Shipbreaking (also referred to as ‘Ship Breaking’) – the dismantling of end-of-life vessels for scrap – is a significant yet controversial industry in Pakistan. Centered at Gadani Beach in Balochistan, once the world’s busiest shipbreaking site, this sector has long fueled Pakistan’s steel supply and employment. However, it also navigates a complex web of national laws and international regulations. Environmental protection statutes, hazardous waste rules, maritime laws, and labor regulations all converge on shipbreaking activities. Meanwhile, global treaties like the Basel Convention and emerging regimes such as the Hong Kong Convention impose additional obligations. This analysis provides a thorough breakdown of Pakistan’s shipbreaking legal framework – from domestic courts to international conventions – to inform ship owners, insurers, maritime law firms, and regulators about compliance requirements and legal risks.
1. National Legal Framework for Shipbreaking in Pakistan
Pakistan’s domestic laws governing shipbreaking span environmental regulation, hazardous waste controls, maritime law, and labor safety standards. Over the years, courts have also weighed in, shaping the legal landscape through key judgments. Below is an overview of the main national legal instruments and precedents:
Environmental Protection and Hazardous Waste Controls:
Shipbreaking operations in Pakistan are subject to the Pakistan Environmental Protection Act, 1997 (PEPA). This federal law – supplemented by provincial environmental regulations after the 18th Constitutional Amendment – provides the backbone for environmental oversight. Notably, Section 15 of PEPA explicitly prohibits the import, disposal, or handling of hazardous waste without proper authorization, aligning domestic law with Pakistan’s Basel Convention obligations. End-of-life ships often contain hazardous materials (asbestos, PCBs, waste oils), classifying them as “hazardous waste” cargo. Under PEPA and its rules, any ship intended for scrapping must obtain environmental clearances. Pakistan’s National Hazardous Waste Management Policy, 2022 further strengthens this framework by establishing measures for controlling transboundary movement of toxic wastes and ensuring environmentally sound disposal. In practice, this means shipbreakers are expected to conduct Environmental Impact Assessments (EIA) for their yard operations and adhere to National Environmental Quality Standards to minimize pollution of coastal soil, air, and water.
Maritime and Admiralty Laws:
Because shipbreaking involves vessels, Pakistan’s maritime statutes also come into play. The Merchant Shipping Ordinance, 2001 incorporates international maritime standards (like MARPOL) into domestic law, and penalizes marine pollution by ships in Pakistani waters.For example, Section 556 of this Ordinance prohibits any ship (foreign or local) from discharging noxious substances in Pakistani coastal areas, providing legal grounds to penalize pollution from shipbreaking (such as oil spills during dismantling). Pakistan’s admiralty jurisdiction – originally under the Admiralty Jurisdiction of High Courts Ordinance, 1980 (replaced by the Admiralty Courts Act, 2017) – allows claimants to arrest vessels for maritime claims. However, once a ship is beached and cut apart, it ceases to be a “vessel” in admiralty law. The Sindh High Court in Sphinx Shipping Agency v. M.V. Justice (1997) held that no maritime lien or arrest can exist on a ship that has been completely dismantled. This precedent means creditors or suppliers must act before a ship’s demolition is finished, or else lose their maritime claim against the vessel. Additionally, Pakistan’s Carriage of Goods by Sea Act 1925 and Marine Insurance Act 1963 govern any disputes over cargo or insurance during a ship’s last voyage to the scrapyard, though such issues are less common in scrap contexts.
Labor and Safety Regulations:
On paper, shipbreaking workers in Pakistan are protected by general labor laws – such as the Factories Act (applicable via provincial adoption) and the Employees’ Social Security laws – as well as occupational safety provisions. However, enforcement in Gadani has historically been lax, leading to hazardous working conditions. The National Commission for Human Rights (NCHR) has flagged that core labor standards were neglected at Gadani, calling for stronger labor inspections and recognition of shipbreaking as a formal industry . A Supreme Court ruling even directed the abolition of abusive contract labor systems, urging that workers be allowed to unionize. Currently, the Balochistan Development Authority (BDA) oversees the Gadani yard and issues plot leases to shipbreaking companies, which come with safety and environmental conditions. For instance, official protocols require that before cutting begins, each beached ship must be certified “gas-free” and cleared of all flammable oil residues.This rule – enforced after deadly accidents – compels breakers to remove fuel, gas, and other combustibles to prevent explosions. Non-compliance can lead to provincial labor department penalties or suspension of yard operations. In practice, though, oversight remains a challenge, and much depends on ad-hoc inspections by Balochistan’s labor and environmental officials.
Key Judicial Precedents in Pakistan:
Pakistan’s courts have adjudicated numerous shipbreaking-related disputes, shaping policy on taxation, regulation, and liabilities. A landmark case was Federation of Pakistan v. Noori Trading Corp (1992, Supreme Court), where the Court upheld the imposition of federal excise duty on scrap steel recovered from shipbreaking . The judgment confirmed that scrap steel plates from dismantled ships were liable to tax once cleared for local use, cementing the government’s right to revenue from this industry. In Government of Balochistan v. Shershah Industries (1992, Supreme Court), the Court likewise sustained local government octroi/entry taxes on shipbreaking activities, validating Balochistan’s authority to levy fees on ships beached at Gadani. Together, these early 1990s cases established that shipbreakers must contribute taxes and cannot evade duties by arguing technicalities. More recently, courts have also enforced regulatory compliance: In Usman Ship Breakers v. Government of Balochistan (2024), the Balochistan High Court upheld the cancellation of a Gadani plot lease because the shipbreaker left the plot idle without dismantling a ship for over four months, violating yard rules. This case underscores that the yard authority can repossess plots if operators do not continuously utilize them, reflecting a strict regulatory environment to prevent speculation or unsafe abandonment of vessels. Conversely, courts have protected shipbreakers from arbitrary government actions: In Muhammad Anwar v. Pakistan (2023), a shipbreaking company was awarded damages after a purchased ship sank and tax officials unreasonably impeded its salvage and scrapping. The Sindh High Court found the authorities’ actions ultra vires (beyond their powers) and in bad faith, ordering compensation for the business loss. This outcome illustrates the judiciary’s willingness to check administrative overreach and ensure that officials follow due process when regulating the industry. Pakistani admiralty courts have also clarified foreign claimants’ rights: In A&B Petrol Urunleri v. M/V Nazlican (2022), a supplier sued for unpaid fuel delivered to ships that were sold for scrap. The High Court dismissed the suit, ruling that once ownership transferred for demolition, the ships were no longer “beneficially owned” by the original debtor – thus an admiralty claim was not maintainable. This highlights the complexity of asserting claims when ships change hands to cash buyers or scrap yards. Overall, these cases show Pakistan’s legal framework balancing strict enforcement of regulations and taxes with protection of businesses’ rights, all under the supervision of the courts
2. International Legal Framework Impacting Pakistani Shipbreaking
Pakistan’s shipbreaking industry is heavily influenced by international conventions and regulations on environmental protection, waste shipment, and maritime safety. As end-of-life vessels frequently originate from abroad, global treaties govern how these ships can be exported to and dismantled in Pakistan. Key international frameworks include the Basel Convention, the European Union’s waste shipment rules, the Hong Kong Convention, and other maritime and labor agreements:
Basel Convention: Hazardous Waste Exports and Loopholes
