Seller sentenced to prison for assisting with attempted last voyage.

For a global shipping industry with increased focus on ESG compliance, a recent judgment from a city court in Norway is a timely reminder of the risks involved when engaging in scrapping of vessels, not only for shipowners as sellers, but also for insurers, classification societies, brokers, lawyers and other parties involved in such transactions. A Norwegian shipowner sold a vessel in layup in Norway to a well-known scrap buyer, and the shipowner was sentenced to six months in prison for assisting buyers with an attempt to illegally export the vessel for scrapping in Pakistan.

According to the Norwegian Pollution Control Act and the Norwegian Waste Regulation (based on corresponding EU rules), the export of vessels for scrapping outside the OECD countries requires permission from the Norwegian Environment Agency. As a matter of practice, the Environment Agency does not grant permission for scrapping of vessels in Pakistan, India and Bangladesh, since scrapping in these countries, by way of beaching or otherwise, often involves poor working conditions and inadequate procedures for handling of environmentally hazardous waste.

The vessel “Tide Carrier” (later renamed “Harrier”) left port near Haugesund in Norway in February 2017 and suffered an engine breakdown on its way along the Norwegian coast. The explanation given to the Norwegian authorities was that the vessel was going to Dubai for a conversion, before the start of a charterparty in Africa. However, the insurance certificate on board, together with explanations given by the crew, indicated that the vessel was headed for scrapping in Pakistan. No application for export permission had been submitted to the Norwegian Environment Agency.

The vessel was previously owned by a Norwegian company, of which the accused in the subsequent criminal matter, Mr Eide, was the sole owner and general manager. The vessel had been out of operation and laid up in Norway since 2007. In 2015, the vessel was sold to a Singapore company, Wirana, an entity routinely involved with buying vessels for scrapping. Wirana was the company in charge of the voyage when the vessel suffered the engine breakdown in February 2017.

The court found that Wirana was in fact attempting to export the vessel for scrapping in Pakistan without permission from the Norwegian Environment Agency. In October 2020, Wirana accepted a fine of NOK 7 million from the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim) for attempted illegal export of the vessel.

Mr Eide, as the sole shareholder of the company which had sold “Tide Carrier” to Wirana two years earlier, was indicted of having assisted the vessel and its new owners with departure from Norway. The actual sale to Wiarana was not considered a criminal offence – the offence was Mr Eide’s practical assistance to Wirana in making the vessel ready for its voyage to Pakistan. Thus, Mr Eide was charged with aiding (as an accomplice) the attempt to sail the vessel for scrapping outside the OECD without permission from the Norwegian Environment Agency.

The district court found it proven that Mr Eide had assisted physically in making the vessel ready for departure from Norway to Pakistan: An employee in one of Mr Eide’s companies had, for example, obtained bids from diving companies for repair of damage to the hull of the vessel, and obtained quotes for bunker fuel, lubricating oil and tugboat assistance, etc. This employee was also present at a port state control on the new owner’s request.

The case documents show that preparations for the vessel’s departure was a planned cooperation between Mr Eide and the new owner. It was also emphasised that Mr Eide had worked in the shipping business his entire career, and that he was aware that the new owner was one of the world’s largest buyers of vessels for scrapping. Further, the court had no doubt that the accused knew that there was every probability that scrapping would take place in India or Pakistan, and that no permission had been given from the Norwegian Environment Agency. After an overall assessment of the evidence, the court found it proven that Mr Eide – at least – knew that there was every probability that a new owner would scrap the vessel in a country outside the OECD. Mr Eide was sentenced to six months in prison.

The company which had sold the vessel had to suffer confiscation of parts of the sales proceeds, as these were found to result from a criminal act. The district court estimated the difference between the vessel’s actual sales price and what the company would have received if the vessel had been sold legally, to be at least NOK 3 million. The legal alternative was calculated based on export to a shipyard in Turkey (an OECD country). Due to the company’s weak financial position, the amount to be confiscated was reduced to NOK 2 million.

It should be noted that the district court’s judgment has been appealed.

This case is the first where someone has been sentenced for attempted illegal scrapping of vessels under the Norwegian Waste Regulation. In line with the corresponding EU rules, there are two parallel regulations that may affect attempts to scrap vessels illegally in Norway. The Waste Regulation only apply to export of waste out of Norway, i.e. to vessels located in Norway before departure to destinations for illegal scrapping, irrespective of the flag of the vessel. The alternative regulation is the so-called Recycling Regulation, where the flag of the vessel is decisive: Under the Recycling Regulation, EU/EEA-flagged vessels, including Norwegian-flagged vessels, must be scrapped in one of the yards included in the EU’s list of approved yards, irrespective of where the vessel was located prior to the scrapping.

It is interesting to note that Økokrim initially also charged Wirana’s insurance agent as an accomplice to attempted environmental crime due to the fact that the insurance agent had provided the insurance for the vessel’s voyage to Pakistan. The title of the insurance was “Break-Up Voyage”, and it was stated that the vessel was supposed to sail to Gadani in Pakistan. In addition, the authorities had initially charged a maritime-technical consultancy company which certified that the vessel was seaworthy for its voyage to Pakistan. However, these charges were dropped before an indictment was issued. It is thus still not clear to what extent insurance agents, consultants, classification societies, brokers and other advisors can be sentenced for complicity in environmental crimes under the Waste Regulations.

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