After a years-long transition period, the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, signed by the 24 contracting states, entered into force on 26 June 2025. This marks the first time that globally binding provisions have been established for safe and environmentally sound ship recycling. The Convention forms a further important legal basis alongside the Ship Recycling Regulation already in force in Europe, and has far-reaching implications for stakeholders along the maritime value chain. This is particularly relevant for shipyards, ship owners, recycling companies and suppliers in the maritime industry, as non-adherence to the new requirements carries considerable compliance and liability risks under civil, administrative and environmental criminal law, and is likely to result in greater enforcement (e.g. through port State controls). At the same time, regulation is opening up new business opportunities – particularly for ship recycling companies.
Background
Global demand for ship recycling is high: By 2032 more than 15,000 ships worldwide will have to be scrapped and recycled. For this reason, international efforts to regulate ship recycling across national borders have been underway for several years. The aim is to promote sustainable recycling in the maritime sector, ensure the controlled handling of hazardous materials such as asbestos, PCBs and heavy metals, and protect ecosystems through binding international guidelines.
These efforts led to the adoption of the Hong Kong Convention (HKC) in 2009 under the auspices of the International Maritime Organisation (IMO), although it was not until 2023 – when the Convention was ratified by Bangladesh and Liberia – that the minimum number of signatory states required for its entry into force was reached. In 2013, the EU adopted Regulation (EU) 1257/2013 (Ship Recycling Regulation – EU SRR), which legally enforces the Convention’s objectives and provisions across all EU Member States, and largely mirrors the provisions of the HKC.
With the HKC now in force, international and European law requirements for ship recycling overlap, creating not only new challenges but also potential business opportunities for ship owners, shipyards and ship recycling companies. That presents an opportunity for shipyards and other companies in particular to establish themselves as certified ship recycling facilities in an shifting market environment. As the need for legally compliant recycling capacity grows, so too will the demand for stakeholders who invested early in infrastructure and certification and can provide recycling and disposal services that meet the new requirements.
Hazardous materials regulations for ship recycling
The main requirements of the HKC and the EU SRR overlap significantly. Specifically, both require that a ship-specific inventory of hazardous materials (IHM) be prepared and kept, and both set similar requirements for ship recycling facilities:
The Hong Kong Convention includes provisions to ensure the safe and environmentally sound recycling of seagoing vessels worldwide, covering their entire life cycle. Responsibility for meeting these provisions lies with ship owners and shipyards as well as ship recycling facilities. In addition, suppliers may also have contractual duties to declare hazardous materials that can lead to indirect obligations along the supply chain.
The internationally binding IMO guidelines, in particular MEPC.379(80), provide further clarification and detail on the Convention’s requirements.
I. Scope of the Convention
The HKC’s material scope extends to all seagoing vessels with a gross tonnage (GT) of 500 or more, provided they are operated under the flag of a contracting state. The term “ship” used in Article 2 HKC is broadly defined and generally covers all types of vessels, including floating platforms and equipment. State-owned or operated ships such as warships or other naval vessels are expressly excluded. The Convention also applies to all ship recycling facilities located within the sovereign scope of a contracting state (see Article 3 HKC).
So far 24 countries, including major ship recycling nations such as Bangladesh and Pakistan, have ratified the Convention. Because approximately 60% of the world’s merchant ships are registered in a contracting state, the convention effectively has a global reach.
II. Obligations for economic actors
Both the HKC and the EU SRR include significant obligations regarding the declaration of hazardous materials on the one hand, and shipbreaking on the other.
1. Shipyards and ship owners – inventory of hazardous materials
The main obligation faced by shipyards and ship owners is that they must compile, maintain and update an inventory of hazardous materials (see Regulation 5, Annex to HKC). After the ship is taken out of service, the ship owner must also transfer the ship to a ship recycling facility authorised and certified under Regulation 8, Annex to HKC.
The inventory of hazardous materials must be compiled for new ships when they are built and for existing ship already in operation. The inventory must by updated if the ship is refitted, or if changes are made to its structure or equipment. In practice, shipyards will usually have to compile the inventory of hazardous materials for new ships, and ship owners will have to compile it for ships in operation.
The inventory is specific to each ship and documents the ship’s compliance with the prohibitions and restrictions set out in the HKC with regard to the use and declaration of hazardous materials. It has three parts, each requiring different levels of information:
Part 1 of the inventory of hazardous materials is binding. It must list all hazardous materials contained in the ship’s structure or equipment that are either prohibited or restricted. It must also identify the approximate quantity of the materials in question. Appendices 1 and 2 to the Convention set out what materials this concerns.