The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes (1989) is the principal global treaty regulating the export of hazardous waste. Pakistan ratified Basel in 1994, committing to its prior informed consent regime for hazardous waste imports .In Basel’s terms, an end-of-life ship containing toxic materials (like asbestos, oils, heavy metals) is considered “hazardous waste.” Thus, exporting such a ship to Pakistan requires notification to and consent from Pakistani authorities, and the waste must be managed in an environmentally sound manner. Basel also obliges Pakistan to ensure it has adequate capacity to handle the hazardous wastes it imports – a point of concern given the limited waste treatment facilities at Gadani. In 2019, the Basel Ban Amendment took effect, forbidding OECD/EU countries from sending hazardous waste to developing countries like Pakistan. Despite these rules, loopholes have historically allowed ships to reach South Asian beaches. One common practice is declaring a vessel as a “ship for recycling” and sailing it to Gadani under its own power, rather than labeling it as a waste shipment. This exploits ambiguities: until the ship is actually beached and dismantled, some exporting states don’t classify it as waste, evading Basel oversight. Additionally, ownership transfers to cash buyers and flagging-out (changing a ship’s registry to a flag not bound by strict waste export rules) often occur just before scrapping. These tactics mean that many vessels sidestep the Basel Convention’s intent. Pakistan, as an importing state, theoretically should refuse entry to illegal waste shipments, but enforcement has been challenging. Indeed, international observers note that illegal traffic of end-of-life ships to South Asia continued despite Basel, because culpable shipowners “very knowingly” exploit regulatory gaps.To address this, Pakistan has begun tightening its import controls – for example, requiring detailed hazardous material inventories for incoming vessels and insisting on NOC (No Objection Certificates) from environmental authorities before beaching. Nonetheless, Basel’s implementation remains a work in progress: its broad environmental mandate often collides with the economic incentive for developing countries to welcome scrap steel, even if laden with toxic substances.
European Union Waste Shipment Regulation (and Ship Recycling Rules)
Many aging ships dismantled in Pakistan originate from European owners or flags. The European Union’s Waste Shipment Regulation (WSR) incorporates Basel Convention principles and the Ban Amendment into EU law – meaning that, in theory, EU countries cannot export hazardous waste (including end-of-life ships) to Pakistan. In practice, however, the EU devised a separate regime for ship recycling. In 2013, the EU adopted the Ship Recycling Regulation (SRR), which excludes EU-flagged vessels above 500 GT from the general waste shipment rules . Under the SRR, EU-flag ships at end-of-life must be recycled in approved facilities that meet strict environmental and safety criteria. To date, no Pakistani yard (and indeed no South Asian beaching yard) is on the EU’s approved list, so a ship still flying an EU flag cannot legally be scrapped at Gadani. This should have curtailed the flow of European ships to Pakistan. However, loopholes and evasions persist. European shipowners often sell their vessels to intermediaries and change the flag to a non-EU registry just before the final voyage, thereby avoiding the SRR’s requirements. This flag-switching tactic removes the ship from EU jurisdiction, after which it can be sailed to Pakistan as an ordinary export. European regulators have begun cracking down on such circumvention. For example, a Dutch court fined the company Seatrade for illegal waste shipment after it sent vessels to South Asian yards in contravention of the WSR. In a notable Norwegian case, authorities imposed a NOK 7 million fine on a scrap dealer (Wirana Shipping) for attempting to export the vessel Tide Carrier (renamed Harrier) to Gadani, Pakistan – a direct violation of Norway’s laws implementing the Basel ban on export of hazardous waste to countries lacking “satisfactory waste management systems”. These enforcement actions send a clear signal that EU countries view the beaching of ships in Pakistan as an unlawful evasion of environmental law. Still, the overall effectiveness of the WSR/SRR in limiting toxic ship exports has been mixed. While some high-profile prosecutions have been pursued, dozens of EU-linked ships each year continue to end up on Pakistani and Bangladeshi beaches via reflagging and grey channels. Environmental NGOs argue that the EU “can’t have it both ways” – it cannot champion a Green Deal and Basel compliance while simultaneously allowing loopholes for shipowners. As pressure mounts, we may see more EU enforcement or even bilateral agreements. (The EU has floated the idea of recognizing certain upgraded yards in India under the SRR, but similar consideration for Pakistan is unlikely until Gadani’s standards markedly improve.) For ship owners and insurers, the key takeaway is that any end-of-life vessel with EU connections faces strict scrutiny and potential legal liability if sent to Pakistan in breach of waste shipment rules.
Hong Kong Convention (HKC) and its 2025 Enforcement
The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009 (HKC) is a treaty specifically designed to regulate ship recycling. It sets global standards for how ships should be recycled, focusing on safety of workers and reduction of environmental harm. HKC was adopted under the IMO, but will only enter into force on 26 June 2025 – now that requisite conditions were met with recent ratifications . Importantly, Pakistan became a party to the Hong Kong Convention in December 2023, joining other major shipbreaking nations (India and Bangladesh) in finally ratifying the treaty.This development means that by 2025, Pakistan is obligated to implement HKC standards at Gadani and any other recycling facilities. The HKC mandates that recycling yards have an approved Ship Recycling Plan for each vessel, adequate infrastructure (e.g. impermeable floors, waste handling systems rather than simple beaching), proper removal and disposal of hazardous materials, and occupational safety measures including training and protective equipment. It also requires ship owners to provide an Inventory of Hazardous Materials (IHM) to the yard prior to dismantling. For Pakistan’s under-equipped yards, compliance will be a significant challenge. To date, unlike some Indian yards that upgraded their facilities, Gadani’s owners have made “few moves, if any,” to improve infrastructure to HKC levels. Without upgrades, Pakistan risks losing business to competitors who achieve HKC certification. Indeed, industry analysts warn that Gadani could become “virtually redundant” as a recycling destination if it fails to adapt, especially as global shipowners come under growing pressure to choose safer, greener yards. Ironically, the HKC’s entry into force also raises a legal conundrum: how it interacts with the Basel Convention. Basel treats end-of-life ships as hazardous waste, whereas the HKC treats them as ships to be recycled under a separate regime. There is concern that once HKC is in force, ship-exporting countries might favor it over Basel, potentially undermining Basel’s stricter controls (a scenario sometimes termed a regulatory conflict). Recognizing this, Pakistan – along with Bangladesh, India, Norway and major shipping organizations – has urged the IMO to resolve inconsistencies between the HKC and Basel. One conflict is definitional: under Basel a ship’s hull is “waste”, but under HKC (for a Party that has also adopted Basel’s Ban) that same ship might be allowed for recycling under certain conditions. The worry for businesses is whether dual compliance is needed or if one convention’s rules trump the other’s. It remains to be seen if future guidance will clarify this. On balance, the Hong Kong Convention’s enforcement is expected to improve conditions in Pakistan by pushing regulators to modernize Gadani. It should bolster worker safety and waste handling (complementing Basel’s goals), but there’s also a possibility that some states or owners will use HKC compliance as a justification to sidestep Basel’s outright ban on hazardous exports. Shipowners and cash buyers dealing with Pakistani yards in 2025 onward must ensure the chosen yard has a Hong Kong Convention Statement of Compliance or certification, or they could face rejection by classification societies and negative publicity. For Pakistan’s part, successful HKC implementation – audited by the IMO – could eventually pave the way for recognition under frameworks like the EU’s, re-opening access to EU-flagged tonnage if yards improve.
