East Asia and that it is inherently "bad for the environment." The reality is that this tried and tested method of recycling maritime assets is used in many places around the world, not just South East Asia.  In fact, this method is not very different from practices regularly used in the West for dismantling old buildings and large commercial structures.  In the West, it is often referred to in the construction and building industry as "controlled demolition," however, this fact is intentionally overlooked by the program's makers.

The program's commentary regarding the EU yard featured in Ghent, Belgium, is also particularly interesting. They claim that 98% of a ship in their care is recycled, with 2% of the vessel going to landfills.  This is similar to the recycling figures that have been applicable within Indian yards for many years.  EU yards should be applauded for their efforts to finally meet Indian standards on this particular issue. 

While the EU yards are making efforts to become more competitive with Indian facilities, the videos portraying some of these EU yards in this documentary alone, depict a level of unorganized operation that likely contributes to these yards' inability to compete internationally on a cost basis.  The reality is that it is well known that EU yards pay very little for the ships that they recycle and are not price competitive in the global markets. Government subsidies that could allow these European yards to be less cost conscious, coupled with low local steel prices, are just some of the true untold economic factors contributing to the significant disparity in pricing between the EU and Indian recycling facilities.  

The documentary also attempts to negatively portray these Indian recycling yards by featuring a lone disgruntled Indian yard employee. However, the journalists intentionally fail to highlight or depict the many other thousands of workers who are happy to be employed at these facilities.  Another fact that journalists conveniently omit in the program, is that workers travel from across India to attain these coveted jobs, which pay above-average local compensation. 

Unsurprisingly, the program makers also chose to omit the commendable and noteworthy humanitarian efforts and actions made by most Indian recycling yard facility owners during the unprecedented COVID-19 pandemic shutdowns in India.  Most yards continued to pay salaries to their existing employees throughout the shutdown period, and in order to help ease the severe financial and social discomfort experienced by these workers, food distribution centers were also set up by many of the local recycling yards to ensure these workers were appropriately supported during these challenging times.   

FALSE INFORMATION - GMS was also incorrectly referred to and mentioned throughout this program.  One such reference was made to a company called "GMS Liberia" that was supposedly used in the transactions in question.  However, a company by this name does not exist, and if it does, it has nothing to do with GMS or its principals.  GMS is an agent, acting on behalf of its principals, which are ship owning companies based around the world.  These principals have diverse interests in maritime assets, ranging from very modern and newly built ships, down to end of life vessels that are often operated, chartered, and traded until being sold for further trading or recycling. 

The fact remains that GMS, as an agent, negotiates the acquisition of more ships and maritime assets on behalf of its principals than any other company in the world.   

WATCHING THE "WATCHDOGS" - GMS remains committed to maintaining a high level of ethics in its operations and commercial transactions and will continue to serve as a guardian and leader of the ship recycling industry.  From the NGO Shipbreaking Platform to the television stations that broadcast misinformation and sensationalized stories about ship recycling in India, to further their own political narratives and agendas and to increase their viewership, we recognize the ever-growing importance of confronting and speaking out against falsehoods and voicing the truth for those who are involved in the ship recycling industry.  By allowing such misinformation and factual inaccuracies to go unchecked, it is not just ship owners and large companies who depend on ship recycling in India that are adversely affected, but also the thousands of people who are employed by and derive their livelihoods from these yards, and who work every day to earn an honest living to support their families.  

For personal and political reasons, these highly aggressive NGOs have chosen to push a misguided political agenda and narrative within the EU from a policy and media perspective.  This attack on Indian ship recycling threatens the livelihood of hundreds of thousands of people who are dependent on this industry and who do not have a collective voice loud enough to be heard over the well funded NGOs and media outlets that have focused on exploiting the hard-working people of the recycling industry in order to benefit themselves.

GMS is in the process of seeking advice on its legal options against the organizations that have relied on and published false and defamatory information, with a clear intention to slander GMS's reputable and well-known name in the market with this documentary.  As these misguided media assaults are becoming more frequent, maintaining an objective perspective and focusing on unbiased facts is vital. We ask that readers take the time to properly understand and appreciate the tremendous progress that has been made in the recycling industry in South East Asia, and contact us with any questions about the constant efforts being made to improve.

