7 th annual marine money gulf ship finance forum, wednesday, 9 th march 2011 sanctions and their...
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7th Annual Marine Money Gulf Ship Finance Forum, Wednesday, 9th March 2011SANCTIONS AND THEIR IMPACT ON SHIPPING: An Overview
Tony Rice
Tel: +44 (0)20 7264 8315
Sanctions and their impact on Shipping: an Overview
Summary of Sanction Regimes
UN
US
EU
Some key questions
Impact on Shipping
What's ahead?
Summary
Sanctions and their impact on Shipping: an Overview Summary of Sanction Regimes
UN
Purpose (1) restriction on import/export of prohibited
items/technology/services/investments
(2) financial sanctions on target entities
(3) prohibition on activities linked to nuclear
proliferation
UN Security Council Resolutions
(1) No. 1737 (2006)
(2) No. 1747 (2007)
(3) No. 1803 (2008)
(4) No. 1929 (2010)
Sanctions and their impact on Shipping: an Overview
Summary of Sanction Regimes
UN Prohibitions – application includes
(1) use of Member State ships
(2) insurances
(3) financial assistance/services
(4) investment
(5) brokering
Sanctions and their impact on Shipping: an Overview
US
- US Iranian Transaction Regulations
(1) US Treasury OFAC
(2) "US person" focus
(3) blanket restriction
Sanctions and their impact on Shipping: an Overview
Summary of Sanction Regimes Comprehensive Iran Sanctions, Accountability & Divestment Act 2010
("CISADA")
(1) State Dept (expands ISA 1996)
(2) extraterritorial focus – foreign companies
(3) energy focused – "knowingly" provides- refined petroleum products ("RPPs") (diesel, gasoline, jet
fuel and aviation gasoline)- goods/services which facilitate maintenance or production
of RPPs- goods/services (e.g. Insurance, finance or transport) which
could contribute to enhancement of ability to import RPPs
(4) adds 3 new sanctions to the ones listed in ISA 1996 : forex, banking transactions (i.e. all USD transfers) and US
property transactions
(5) role of US banking system in international trade/commerce
Sanctions and their impact on Shipping: an Overview
Summary of Sanction Regimes
EU
- Council Regulation No. 668 (26 July 2010)
(1) broadened original 2007 published list of designated target
entities (IRISL, Bank Mellat, Bank Melli, Bank Sedarat)
(2) no impounding of IRISL vessels or cargos or detention of
crews
- Council Decision (26 July 2010)
(1) implemented UN SCR No. 1929 – but goes further
(2) wide ranging prohibitions and measures in trade, financial
services, energy, transport and asset freezing
Sanctions and their impact on Shipping: an Overview
Summary of Sanction Regimes EU (cont'd)
- Council Regulation No. 961 (27 October 2010)
(1) implements the CD of 26 July 2010
(2) comprehensive and robust – extends UN Security Council Resolutions
(3) restrictions include:- Iran banking sector- investment in Iranian oil and gas industry (finance or JVs)- access to EU insurance and bond markets- services to Iranian ships and aircraft (no cargo
loading/unloading in EU ports for IRISL ships)- asset freezing (including IRISL and subsidiaries)- export/import of stipulated goods, technology and equipment
Sanctions and their impact on Shipping: an Overview
Summary of Sanction Regimes
EU (cont'd)
(4) applies within EU territory; to all ships in EU; to all EU
nationals and companies
Sanctions and their impact on Shipping: an Overview
Some Key Questions
Who are your counterparties and are they persons who are the subject of
sanctions?
Are any of the persons in the contractual chain in that position?
If an owner/charterer, are you satisfied that the cargo does not fall within
the sanctions legislation?
Can you make/receive payments from counterparties?
Can you obtain insurance?
Sanctions and their impact on Shipping: an Overview
Impact on Shipping
uncertain terrain for companies/banks and their advisors
increased costs and regulatory burden (particularly regarding
reporting/auditing obligations)
difficult business decisions must be made by non-US entities
variations in implementation by member states
unclear interpretation and State Dept. guidelines for CISADA
extraterritoriality of CISADA and US banking system sanctions
shippers, traders, banks, insurance companies – all affected
Sanctions and their impact on Shipping: an Overview
What's ahead?
so far only one single CISADA enforcement
State Dept. indicate not looking to aggressively enforce – prefer to
encourage voluntary action
HFW/US State Dept. Forum
global tours by State Dept. officials
enforcement of EU sanctions by member states
crude next?
BIMCO sanctions clause; insurance contracts; ship finance loan
agreements
Libya
Sanctions and their impact on Shipping: an Overview
Summary
comprehensive, wide-ranging and robust
unprecedented universal support (China; Russia)
extreme caution
due diligence and related costs
developing situation
7th Annual Marine Money Gulf Ship Finance Forum, Wednesday, 9th March 2011SANCTIONS AND THEIR IMPACT ON SHIPPING: An Overview
Tony Rice
Tel: +44 (0)20 7264 8315