Other Relevant International Conventions (MARPOL, ILO, etc.)
Beyond Basel and the HKC, several other international agreements shape the norms for shipbreaking in Pakistan:
- MARPOL (International Convention for the Prevention of Pollution from Ships): MARPOL isn’t directly about ship recycling, but its regulations on the disposal of oils, noxious liquids, garbage, and air pollution from ships apply until a vessel is fully dismantled. Under MARPOL (enforced in Pakistan via the Merchant Shipping laws), ships must offload residual fuel, sludge, and hazardous materials at proper reception facilities rather than dumping them at sea or on the beach . This means a ship arriving for scrapping should, in theory, arrive cleaned of oils or with arrangements to safely remove and dispose of them ashore. Violations – such as intentional dumping of residues before beaching – can lead to penalties. Additionally, the London Convention 1972 (on prevention of marine pollution by dumping) and its Protocol would prohibit simply scuttling a ship or offloading its waste into the ocean near Gadani. Adherence to these maritime pollution treaties is crucial for insurers (P&I Clubs) as well, since an oil spill during scrapping can trigger substantial liability claims.
- ILO Conventions and Safety Guidelines: The International Labour Organization (ILO) has developed standards relevant to shipbreaking, focusing on worker rights and safety. While there is no ILO Convention specific to ship recycling, general conventions on occupational safety and health (OSH) and labor inspections apply. Pakistan has ratified ILO core conventions on labor rights and some OSH-related conventions (e.g., the Labor Inspection Convention). The ILO, along with IMO and Basel Convention Secretariat, also issued non-binding “Safety and Health in Shipbreaking” Guidelines (2004) tailored for Asian countries .These guidelines outline best practices for employers: proper training, provision of personal protective equipment, asbestos abatement procedures, emergency response plans, etc. They effectively form an internationally accepted framework to prevent accidents and occupational disease in shipbreaking .As the 2016 Gadani disaster showed, failure to follow safety protocols (like cleaning gas tanks) can be catastrophic .With Pakistan’s HKC ratification, many of these ILO guidelines will become part of the mandatory yard standards. Moreover, conventions such as the ILO Asbestos Convention (1986), if ratified by Pakistan, would require strict controls on handling and disposing of asbestos from ships – a key hazard in older vessels. Pakistan’s participation in the ILO means it faces international scrutiny on these issues, especially after major accidents. The presence of unions like the National Trade Union Federation (NTUF) in Gadani, which is affiliated with IndustriALL Global Union, also ties local labor conditions to international labor rights campaigns In summary, ship owners and contractors operating in Pakistan must heed not only local labor laws but also international labor standards, as non-compliance can lead to reputational damage and pressure from global unions or even liability under home-country laws (for instance, a UK or EU-based company could be sued at home for negligence if workers are injured due to knowingly unsafe practices abroad).
3. Legal Risks & Disputes Involving Foreign Parties in Pakistan’s Shipbreaking
Shipbreaking in Pakistan often involves cross-border transactions – foreign shipowners selling vessels, international cash buyers, and foreign insurers underwriting the risks. This gives rise to legal disputes that span jurisdictions. Understanding these risks is crucial for shipowners, P&I clubs, and scrap dealers engaged with Gadani.
Foreign Enforcement of Hazardous Waste Laws: A prominent risk for shipowners is getting caught by regulators in their home country for sending ships to Pakistan in violation of waste export laws. Several precedent-setting cases in Europe illustrate this. The Netherlands prosecuted the shipping company Seatrade for illegally sending vessels to South Asian breakers in breach of the EU Waste Shipment Regulation, resulting in fines and a temporary ban on vessel sales . In Norway, as noted earlier, authorities investigated and penalized parties involved in the attempted export of the Tide Carrier/Harrier to Gadani. Similarly, Belgian and UK environmental authorities have scrutinized ship exports to Gadani when improper handling of hazardous materials was suspected. These cases typically involve shipowners (or their directors) as defendants, along with intermediaries (cash buyers). The common legal challenge is the classification of the ship as “waste”: if a court finds the ship was destined for scrap when sold, the seller can be held liable for exporting hazardous waste without notification. For shipowners, this means that a paper trail of intent – emails, sale documents – can become evidence. Insurers and P&I clubs also need to be wary; some have clauses excluding coverage if the ship disposal violates environmental laws. In sum, foreign companies face criminal or civil liability at home for what happens in Pakistan, even if Pakistani law is permissive, due to extraterritorial environmental regulations.
Contractual and Commercial Disputes: Not all legal issues are environmental – many are commercial. The sale of a ship for scrapping is usually done via a “Cash Buyer” contract (often under English law or Singaporean law). Disagreements can arise over the delivered condition of the vessel, late delivery, or sudden changes (for instance, if new regulations in Pakistan halt imports temporarily, a buyer might seek to cancel the deal). Such disputes often end up in arbitration in London or another agreed forum, given the international nature of the contracts. Additionally, if a ship sinks or is damaged en route to Gadani (not unheard of for very old vessels), disputes over who bears the loss can lead to litigation. The Muhammad Anwar case in Pakistan (2023) touched on this: a ship sank and local authorities prevented its scrapping, leading to a claim of damages by the buyer.Foreign insurers (hull & machinery underwriters or P&I clubs) might find themselves paying for wreck removal or pollution cleanup and then seeking recovery. Admiralty claims in Pakistan by foreign suppliers or subcontractors are another area of risk. As seen in A&B Petrol Urunleri v. MV Nazlican, if a foreign bunker supplier hasn’t been paid for fuel by a ship that is now at Gadani, arresting the ship in Pakistan might fail once the ship is sold for scrap. The original owner is usually a one-ship shell company that dissolves post-sale, making recovery difficult. Thus, foreign businesses often face jurisdictional hurdles – they may need to chase claims in the courts of the country where the contract was made or where the cash buyer is incorporated, rather than in Pakistan.