Finally, it's regrettable that GMS remains the only institution in the ship recycling industry that rises up to confront and challenge these false narratives with truth and facts. As a result, we end up being a favourite target on the "hit list" of those determined to derail the progress of the HKC, and who are ultimately intent on stopping ship recycling in the Indian subcontinent. We invite shipowners and their associations, capital providers, underwriters, shipbrokers, class societies, auditors, and all those who work in this industry and have studied this industry up close, to rise up and speak up!

-END OF TEXT-

For further inquiries, please contact us at bd@gmsinc.net

 

ABOUT GMS

Founded in USA, GMS is the world’s largest Buyer of ships and offshore units for recycling. GMS has successfully negotiated several thousand assets since its inception—more than any other company in the world! For more than a decade GMS has led the industry by sheer volume of transactions and innovative products. The firm's mission is to simplify the disposal and recycling processes in the maritime world by providing end-to-end solutions, sustaining an asset’s residual value while simultaneously improving international health, safety and environmental standards. With nine international offices, an award-winning Responsible Ship Recycling Program, and a team of specialized experts, GMS continues to influence positive change in the global maritime and offshore industry.

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Green ship recycling – time to invigorate all the segments of the industry
By Dr. Kanu Priya Jain, Coordinator, Responsible Ship Recycling, GMS (Dubai)

The majority of the global ship recycling activity is operated from a handful of countries such as: India, Pakistan, Bangladesh, China and Turkey. Within the last few years we have witnessed a rapid growth in the ship recycling yards looking to upgrade their facilities in these major recycling countries. In India, almost half of the active yards are operating under a Statement of Compliance (SOC) with the Hong Kong Convention (HKC) and recently, the first yard in Bangladesh also received the same certification. These developments in the market have led to an increase in the capacity of the ‘green’ ship recycling, which denotes the safe and environmentally sound disposal of ships and offshore assets. Ideally, this increased capacity should attract owners of all ship types to opt for ‘green’ recycling of their end-of-life tonnage, however, in our experience, we have witnessed a fragmented demand. It would be interesting to analyze which industry segment is lagging in availing ‘green’ recycling services and the reasons behind it.

The data required to analyze the market of ‘green’ recycling is generally confidential. Therefore, we will use the data of our company in aggregate form. Being the leading company in the ship recycling industry, the dataset used for the analysis represents the general trend of the industry. Within the last few years, we have undertaken about 30 projects annually under our ‘Responsible Ship Recycling Program’ (GMS RSRP) which caters to the needs of the ship owners interested in recycling end-of-life ships and offshore units in a safe and environmentally sound manner. Interestingly, none of the projects are of tankers, whereas 38% projects are of container ships, 29% projects are of offshore units, 17% are of car carriers, followed by 8% for bulkers and 4%  for reefers and  LPG carriers.

The percentages above, especially that of tankers is quite concerning because despite the fact that tankers pose the highest risk during the dismantling process, owners are not very keen to avail ‘green’ recycling options. This is quite worrying because the availability of the HKC-compliant yards has increased significantly in the recent years. Such a trend doesn’t augur well for yards willing to upgrade their facilities as they do not find enough incentive to do so considering the fact that not all ship types reach ‘green’ recycling yards. These numbers reflect the defensive strategy adopted by the tanker owners which tend to go for ‘as is’ deals at the end of ships’ economic life to condone their duty of recycling end-of-life ships responsibly.

When an industry transits towards enhancement, all stakeholders must assume a collective responsibility of equal and meaningful contribution to achieve an effective progression. Presently, we are seeing more and more yards inclined towards the upgrading of their facilities to meet the standards of the HKC, especially in India. Certain Classification Societies have voluntarily started providing Statements of Compliance (SOC) to the recycling yards that wish to upgrade their infrastructure and processes in line with the HKC. At the same time, we as a vital link between the ship owners and the recycling yards, have been contributing to the industry by delivering workers’ training programs in association with Classification Societies (such as IRCLASS), offering additional services to the ship owners such as supervision, monitoring and reporting of the recycling process, and providing technical expertise to the yards for the upgrading of their facilities. A bigger contribution and will to embrace ‘green’ recycling options from the ship owners’ side is required to boost the ship recycling industry in the right direction.

