Keeping up with the sanctions headache
For commercial as opposed to political reasons, insurers are gnashing their teeth over the propensity of the US and its allies to impose sanctions on dictatorial regimes. They have lost some lucrative business, and have to spend huge amounts of time working out the new coverage issues, and even the lawyers are struggling to find the right answers in a fast-moving situation.
The decision in June by the European Union under its Regulation 572/2011 to freeze the assets of six port authorities in Libya, blocking payment of port dues, fees and expenses which allow vessels to berth, brought a new dimension to the sanctions dilemma. No funds or economic resources are allowed to be used directly or indirectly for the benefit of the designated ports.
When this was followed in short order by a US embargo against Tidewater Middle East, which runs a terminal at Bandar Abbas and is responsible for 90% of container imports into Iran, it was clear that the ports industry is now under financial fire, in addition to such measures as the ban on insuring and reinsuring Iranian entities – Iran having been for years a buoyant source of business for the international insurance market.
The ports weapon had been wielded by the EU earlier in the year against Abidjan and San Pedro as part of the successful attempt to dislodge president Laurent Gbagbo of Cote d’Ivoire.
The trouble for traders over sanctions is, as Mike Roderick, a partner at Clyde & Co said at a recent presentation to London Shipping Law Centre, that there are multiple sources of legislation (UN, EU, US, UK, Norway, Singapore, Australia etc), each sanctions regime is different, and the picture is constantly evolving, with rules issued almost on a weekly basis
For instance, there is no general ban on trade with Iran, as discharging or loading a vessel in Iranian waters does not transform a foreign company into a banned Iranian one. There is a clampdown on the refined petroleum products trade; but crude oil and gas can be imported or exported, although an insurer is forbidden to pay a claim by an Iranian buyer. Under EU sanctions, providing bunkering or ship supply services to Iranian owned or chartered vessels may be prohibited, according to Nick Austin, also of Clyde & Co.
The US Office of Foreign Assets Control has 6,000 people, organisations and ships on its blacklist, and the Comprehensive Iran Sanctions, Accountability and Divestment Act 2010 brings foreign companies into the net. Penalties for violation are severe, including prison terms and big fines, and potentially even worse, loss of future US contracts. Breaching the CISADA code could effectively put an insurer or other service provider out of business .
Doing their best to comply with the multiplicity of regimes, insurers and other service providers are spending long hours to ensure they cannot be accused of circumventing sanctions. “Keeping on top of this area is effectively a full time job,” said Mr Austin.
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