Liability for Accidents and Environmental Damage: Shipbreaking at Gadani has seen fires, explosions, and pollution incidents (such as oil spills or toxic smoke releases). If a major accident occurs, questions arise about the liability of foreign entities involved. For example, when an oil tanker being cut at Gadani exploded in 2016, causing dozens of deaths, investigators pointed to negligence in gas-freeing the vessel.
. Hypothetically, could the original shipowner or the classification society that certified the ship’s gas-free status be sued? In Pakistan, injured workers or their families typically claim compensation under Pakistan’s Workers’ Compensation law or Fatal Accidents Act against the local yard operator. Foreign owners are generally not directly sued in Pakistani courts for on-site accidents, especially if they have sold the ship prior to beaching. However, there is a growing theory of “extended producer responsibility” for ships: NGOs argue that an owner knowing a ship will be scrapped in substandard conditions could be held accountable for subsequent harm. In some jurisdictions, this theory is being tested. For instance, a landmark case in the UK (ongoing as of this writing) involves an attempt to hold a British company liable for environmental damage caused by shipbreaking overseas (though not in Pakistan specifically). Additionally, insurance claims can become contentious: P&I insurance would typically cover third-party liabilities (e.g., if an oil spill during scrapping causes environmental damage, local authorities could claim cleanup costs). The P&I club might then seek recourse if negligence by the shipowner contributed (for example, failing to remove oil cargo residues). We also see scenarios where scrap dealers sue sellers if unexpected toxic substances (like radioactive materials or excessive asbestos) are found, breaching contractual promises that the ship was “gas-free for hot work” or free of certain contaminants. These cross-border liability issues remind foreign businesses that selling a ship “as-is” to a distant yard does not completely shield them from fallout. Due diligence and contractual safeguards are paramount – e.g., sellers often require the buyer to covenant that they will follow all applicable health, safety, and environmental laws, to create a paper defense if something goes wrong.
Involvement of Foreign Regulators and NGOs: Another legal risk comes from the activism of global NGOs and the resulting pressure on regulators. The NGO Shipbreaking Platform, Basel Action Network, and Greenpeace have been known to track ships heading to Pakistan and alert authorities in the flag state or owner’s country. This can trigger investigations or at least public relations headaches. For example, if a German shipowner quietly sells a vessel to a Pakistani yard, NGOs might file a complaint with German regulators citing the Basel Convention and EU law, prompting an inquiry. Reputation management is thus a legal concern: companies have faced shareholder actions and sanctions listing for environmental violations. Maritime law firms representing shipowners must be prepared to respond to such transnational advocacy – often by demonstrating compliance with the Hong Kong Convention guidelines or proving that all hazardous wastes were removed in a OECD country before the ship’s final voyage. In extreme cases, if Pakistan were to experience a major environmental disaster from shipbreaking (say a massive oil spill or chemical release affecting the marine ecosystem), international claims could even be brought under treaties or through diplomatic channels. For instance, neighboring countries or international bodies could raise issues under MARPOL or UNCLOS (United Nations Convention on the Law of the Sea) about pollution emanating from Pakistan’s shipbreaking. While such international dispute resolution has not yet occurred, the possibility underscores why foreign stakeholders (including states that send ships) have a vested interest in Pakistan maintaining standards.
In summary, foreign businesses connected to Pakistani shipbreaking face a matrix of legal exposures: from being prosecuted at home for illegal waste export, to commercial disputes in arbitral tribunals, to liabilities for accidents and environmental damage. The jurisdictions involved range from Pakistani courts to European criminal courts and international arbitration forums. Prudent shipowners and insurers manage these risks by ensuring compliance with export laws, carefully structuring contracts (with choice-of-law and forum clauses), obtaining warranties and indemnities from buyers, and verifying that the Gadani yard has at least basic safety measures to avoid catastrophes. In an industry notorious for its past laissez-faire attitude, such legal foresight is increasingly not just advisable but necessary.
4. The Gadani Shipbreaking Industry: History, Key Legal Issues, and Developments
A bulk carrier being dismantled on the beach at Gadani, Pakistan – once a thriving shipbreaking hub now facing decline.
Gadani, a coastal strip about 50 km west of Karachi, has been the heart of Pakistan’s shipbreaking industry. What began informally in the 1960s with stranded vessels grew into a massive enterprise by the 1980s and 1990s. At its peak around the year 2000, Gadani was among the top shipbreaking yards in the world, with over 130 active plots along 10 km of beach and dozens of ships beached each month. Over time, however, the industry has seen major ups and downs – shaped by economic forces and legal challenges alike.
Historical Overview: In the early decades, Pakistan benefited from minimal regulation and low labor costs, attracting ship owners looking for cheap disposal. Gadani earned the moniker “world’s largest graveyard of ships.” The government of Balochistan, through the BDA, leased out hundreds of plots to private shipbreakers, and local communities saw an economic boom. By producing millions of tons of scrap metal annually, Gadani became vital for Pakistan’s steel re-rolling mills . Legal oversight was rudimentary; environmental and labor laws were scarcely enforced during the boom years. However, the mid-2000s onward saw growing scrutiny. Competing countries (notably China and Turkey) began modernizing their recycling facilities, and global pressure mounted against the “beaching” method due to its pollution and accident record.Pakistan’s Supreme Court and High Courts also started hearing petitions concerning tax issues and safety standards (as discussed in Section 1), gradually pulling the industry toward a more regulated footing. For instance, after some shipbreakers challenged taxation in the 1990s, the courts affirmed the government’s right to impose duties thus integrating the industry into the formal fiscal regime. Through the 2000s, periodic efforts were made to improve practices – e.g. requiring pre-arrival decontamination of ships and banning scrapping of vessels with radioactive contamination. But enforcement remained inconsistent, often overshadowed by the drive for profits and Pakistan’s need for cheap steel.