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The conundrum of the enforcement of the Hong Kong international convention on ship recycling
By Dr. Kanu Priya Jain, Coordinator, Responsible Ship Recycling, GMS (Dubai)
 
More than 8 years after the IMOs Hong Kong international convention for the safe and environmentally sound recycling of ships (the Hong Kong Convention (HKC)) was adopted, currently, the biggest question being asked in the corridors of the ship recycling industry is “when will the HKC come into force”. The Convention aimed at improving the health and safety standards of the ship recycling yards has so far seen a very slow progress towards meeting its entry into force criteria. At the beginning of 2017, only four countries – Belgium, Congo, France and Norway had ratified the Convention. The list got only two more additions by the end of 2017 when Denmark and Panama acceded to the Convention, which does not translate into the minimum requirements of the convention’s entry into force.
 
The Hong Kong Convention will enter into force 24 months after the date on which the following conditions are met:
1) At least 15 States have either signed it without reservation or deposited instruments of ratification/acceptance/approval/accession with the IMO Secretary-General.
2) The combined registered gross tonnage of the States mentioned in ‘1)’ is at least 40 percent of the total world registered tonnage.
3) The combined maximum annual recycling capacity of the States mentioned in ‘1)’in the preceding 10 years is at least 3 percent of their combined registered tonnage.
 
Effectively, the above conditions mean that in order for the Convention to enter into force, it is required to be ratified/acceded by at least one of the largest shipping registries along with two major recycling nations, which could technically be either of the following combinations – India and China, India and Bangladesh, India and Pakistan, and China and Bangladesh. However, given the state of the industry in Bangladesh and Pakistan, it would be safe to assume that any combination involving Bangladesh or Pakistan isn’t likely in the near future. Therefore, China and India become crucial in this context. Moreover, China (including Hong Kong) having a relatively large percentage of fleet registration becomes even more critical for the HKC’s entry into force.
 
In light of these requirements, 2017 has been an important year as Denmark and Panama have acceded to the Convention. The world’s largest flag state – Panama acceding to the convention mean condition #2 mentioned above is getting close to fulfilment. Moreover, Turkey got within the touching distance of submitting the ratification documents to IMO by incorporating the HKC into its domestic law and India completed the draft bill for translating the provisions of the HKC into its domestic law. Turkey’s ratification and India’s accession to HKC would help impart pressure on other major recycling countries to ratify the Convention and its journey towards enforcement will be accelerated.
 
In conclusion, we have seen some important developments in 2017 stimulating the progression of the HKC towards enforcement. However, more efforts are required to meet the criteria set by the IMO. Other relevant states must step up for the speedy enforcement of the HKC, following Turkey and India’s steps taken in the right direction.
 
For any questions or comments, please contact at: green@gmsinc.net
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Authored by Ms. Arnavi Panda, LLM (Maritime Law), Legal Advisor at GMS DMCC

Risk assessment and risk transfer are fundamental to every commercial contract. In English law, in the absence of any contract to the contrary, liability is traditionally assessed on the basis of fault. Emphasis should be laid on the phrase “in the absence of any contract to the contrary”. A knock for knock clause if one such regime whereby the parties can contractually agree that the liability and/or the losses lie where they fall irrespective of fault of either of the parties and without any further recourse against one another. The English Courts have upheld the validity of the knock for knock liability clause describing it to be “a crude but workable allocation of risk and responsibility” and would normally seek to give effect to the “natural and ordinary” meaning to the agreement between the parties so long as it is not repugnant to basic principle of contract. 

Knock for knock clauses are a common feature in most maritime and offshore contracts adopted in numerous standard form contracts published by BIMCO. This article focuses on the knock for knock clause in the BIMCO Towcon 2008 contract.  The knock for knock clause in a standard BIMCO Towcon appears in Clause 25 which essentially seeks to allocate risk and liability between the parties where each party agrees to bear responsibility for and indemnify the other party for any loss or damage sustained to their respective property i.e. either the tug in the case of the tugowner or the tow in the case of the Hirer, and any injury or death of their own (and their contractors and subcontractors) employees, irrespective of fault. While the rationale behind the knock for knock clause was to protect contractors from accepting liability for a client’s property that might involve significant high risks and to avoid the need of overlapping insurance coverage, and even though the liability regime has developed since 1970s from the time of it’s origin, the primary debate of this regime still focuses on whether the knock for knock regime exempts a party to the contract from gross negligence, material breach of performance of contract or willful misconduct. 