Note: Annexes I and II to the EU SRR also include a list of hazardous materials that currently covers more materials than the Hong Kong Convention does. If the ship is to be operated within the scope of the EU SRR, a further hazardous materials survey is required.
- By contrast, Parts 2 and 3 of the inventory of hazardous materials do not contain legally binding requirements. Instead, they serve as a recommendation to identify and declare specific waste and stored products still on board the ship before the recycling process begins. This recommendation is intended to facilitate safe handling of these materials later in the recycling process.
2. Ship recycling companies – requirements for recycling facilities
Ship recycling companies also have some direct shipbreaking obligations under the HKC. In addition to dismantling retired ships in a safe and environmentally sound manner, these companies also ensure the proper management and disposal of hazardous materials.
Regulation 8, Annex to the HKC, specifically requires them to obtain authorisation from the flag state. Authorisation is subject to compliance with the requirements of the HKC, in particular with regard to the environment, occupational health and safety, and waste/hazardous materials management. A ship flying the flag of a contracting state can only be recycled in a ship recycling facility that meets these requirements.
A similar provision can be found in Article 6(2), letter (a) EU SRR, according to this which ships within the scope of the EU SRR can only be recycled at facilities that are included in the European list of ship recycling facilities (European List). Recycling facilities from both Member States and non-Member States that meet the requirements of Article 13 EU SRR can be included in the European List.
- The company must prepare a Ship Recycling Facility Plan for its ship recycling facility pursuant to Regulation 18 to the HKC and update it regularly. The purpose of this is to combat the poor conditions in ship recycling facilities with respect to occupational health and safety and environmental protection. Among other things, the Plan must include site descriptions, procedures for handling hazardous materials, staff training and environmental monitoring and protection measures.
- Pursuant to Regulation 9 Annex to the HKC, a ship-specific Ship Recycling Plan must be developed by the recycling company and approved by the responsible flag state. In particular, the plan must include the monitoring of the inventory of hazardous materials as well as the company’s technical measures and planned recycling methods.
However, the requirements for inclusion in the European List pursuant to Article 13 EU SRR are in some cases stricter and more extensive than the requirements of the HKC, as the former in particular stipulate additional obligations to provide evidence, extended lists of hazardous materials and a formal listing and control procedure conducted by the European Commission. For this reason, it cannot be assumed that recycling plants that are only authorised under the HKC will automatically receive authorisation to be included in the European List. Companies that have their plant certified under the HKC in future will likely also have to go through a separate approval procedure under the EU SRR and meet the more stringent EU requirements, insofar as they fall within the scope of the EU Regulation.
Other chemicals law requirements
Alongside the ship-specific hazardous materials requirements set out in the HKC and EU SRR, stakeholders should also check to what extent they need to adhere to other chemicals law requirements when declaring hazardous materials that may overlap with hazardous materials requirements for ship recycling. Key regulations to consider include:
- The REACH Regulation (Regulation (EC)) No 1907/2006) (e.g. for the use of anti-fouling coatings containing biocides on ships’ hulls)
- The F-Gas Regulation (Regulation (EU) No 517/2014) (e.g. for refrigeration and air conditioning systems on ships)
- The CLP Regulation (Regulation (EC) No 1272/2008) (e.g. for lubricating oils and fire extinguishing agents)
- The RoHs Directive (Directive 2011/65/EU) (e.g. for navigation systems and lighting)
- The POP Regulation (Regulation (EU) No 2019/1021) (e.g. for cables, seals and electrical components)
Materials that contain perfluoroalkyl and polyfluoroalkyl substances (“PFAS”) are relevant not only to the inventory of hazardous materials within the meaning of the EU SRR (certain PFAS such as perfluorooctane sulfonic acid are already listed in Annex I to the EU SRR), but are also subject to restrictions under the REACH Regulation and the POP Regulation. Current developments also need to be taken into consideration here: A draft amendment to the REACH Regulation is expected in 2025 that will include stricter requirements for the use of PFAS (https://www.gleisslutz.com/en/news-events/know-how/pfas-restriction-proposal-eu-level). It is also conceivable that additional PFAS will be incorporated into the EU SRR.
New risks and sanctioning options
With the Hong Kong Convention having come into force on 26 June 2025, ship owners, shipyards, ship recycling facilities and suppliers now risk significant penalties and fines if they fail to comply with the new requirements.