Key Legal and Safety Issues: Gadani’s most pressing challenges have been environmental pollution and worker safety. Decades of shipbreaking have left the beach and surrounding sea contaminated with oil sludge, paint chips laden with heavy metals, and fragments of asbestos insulation. Environmental laws (PEPA 1997 and provincial regulations) technically prohibit discharge of pollutants, but monitoring was scant. Occasional prosecutions of shipbreakers for oil spills or improper waste disposal have been rare, partly due to jurisdictional confusion between federal and provincial agencies. A significant wake-up call was the Gadani oil tanker explosion on 1st November 2016. The tanker MT Aces caught fire during torch-cutting, causing a massive blast that killed at least 26 workers and injured dozens more. It was one of the worst industrial accidents in Pakistan’s history . Investigations revealed that flammable gases and fuel residues had not been cleaned from the vessel – a direct breach of required safety protocol. The tragedy exposed the lack of emergency infrastructure at Gadani (no on-site firefighting or burn treatment facility) and the fact that many laborers worked without proper protective gear or training. In its aftermath, the Balochistan government temporarily halted shipbreaking, and a high-level commission was formed to recommend reforms. The NCHR demanded that the commission’s report be made public and that victims’ families be compensated promptly. It also highlighted systemic issues: the widespread use of short-term contract labor (leaving workers without job security or benefits) and the absence of labor unions to voice concerns.Legally, the 2016 incident spurred enforcement of existing rules – for example, now every incoming tanker must present a gas-free certificate from a certified chemist before workers can cut it. Authorities also started strictly requiring No Objection Certificates (NOCs) from the Balochistan EPA for each ship, ensuring that hazardous materials are inventoried. Yet, compliance on the ground still often lags behind on-paper requirements.
Regulatory Enforcement and Government Response: Over the last decade, Pakistani authorities have oscillated between clamping down on Gadani and providing relief to keep it afloat. After accidents or media exposés, there is usually a surge in inspections. For instance, post-2016, the BDA enforced the 1979 yard rules more diligently – cancelling leases of non-compliant operators (as seen in the 2024 Usman Ship Breakers case) and insisting on continuous use of plots . The federal government, on its part, has periodically adjusted import duties and taxes to either protect local steel manufacturers or to incentivize shipbreaking. In some years, high duties on ship imports depressed the industry; in others, concessions were granted to revive it. A court case in 2020 (Ghulam Ali Bhatia v. Federation) addressed this, where petitioners challenged special tax incentives for shipbreakers as discriminatory. The Sindh High Court upheld the policy, recognizing the “unique risks and financial implications” of shipbreaking relative to regular scrap imports. This judicial nod affirmed the government’s approach to treat shipbreaking as a special case, sometimes deserving lower taxes or easier credit, especially after downturns. On the environmental front, Pakistan’s Ministry of Climate Change in 2022 launched the hazardous waste management policy (noted earlier) and partnered with UN agencies to train Gadani operators in safer waste handling.However, persistent issues like asbestos disposal (much asbestos from ships still gets illegally dumped or sold in local markets, posing public health risks) remain unresolved, largely due to the lack of dedicated hazardous waste facilities.
Recent Developments and Industry Decline
In the last few years, Gadani’s shipbreaking has faced a sharp decline. A combination of global and local factors has driven this downturn. Globally, an oversupply of cheap Chinese steel reduced the demand for scrap steel, undercutting the profitability of shipbreaking .At the same time, international pressure to use “green” recycling yards has diverted many vessels away from South Asia to Turkey or newer facilities. The European Union’s stricter rules (and prosecution of violators) have had a chilling effect on European tonnage arriving at Gadani. Locally, Pakistan’s economic troubles (especially in 2022–2023) made it hard for buyers to obtain foreign currency letters of credit to purchase ships – Pakistan’s central bank at one point restricted L/Cs for ship imports, causing a virtual standstill in new acquisitions
The result: from around 75 large ships beached in 2019, Gadani saw only about 7 ships in the first half of 2023. The number of active yards dwindled to single digits as many plot owners exited the business.
By late 2023, industry veterans described Gadani as a “sinking ship” itself, no longer a guaranteed destination for the world’s vessels. This downturn, while economically painful for local stakeholders, may have a silver lining legally: it provides an opportunity to recalibrate and upgrade facilities before the next surge (which could happen when global shipping cycles lead to more retirements of ships). In fact, Pakistan’s ratification of the Hong Kong Convention in 2023 is a significant recent development aimed at aligning Gadani with global standards and hopefully attracting business from responsible shipowners. The government and yard owners are now under pressure to invest in better infrastructure – e.g., building impermeable working areas, installing cranes instead of manually cutting everything on beach, and ensuring proper waste storage. Organizations like IndustriALL and NTUF are also pushing for worker registration so that labor laws (minimum wage, social security, etc.) are applied.
In conclusion, Gadani’s story encapsulates the tug-of-war between economic gain and legal regulation. It has gone from a booming but dangerous scrapyard to a slumping industry that must reform to survive. Environmental and safety concerns remain at the forefront: any failure to address them not only invites legal action (be it domestic public interest litigation or international censure) but also jeopardizes the industry’s viability in a world moving towards sustainable practices. The coming into force of the HKC in 2025 could be a turning point – either Gadani reinvents itself under a stricter regime, or it risks being left behind as an relic of a dirtier past. For now, businesses engaged in Gadani must stay abreast of rapid regulatory changes and participate in shaping a safer, legally compliant future for Pakistan’s shipbreaking.
5. Cross-Border Legal Implications and Multi-Jurisdictional Disputes
Disputes arising from shipbreaking in Pakistan can reverberate far beyond its shores. Given the international nature of shipping, legal issues frequently straddle Pakistan and foreign jurisdictions. Here we examine how and where cross-border issues may be litigated, and the potential legal exposure for foreign entities connected to Pakistani ship recycling.
Transnational Contract and Arbitration Issues: The sale contract for an end-of-life vessel is often governed by a law different from Pakistan’s. Many such contracts use English law and London arbitration (the standard BIMCO sale form “Demolition Contract” provides for this, unless parties choose otherwise). This means that if there is a breach – for example, the Pakistani breaker fails to pay the full price, or the ship owner delivers a vessel in materially worse condition than promised – the dispute might be resolved in an arbitration in London or Singapore, not in Karachi. Pakistani courts generally respect arbitration clauses and would dismiss local lawsuits in favor of agreed foreign arbitration. A scenario that has occurred is when currency fluctuations or import policy changes in Pakistan impact the deal: e.g., a sudden devaluation of the Pakistani Rupee might lead a buyer to renegotiate or default on payment, invoking hardship clauses. Such cases would be argued before arbitrators, who must consider Pakistani import regulations as facts but apply the governing law of the contract. Additionally, if a cash buyer (middleman) based in a third country is involved, there could be a chain of contracts (Owner-to-Buyer, then Buyer-to-Local Breaker), raising complex questions of liability and recovery across borders. Law firms representing owners must be prepared to enforce arbitration awards in Pakistan, which can be tricky – Pakistani courts can enforce foreign arbitral awards under the New York Convention, but the process can be slow, and assets of the losing party in Pakistan might be hard to seize if, say, the yard has minimal funds.