This is particularly a cause of concern in the ship breaking and recycling market where the Hirer will be seen to waive off his rights to claim any damage for damage sustained to the physical property of the tow i.e. the Vessel and/or any other asset that is often towed from one destination to the recycling yard depending upon the condition of the Vessel to sail on her own power or in need of being towed. Such waiver includes but is not limited to pillage of material onboard the Vessel which might be of commercial value at the end destination i.e. the recycling yard where every part of the Vessel is either dismantled or reused. Furthermore, it is important to note that gross negligence is not recognized as a distinct concept with no set defined meaning in English law and is open to the interpretation of the Court from a case to case basis. Parties are only required to observe a minimum level of due diligence in conducting the towage operation based on the precedent established in the landmark judgment of ATurtle [2008] EWHC 3034 and therefore in the absence of a specific provision in the contract must ensure to carefully word such knock for knock clauses in such contracts. Under English law, courts will usually give preference to enforce the contractual terms agreed to between the parties excluding negligence, gross negligence, material breach of contract, consequential losses or willful misconduct provided that the wording used of such exclusion is clear. Such amended clauses normally require the assessment and approval of the tugowners and the Hirer’s underwriters specially in the case of Towcons where the damages suffered may very well be over the cost of the asset. A clearly drafted knock for knock provision coupled with a complimenting insurance cover is therefore vital and needs particular attention when negotiating a towcon and assessing the potential recourses in the event of defaults, negligence, misconduct or material breach of contract amongst other primary terms of contract. 

 

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Myriads of responsibilities and possibilities for ship owners seeking to recycle end-of-life tonnage
By Dr. Kanu Priya Jain, GMS Green Team

For ship owners, it is critical to manage the recycling of end-of-life ships and offshore assets carefully, keeping in mind the relevant national and international regulations and the CSR policy of their company. However, most ship owners lack time and resources to dedicate specifically to such tasks because their main focus is on operations. In recent days, managing end-of-life ships is becoming increasingly complex due to revamped international and national regulatory landscape. Moreover, environmental protection has taken a spotlight amidst the talk of corporate social responsibility towards the environment and climate change. Therefore, ship owners, besides seeking the best possible monetary value for their  end-of-lifeships and offshore assets, are also in need of partners capable of end-to-end management of such projects.

The entire end-to-end management of such projects includes memorandum of agreement between the ship owner, the last voyage owner and the end-buyer, i.e. the ship recycler; the technical management of the ship’s last voyage to the recycling yard; and the safe and environmentally sound management of the ship recycling process with continuous supply of technical expertise and supervision. All these tasks must be undertaken within the purview of a complex mesh of national and international regulatory regimes governing the shipping industry. With such tasks, responsibilities related to legal, technical, regulatory and social must be diligently undertaken by the concerned parties.

In the current market, India, Pakistan, Bangladesh, China and Turkey continue to be the major recycling countries in terms of recycled tonnage volumes. However, within each country many different types of ship recycling facilities co-exist. The facility types can be broadly classified as non-ISO-certified, ISO-certified and Hong Kong Convention (HKC)-compliant. Usually, ship owners are free to choose the type of yard they want their ships to recycle.

Since GMS’ inception over two decades ago, the company has successfully negotiated about 3200 ships for recycling. Our job goes beyond negotiating ships for our principals. We  monitor the recycling process with monthly reports created by our Green Team of dedicated Ph.D. professionals from the moment a ship is sold to our principals till  the completion of the recycling process,  keeping the ship owner informed about and involved in the entire procedure. The decision on critical aspects such as the selection of the recycling yard is also left to the ship owners during initial negotiations. In the past few years, we have seen an increase in demand for the HKC-compliant facilities as more and more ship owners are seeking environmentally conscious options to dispose of end-of-life tonnage and we have been strongly advocating in favor of Responsible Ship Recycling at HKC compliant recycling facilities

Amongst major recycling centers, India is now emerging as a leader of HKC-compliant yards where almost half of the operational yards now have acquired a HKC Statement of Compliance (SOC) issued by reputed (IACS members) classification societies. Also, Turkey, that has recently taken legal steps towards ratifying the HKC, and China, too have several HKC-compliant yards. Interestingly, quite recently (19th Oct 2017) we saw the first recycling yard in Bangladesh receiving a SOC with HKC from classification society RINA. We hope this trend amongst yards to become HKC-compliant keeps growing in all major recycling countries. It will create a fair competition between major recycling regions and increase the options for ship owners seeking the services of ‘green’ yards.

For any questions or comments, please contact our Green Team at: green@gmsinc.net 

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