For example, if ship recycling facilities do not meet the technical and organisational requirements, they risk losing their authorisation under the HKC – as well as being removed from the European List. Port State controls may also include measures with financial consequences: If, for example, a ship is operated without a valid inventory of hazardous materials, Article 19(2) Directive 2009/16/EC provides for the ship to be detained in port – which can involve considerable cost. If the ship is detained, it may not leave port until the non-compliance with hazardous materials law has been rectified or the competent authority has issued an action plan to address this. The ship may be detained indefinitely as there is no upper time limit. The penalty and criminal provisions of general environmental law may also be brought to bear. In Germany, the construction or operation of a ship recycling facility without the required authorisation pursuant to section 62(1), no. 1 Federal Emissions Control Act (Bundes-Immissionsschutzgesetz) may be punished with a fine of up to EUR 50,000. Operating a facility without authorisation may even lead to criminal prosecution under section 327(2) Criminal Code (Strafgesetzbuch, “StGB”), carrying a penalty of up to three years’ imprisonment or a fine. In addition, violations of the rules on chemicals under the REACH Regulation, the CLP Regulation and the F-Gas Regulation may be sanctioned pursuant to the revised sections 26(2) and 27 Chemicals Act (Chemikaliengesetz, “ChemG”) in conjunction with the Chemicals Prohibition Ordinance (Chemikalien-Verbotsverordnung) or result in the confiscation of the contaminated product under section 27d ChemG in conjunction with section 74a StGB.
The EU SRR and HKC require contracting states to impose criminal penalties for violations of ship recycling rules in accordance with their national laws. In many European countries, non-compliance with hazardous materials laws and ship recycling regulations already carries significant penalties – in France, this can mean fines of up to EUR 100,000 or imprisonment, for example. There are currently no comparable regulations in Germany. Although existing criminal statutes, such as section 326 StGB and section 18a Waste Shipment Act (Abfallverbringungsgesetz), provide for prison sentences of up to five years or fines, they are currently unlikely to apply to the obligation to recycle ships falling under the EU SRR or HKC only in approved ship recycling facilities and in accordance with prescribed procedures.
However, based on the provisions of Article 3(2), letter h in conjunction with Article 28 Directive (EU) 2024/1203, Germany is likely to enact a corresponding criminal law provision by no later than the end of the transposition period on 21 May 2026.
Suppliers are also affected, as they may be contractually liable to shipyards or ship owners if their material declarations are incomplete or inaccurate. Possible consequences include recourse payments in the case of declaration violations that lead to fines for shipyards and ship owners or contractual penalties if a ship becomes unfit for service because a hazardous material was installed in violation of regulations. The damage to be compensated will likely relate primarily to the costs arising from ship detention and the fines payable to the Member States incurred by ship owners and shipyards due to missing or incorrect hazardous materials information. In extreme cases, this may even result in the complete rescission of the contract between the supplier and the ship owner or shipyard, e.g. if the product contains hazardous materials such as asbestos that are generally prohibited on new ships under the EU SRR and HKC.
Conclusion and outlook
The entry into force of the Hong Kong Convention on 26 June 2025 for the first time creates a globally standardised legal framework for the recycling of ships – with considerable impact along the entire supply and disposal chain. Ship owners, shipyards, ship recycling companies, and suppliers now face new obligations, along with a higher risk of liability and sanctions. The simultaneous application of European and international regulations also raises issues of how the regulations overlap and how they are to be implemented, for example with regard to differing lists of hazardous materials, different certification requirements and the authorisation of ship recycling facilities. By implementing the right compliance measures early on, companies can avoid the considerable cost of creating and updating hazardous materials inventories and certifications, which also helps prevent disruptions to their operations and potential violations of the EU SRR and the HKC. Stakeholders must also check the extent to which they need to comply with the other chemical regulations when declaring hazardous materials.
However, the new regulations also create opportunities and open up new business areas, especially for companies that are already engaged in ship recycling or are considering expanding their business in this area. The new rules restrict recycling to ship recycling facilities certified and authorised under the EU SRR or the HKC, giving authorised facilities a clear competitive edge over uncertified ones that are only allowed to operate outside the scope of the aforementioned regulations, i.e. they are only allowed to recycle and dismantle ships from a state that is not party to the HKC or the EU SRR.
Companies should therefore review their internal processes, contractual structures and documentation obligations early on to ensure that they comply with the new requirements of the Convention and – if they have not already done so – with the longstanding requirements of the EU SRR. Only then can they be sure that their operations in the international ship recycling market will remain legal in the future.
Forward