Jurisdictional Overlaps in Liability Claims: When accidents or environmental incidents occur during shipbreaking, they can trigger legal claims in multiple countries. Take an oil spill during beaching: Pakistan’s own laws would address immediate cleanup and fines, but if that oil spill drifts to international waters or Iranian waters, it could lead to claims under MARPOL by other states. Or consider a worker’s injury: while the worker’s remedy is usually under Pakistani law (through the Employees Compensation system), if the worker was employed by a subcontractor of a foreign company, there might be an attempt to sue that foreign company in its home country’s courts. These overlaps are not common, but they are possible. One example is toxic waste liability: suppose improper disposal of hazardous waste from a ship at Gadani leads to environmental damage that an international fund has to help clean (imagine an NGO funded a cleanup of contaminated beach areas). That NGO might attempt to sue the original shipowner in a U.S. or European court for the costs, arguing negligence in sending the ship to an inadequate facility. The success of such cases would hinge on jurisdiction (does the foreign court have jurisdiction over a tort that occurred in Pakistan?) and the ability to establish duty of care. Generally, courts are cautious – they may view it as Pakistan’s responsibility. However, evolving principles in international law, like human rights due diligence for corporations, are creating avenues where companies can be held accountable for overseas operations impacting health and environment. Shipping companies and their insurers thus cannot assume that “what happens in Gadani stays in Gadani” from a legal viewpoint.
Insurance and Reinsurance Complications: The global insurance industry often bears the financial brunt of shipbreaking mishaps, and with that comes legal maneuvering across borders. A P&I Club (often based in London or New York) insuring a vessel for third-party liabilities might be involved if a ship causes damage while being scrapped. For instance, after the 2016 Gadani explosion, there were reports that some survivors and victims’ families, with NGO support, sought higher compensation beyond Pakistan’s statutory limits – potentially looking to the shipowner’s liability insurer. Foreign insurers may settle claims locally but then exercise subrogation rights to pursue any responsible third parties. If, say, a service company negligently certified the tanker as gas-free, the insurer might sue that company in its jurisdiction. Reinsurance is another layer: insurers who covered the ship or yard often have reinsurance in international markets, meaning a large loss will involve legal discussions in places like London (under reinsurance contracts) about whether the loss is recoverable or if it was aggravated by illegal conduct (e.g. breaking sanctions or laws). If a shipbreaker was violating laws, an insurer could even deny coverage – though this is rare and would likely end up in Pakistani courts to interpret the policy.
Cross-Border Collaboration and Extradition: As environmental crime enforcement tightens, there’s a chance that countries will collaborate to crack down on illegal scrapping. Europe’s enforcement so far has relied on fines, but in theory severe cases can lead to criminal charges and even extradition requests. If a shipowner in the EU deliberately falsifies documents to export a toxic ship to Pakistan and people die as a result (as an extreme scenario), one could imagine an EU prosecutor charging manslaughter or environmental crimes. Whether Pakistan would extradite its nationals (or India theirs, etc.) in such a case is uncertain, but mutual legal assistance treaties could come into play for evidence gathering. Already, we have seen coordination between NGOs, prosecutors, and even IMO agencies in tracking vessels headed for South Asia. A high-profile incident was the case of the aircraft carrier Clemenceau (although involving India, not Pakistan) where international legal pressure forced France to take the ship back from the scrapyard. A comparable event in Pakistan could embroil multiple courts – Pakistani courts might issue injunctions (for instance, the Supreme Court of Pakistan has in the past taken suo motu notice of environmental hazards and could theoretically block a particularly toxic ship from being dismantled), while foreign courts address the legality of the export.
In essence, shipbreaking disputes can become entangled in a web of national and international law. Contractual fights may be resolved under English law, environmental accountability might be pursued under EU law, and personal injury claims could even invoke international human rights norms. Companies involved in this industry must adopt a multi-jurisdictional legal strategy: ensuring compliance with all applicable laws (Pakistani, flag-state, owner’s country) at the outset, and being ready to defend their actions in more than one court if needed. For regulators and observers, the cross-border implications underscore that improving conditions in Pakistan’s yards is not just a local issue but a global concern – one that, if left unaddressed, will continue to create legal friction between nations.
6. Summary of Pakistan’s Shipbreaking Laws and Applicable International Frameworks
Finally, we present a structured summary of the key national and international legal provisions relevant to shipbreaking in Pakistan. This serves as a quick reference for businesses and legal practitioners:
National Laws and Regulations:
- Pakistan Environmental Protection Act, 1997 (PEPA): Core environmental law prohibiting unauthorized import or disposal of hazardous waste.
. Requires environmental impact assessments and compliance with National Environmental Quality Standards for industrial activities, including shipbreaking. Section 15 integrates Basel Convention principles, making it illegal to bring in ships laden with hazardous waste without consent. - Pakistan Hazardous Waste Management Policy, 2022: A policy (non-statutory) aligning national practices with Basel Convention obligations .
. It emphasizes lifecycle management of hazardous waste, record-keeping of waste shipments, and development of waste treatment facilities – directly relevant for managing toxins from scrapped ships. - Imports and Export Control Regulations: Import Policy Orders issued under the Imports & Exports (Control) Act, 1950 govern the import of ships for scrap. Current rules require certifications (e.g., gas-free for hot work, no radioactive contamination) before a ship can be imported for demolition. Letters of Credit for ship imports must include these certificates.
. Non-compliant vessels can be denied beaching permission by customs or environmental authorities. - Merchant Shipping Ordinance, 2001: Maritime law that implements international conventions like MARPOL. Contains provisions (Sections 556, 568, etc.) penalizing pollution from ships. It gives powers to detain ships causing marine pollution and ensures that even foreign vessels breaking in Pakistan’s territory abide by no-pollution rules.
- Admiralty Jurisdiction of High Courts Act, 2017 (formerly Ordinance of 1980): Confers jurisdiction to High Courts over maritime claims, including those related to ship ownership, mortgages, salvage, and damage. Allows arrest of ships for claims, but as precedent (M.V. Justice case) shows, once a ship is dismantled, admiralty jurisdiction lapses.
. Foreign claimants must act quickly before or during the breaking process to secure claims. - Customs Duties and Taxation Rules: Federal government provides special treatment to shipbreaking imports – e.g., reduced customs duty or sales tax on scrap ships. Deferment of Import Duty (Ships for Scrapping) Rules, 1993 allowed deferred payment of import duties .
(and were subject to litigation like Usman Enterprises 1997). Income tax law also imposes advance taxes on ship imports, though courts disfavor retrospective hikes.
