In a nutshell: This year, the European Union updated the existing directive on the protection of the environment under criminal law and made it significantly stricter. Directive 2024 contains new requirements for the criminal enforcement of the applicable regulations regarding the scrapping of ships, which the member states must implement by 21 May 2026. Previous uncertainties as to whether and under what circumstances the scrapping of ships can lead to criminal prosecution should be resolved with the implementation of Directive 2024. This newsletter provides you with an overview of the upcoming changes to the legal situation. In particular, the explicit criminal liability of ship recycling at unauthorized shipyards, the threat of fines and the possibility of skimming off profits are all new.

What applies today?

Currently, numerous environmental offenses are covered by the regulation on the shipment of waste from 2006 (REGULATION (EC) No 1013/2006) and the national implementation of the directives on the protection of the environment under criminal law from 2008 (DIRECTIVE 2008/99/EC) and 2009 (DIRECTIVE 2009/123/EC) and implemented in Germany by the Waste Shipment Act.

In order to establish minimum standards for the protection of people and the environment in Europe, the regulation on the recycling of ships (REGULATION (EU) No 1257/2013, "Ship Recycling Regulation") has been in force since 2013. This regulation governs the procedure to be followed when scrapping ships. According to this regulation, ships may only be recycled at shipyards certified by the European Union. Shipyards in India, Pakistan and Bangladesh, which scrap the majority of the world's old tonnage, have not yet been certified.

Violations of the Ship Recycling Regulation had previously not been expressly criminalised pursuant to German law. However, criminal investigations are currently underway in Germany against people involved in the sale of ships that were scrapped in the Far East after the sale. As the current legal situation is unclear, a court decision on this is eagerly awaited.

What will change?

Directive 2024 contains stricter rules on the prosecution of offenses against the environment and replaces the previous directives from 2008 and 2009.

The number of criminal offenses contained in Directive 2024 has more than doubled and the threat of sanctions has been significantly increased. For the first time, the recycling of ships at shipyards that are not certified by the European Union is to be explicitly punishable (Art. 3 II h of the Directive 2024).

Upon implementation of the new rules, natural persons who violate the Ship Recycling Regulation will face a prison sentence of up to five (5) years. The national states in Europe can also implement a higher maximum penalty. Aiding and abetting these offenses will also be punishable. In addition, natural persons may also be banned from holding management positions and public offices.

In addition to these sanctions against natural persons, sanctions against legal entities could be imposed. The current fine for environmental offenses of up to EUR 10,000,000 under German law is to be significantly increased by up to 5% of the total global annual turnover of the company benefiting from the offense, up to a maximum of EUR 40,000,000. Moreover, any financial benefits of a transaction could be confiscated and an obligation to remedy the resulting environmental damage might be imposed.

Directive 2024 obliges all member states to adapt their respective criminal laws in line with Directive 2024 within two (2) years or at the latest by May 21, 2026.

In addition to the changes described above, the "Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships" ("HKC") will come into force on June 26, 2025. The Ship Recycling Regulation and its national implementation by the relevant EU member states and the HKC will coexist in the future. It is important to note that a shipyard certified under the HKC may not necessarily fulfil the requirements of the Ship Recycling Regulation. Criminal prosecution may therefore still follow even in cases where a ship was recycled in accordance with the HKC.

Conclusion

Once Directive 2024 has been implemented, the risk of criminal prosecution for violations of the Ship Recycling Regulation is expected to increase significantly. This may have a major impact on the current practice of ship scrapping on Asian beaches.

Companies and their decision makers are strongly advised to keep an eye on the status of the new criminal laws and to take them into account when planning ship sales.

If you have any questions, please get in touch with your contact person at EHLERMANN RINDFLEISCH GADOW or with Maje Tode or Hanno Geißler.