However, in a legislative deal reached Thursday among the EU Council, the European Parliament and European Commission, owners of the rusting ships can only "shipbreak" and recycle them in foreign facilities that meet minimum environmental requirements.
Environmental and human rights campaigners have been fighting for an end to the practice, saying the informal ship scrapping operations in such South Asian countries as India, Pakistan and Bangladesh cause significant environmental pollution at a high cost to human health.
The use of child labor was also regularly documented.
But those nations objected, saying banning EU-flagged ships from using the operations would deprive their economies of much-needed jobs and take $6.3 billion per year out of the pockets of ship owners, who use the funds generated from recycling parts as down payments for new vessels, The Wall Street Journal reported.
EU-flagged ships were already required to use only facilities within the Organization for Economic Cooperation and Development -- which includes EU member states, the United States, Canada, Australia, Israel, Turkey and other non-Asian nations.
European ship owners routinely get around those requirements by re-flagging vessels and beaching them in South Asian countries, where 70 percent of the world's shipbreaking is carried out -- at prices significantly cheaper than can be found in OECD states.
Old ships contain such hazardous materials as asbestos, heavy metals and PCBs.
"Up to now, EU ships have generally been dismantled and recycled at sub-standard sites operating to low standards in third countries," Irish Minister for the Environment, Community and Local Government Phil Hogan said in a statement announcing the deal. "From the date of application of this regulation, this practice will now have to cease in respect of EU-flagged ships. Ships will instead have to be properly recycled in approved facilities operating to high environmental and worker safety standards."
Hogan, saying he was confident the new regulation "will be effective," added the new law is intended to serve as an "important stimulus" toward a global solution to unsound ship recycling being sought under the Hong Kong Convention on Ship Recycling adopted in 2009.
Also praising the deal was EU Environment Commissioner Janez Potocnik, who said the legislation is "a major step toward more sustainable recycling of ships around the world."
Under the regulation, he said, "ship owners will be able to choose such facilities from an EU list at a reasonable price. I am convinced it will reduce the illegal practices currently blighting the industry, which will become more responsible and environmentally friendly as a result."
Activists, however, said the compromise represents a "unilateral loophole" for European shippers in efforts to end the practice dumping hazardous materials in developing nations.
The NGO Shipbreaking Platform and European Environmental Bureau denounced the new regulation as "effectively postponing and possibly ridding the EU (of) its responsibility to provide solutions to the global shipbreaking crisis.
"We fear that the regulation will end up applying to very few ships," Jeremy Wates, the EEB's secretary general said in a statement. "Unless an economic incentive for all ships calling at EU ports is rapidly introduced, circumvention of the law will persist, and the European shipping industry will continue to be at the heart of scandals involving severe pollution of coastal zones and exploitation of vulnerable workers in developing countries."