. Overall, shipbreaking is recognized as a distinct category in Pakistan’s tariff and tax schedules to encourage the trade while capturing revenue. - Labor Laws and Safety Regulations: While no industry-specific labor law exists for shipbreaking, general statutes apply: Factories Act 1934 (adopted by provinces) – mandates workplace safety measures, guarding of machinery, etc., arguably applicable to shipbreaking yards as “factories”; Workmen’s Compensation Act 1923 – ensures compensation for workers killed or injured on the job; Provincial Employees Social Security Ordinances – provide medical care and benefits, though coverage of Gadani workers has been scant historically. Balochistan province, where Gadani is located, can issue rules for labor welfare at the yards. Recently, local authorities and courts have stressed registering workers and improving inspections .
. - Balochistan Development Authority (Shipbreaking Yard) Rules, 1979: Governs the leasing and operation of plots at Gadani. Key provisions include the requirement to actively use plots (no long vacancy without permission).
, maintain safety standards, and pay lease rents/taxes to local authorities. The BDA can cancel leases for violations, as upheld by courts, reinforcing that shipbreakers must adhere to yard management regulations.
International Frameworks:
- Basel Convention (1989) and Ban Amendment: Pakistan is a party, thus all imports of end-of-life ships containing hazardous substances must follow Basel’s prior informed consent procedure. Pakistan must consent to any such import and ensure “Environmentally Sound Management” of the waste. The Basel Ban (which Pakistan has supported in principle) prohibits OECD to non-OECD hazardous waste movement; while Pakistan is a recipient, OECD exporters (e.g., EU states) are bound by this – making direct export of ships from Europe to Pakistan illegal .Basel’s guidelines specifically address ship dismantling (2002 Technical Guidelines under Basel). In practice, enforcement relies on cooperation between the flag/exporting state and Pakistan’s authorities.
- Hong Kong Convention (2009): Pakistan ratified in 2023
; will be in force by mid-2025. Imposes comprehensive requirements on ship recycling facilities and ship owners: the yard must be authorized and maintain standards for safe and environmentally sound recycling; each ship must have an Inventory of Hazardous Materials and a Ship Recycling Plan. Pakistan will need to certify and audit its shipbreaking yards for HKC compliance. Once in effect, ships flying flags of HKC-party states can only be recycled in Pakistan if Gadani yards are HKC-certified. This convention should elevate Pakistan’s practices to an international baseline, overlapping with some Basel obligations but focusing on improvement rather than restriction. - EU Waste Shipment Regulation & Ship Recycling Regulation: Indirectly impactful – EU law (WSR) treats old ships as hazardous waste, forbidding their export to Pakistan (a non-OECD country) from EU states
. The EU Ship Recycling Regulation requires EU-flagged ships to use approved yards; as of now, Pakistan has none on that list
. Therefore, EU-flag ships are essentially barred from Gadani unless de-flagged. European shipowners must be wary of heavy fines and even criminal charges if they improperly send ships to Pakistan .These European measures, while not Pakistani law, crucially shape the flow of vessels to Pakistan and impose legal duties on European stakeholders. - MARPOL (1973/78) and London Convention (1972): Pakistan is party to MARPOL, enforcing its six Annexes via domestic law. Relevance to shipbreaking: no discharge of oily mixtures, no dumping of garbage or harmful substances during the vessel’s voyage to the yard or in the breaking process. Violations can lead to port state control actions or penalties by Pakistan.
. The London Convention prohibits dumping waste at sea – meaning a ship cannot legally be scuttled off Karachi to avoid difficult waste; it must be dealt with on land. These ensure that the surrounding marine environment of Gadani is protected (on paper) during scrapping. - ILO Conventions and Guidelines: Pakistan has ratified multiple ILO conventions that indirectly affect shipbreaking. Key among them: Convention 87 and 98 (freedom of association and collective bargaining) – under which workers have the right to form unions (the NTUF’s activities at Gadani stem from this); Convention 81 (labor inspection) – requires a functioning inspection system for industries like shipbreaking; Convention 155 (occupational safety and health) – obliges a national policy on OSH covering all workers. While not always enforced stringently, these conventions set expectations for Pakistan to improve working conditions at Gadani. The non-binding ILO Code of Practice on “Safety and Health in Shipbreaking (2004)” is also a widely recognized set of recommendations that Pakistan endorses in principle. International scrutiny through the ILO lens often follows any major accident, pressing Pakistan to comply with these labor standards.
- Other Maritime Conventions: If a ship at Gadani has international aspects (e.g., removal of remains of cargo), conventions like the International Convention on Safe Containers (CSC) or SOLAS (Safety of Life at Sea) might tangentially apply – for instance, gas-free certifications can be linked to SOLAS regulations for tankers. Also, the United Nations Convention on the Law of the Sea (UNCLOS) provides a general obligation (Article 194) for states to prevent pollution of the marine environment, which would include pollution from shipbreaking. While UNCLOS doesn’t have direct enforcement mechanisms for this scenario, it frames Pakistan’s international responsibility to control pollution at Gadani.
Key Case Law and Legal Trends:
- Supreme Court Environmental Jurisprudence: Pakistan’s higher judiciary has shown increasing concern for environmental and labor issues in shipbreaking. Though no single Supreme Court case has overhauled the industry, a combination of suo motu notices, human rights petitions, and tax suits in the 1990s–2020s have incrementally pushed the industry toward accountability. A trend is the Court’s reliance on public interest litigation (PIL) to address gaps – for example, the Supreme Court has on occasion summoned reports on Gadani conditions after the 2016 disaster, signaling that it views the matter as tied to fundamental rights (the right to life and a healthy environment).
- Foreign Case Law: As noted, European national courts (Netherlands, Norway, etc.) have developed a body of case law penalizing illegal exports to South Asia. These serve as warnings and guidance for compliance – e.g., the Dutch judgement against Seatrade in 2018 clarified that under EU law, even sending a ship to a scrapyard via a cash buyer is considered a waste export if the decision to scrap was made. This effectively means shipowners must decontaminate ships in the OECD before export or use approved facilities, or face sanctions.
- Shifts Due to HKC 2025: A forward-looking trend is that once the Hong Kong Convention is in force, we may see recognition of HKC-certified yards by other regimes, and possibly a decline in Basel-based prosecutions for ships that went to HKC-compliant facilities. The industry, through organizations like BIMCO and ICS, is lobbying for a unified regime that gives legal certainty
. For Pakistan, if Gadani becomes HKC-compliant, it might reduce the stigma of being a “waste dump” under Basel and instead be seen as a legitimate recycling destination. This could lessen the legal conflicts between Pakistan and ship-exporting nations. On the other hand, should Pakistan fail to reform, it could find itself more isolated, with only rogue operators sending ships – which comes with high legal risk (as those operators are often pursued by authorities).
In sum, Pakistan’s shipbreaking industry sits at the intersection of multiple legal regimes. Compliance is not a simple matter of following one law, but rather navigating a mosaic of Pakistani statutes and international rules. For ship owners, insurers, and legal professionals, understanding this landscape is critical to making informed decisions – whether it’s sending a ship for recycling, insuring the risks, or handling a dispute that arises. The situation is dynamic: as environmental and safety norms tighten globally, the legal framework will continue to evolve. Pakistan’s recent policy moves and treaty commitments suggest a direction towards safer and cleaner shipbreaking, but the true test will be in implementation. For now, this comprehensive overview should serve as a guide to the current state of play and help stakeholders steer clear of legal troubles while engaging in ship recycling in Pakistan.
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A Partial Version of the Older Article follows Below:
HYDRI SHIP BREAKING INDUSTRIES LTD v. Sindh Government (2007 MLD 770 Karachi High Court)
In this case, the petitioners sought relief under a constitutional petition against the Sindh Government, challenging the vires of the Octroi Rules and the interpretation of “consumption, use or sale within the Octroi limits.” The High Court entertained the constitutional petitions as an alternate remedy by way of appeal under the West Pakistan Municipal Committee Octroi Rules, 1964, was deemed inadequate and inefficient. The court emphasized that a speedy decision was necessary due to the involvement of significant amounts and the impact on the entire ship-breaking industry.
USMAN ENTERPRISES v. Federation of Pakistan (1997 MLD 3161 Quetta High Court)
Usman Enterprises contested the penalty imposed for non-payment of outstanding dues under the Customs Act, 1969, and the Deferment of Import Duty (On Ships for Scrapping) Rules, 1993. The High Court held that the authorities could not charge a penalty for recovery of specified mark-up dues as it was not sustainable under the law. The action by the authorities was declared without lawful authority and of no legal effect, highlighting the limits of administrative powers in imposing penalties.
SPHINX SHIPPING AGENCY P.E.C.H.S v. M.V. Justice (1997 PLD 216 Karachi High Court)
This case involved a suit against a vessel for the recovery of claims under the Admiralty Jurisdiction of High Courts Ordinance, 1980. The court found that the plaintiff’s claim was not covered under the provisions of maritime lien, as the vessel in question had been completely dismantled and no longer existed. The court dismissed the application for arrest and detention of the ship, recalling the interim order earlier granted.
SEMCO SALVAGE PTE LIMITED v. Kaptan Yusuf Kalkavan Turkish (1995 MLD 706 Quetta High Court)
SEMCO Salvage Pte Limited sought to recover remuneration for salvage services provided to a vessel that had been arrested and sold in Egypt. The court determined that the relevant law for maritime liens was Egyptian Law, which ceased to exist upon judicial sale of the vessel. The High Court dismissed the claim, emphasizing the need for judicial sale by a competent court to maintain a maritime lien.
GOVERNMENT OF BALOCHISTAN v. Shershah Industries Ltd., Karachi (1992 SCMR 1062 Supreme Court)
The Supreme Court upheld the imposition of duty on ship-breaking by the local council, affirming the efficacy of earlier notifications under the Balochistan Local Government Act 1975 and the Balochistan Local Government Ordinance, 1979. The court recognized the continuance of tax imposition as per the terms of the existing law.
FEDERATION OF PAKISTAN v. Messrs Noori Trading Corporation (Private) Ltd. (1992 SCMR 710 Supreme Court)
In this case, the Supreme Court addressed the excise duty on iron and steel plates recovered from ship-breaking. The court ruled that the liability to pay excise duty arose from the date goods were cleared for export or home consumption, dismissing the contention that the plates were not liable to excise duty as they were recovered before the relevant ordinance came into effect.
Recent Cases
The recent cases on ship breaking in Pakistan reveal significant insights into the legal and policy frameworks governing this industry, highlighting issues related to lease agreements, administrative actions, and judicial interpretation of relevant statutes and regulations.
In the case of Usman Ship Breakers v. Government of Balochistan (2024 PLD 50 Quetta High Court), the petitioner, a ship-breaking company, challenged the cancellation of its plot allotment in Gaddani Ship Breaking Yard. The court upheld the cancellation, emphasizing the compliance requirements under Rule 14(1) of the 1979 Rules, which mandated that plots must not remain vacant without a ship for more than four months without prior written approval from the Authority. The court found no substantial evidence supporting the petitioner’s claim of financial crises and noted that the lease agreement had already expired. This case underscores the strict regulatory environment and the importance of adhering to lease terms and conditions in the ship-breaking industry.
In Muhammad Anwar v. Pakistan (2023 PTD 1519 and 2023 PLD 391 Karachi High Court), the plaintiff sought damages for the loss incurred when a ship purchased for breaking sank, and the authorities prevented the scrapping of the submerged vessel. The court ruled in favour of the plaintiff, highlighting that the actions of the Income Tax Department officials were tainted with malafide intent and exceeded their jurisdiction. This decision illustrates the judiciary’s role in protecting businesses from administrative overreach and emphasizes the principles of vicarious liability and compensation for wrongful acts by government functionaries.
The case of A&B Petrol Urunleri Pazarlama v. MV Nazlican (2022 PLD 1 and 2021 CLD 1049 Quetta High Court) dealt with the recovery of money for fuel supplied to ships that were later sold and in the process of breaking. The court held that the suit was not maintainable under the Admiralty Jurisdiction of High Courts Ordinance, 1980, as the ships were no longer beneficially owned by the defendants. This decision highlights the complexities of admiralty law and the need for clear proof of ownership and jurisdiction in maritime claims.
In Ghulam Ali Bhatia v. The Federation of Pakistan (2020 PTD 2038 Karachi High Court), the petitioners challenged the discriminatory tax treatment favouring the ship-breaking industry. The court dismissed the petition, upholding the policy decision to grant tax incentives to the ship-breaking industry, considering the unique risks and financial implications involved in ship breaking compared to other scrap importers. This case reflects the court’s deference to policy decisions aimed at supporting specific industries and acknowledges the distinct nature of ship-breaking operations.
Lastly, in Muhammad Rafique v. Federation of Pakistan (2014 PTD 1881 Quetta High Court), the petitioners contested the retrospective application of increased advance income tax rates on vessels imported for demolition. The court ruled that retrospective application of tax changes was inequitable and unjust, thus protecting the petitioners’ vested rights based on pre-existing agreements. This decision underscores the principle that legislative and executive actions should not impair contractual rights and highlights the importance of legal certainty and fairness in tax administration.
These cases collectively illustrate the legal landscape of ship breaking in Pakistan, characterized by stringent regulatory compliance, judicial protection against administrative overreach, complexities in maritime claims, and deference to policy decisions supporting the industry. The courts have balanced the enforcement of regulations with the protection of business rights, ensuring fairness and adherence to the rule of law.