- US government sanctions companies trading with Venezuelan oil (8 April 2019)
- Member Alert - Sanctions against Venezuela impact shipping (4 February 2019)
- US impose new sanctions against Venezuela (29 January 2019)
Other sanctions regimes
- Nord Stream 2 and Turkstream Sanctions Overview - United States
- Nord Stream 2 and TurkStream - update on new US sanctions
OFAC Compliance guidance
- Guidance to Address Illicit Shipping and Sanctions Evasion Practices (P&I Circular 2659/2020)
- Guidance on the United States sanctions Compliance Programmes published by the Office of Foreign Assets Control (P&I Circular 2647/2019)
Miscellaneous on sanctions
SANCTIONS AND INSURANCE COVER
Sanctions and their counter measures, so-called blocking rules, are increasingly used by States and supranational organisations to influence trading patterns. The increasing complexity of the sanctions laws and regulations are affecting shipping and marine insurance profoundly.
While the information on this site has been put together with care, the information is not exhaustive and is provided as an overview and service to Members only. Its accuracy cannot be absolutely guaranteed as sanctions regimes are inherently altered on short notice.
The Club recommends all Members contemplating trade to or from sanctioned countries, or trade which otherwise may be at risk of including exposure to sanctions, to seek external legal advice to ascertain the legality of their trade. Members are strongly advised to perform due diligence before entering into any contracts that may expose themselves and/or the Club and its reinsurers to sanctions. The Club strongly advises its Members to include appropriate sanctions language in their contracts.
The Club’s FD&D team can assist in providing a general overview of sanctions regimes that may be applicable to a contemplated trade, but this does not alter the Club’s recommendation to all Members to seek independent legal advice to ensure the legality of their intended trade. To ensure the legality of ones’ trade is an operational duty. The Club does not perform due diligence checks for Members on an intended trade as there may be a conflict of interest between the Club and its Members due to the serious effects any sanctions risks may have on insurance cover.
Insurance cover and services
The sanctions position may change quickly, or further details about a contemplated trade may surface. The availability of insurance cover for a contemplated trade may thus change before and during its execution. Insurance cover is always subject to the applicable insurance conditions and/or Rules in each case. All Club Rules and insurance conditions mandatorily contain extensive sanctions clauses. This is an acknowledgement that while certain sanctions regimes may not be directly applicable to the Club and/or its Members, they may still expose the Club and its membership to serious risks if the Club and/or its Members were to be found in breach of such sanctions regimes.
While trade to and from sanctioned countries may be found to be legal in a particular instance, there are a number of practical considerations that will impact whether the benefit of insurance cover can actually be extended in practice. This is the case even where Club cover otherwise remains in place. The same level of service as in other parts of the world can thus, unfortunately, not be expected when trading to and from sanctioned countries, even where the trade in question is lawful.
By way of example, to provide security for a claim or to lend assistance through its network of local service providers, the Club needs to be satisfied it can in practice actually pay the ultimate beneficiary of the security or reimburse its service provider when called upon. So, the Club’s ability to provide the usual level of service associated with the benefit of insurance may be severely affected by the risk appetite of its business partners, such as its banks. Thus, the pay to be paid rule under the P&I Rules may thus have to be upheld to a greater extent than the Club may have wished to.
Cover under the Club’s P&I Rules and Rules for Charterers’ Liability Insurance
The Club’s position, in line with that of other P&I Clubs, is that all Members are under a duty to take steps to satisfy the legality of their own actions, and to ensure the insured vessel is not engaged in any unlawful trade, see inter alia P&I Rules 10 and 11 and Charterers’ Liability Insurance Rules 18 and 19. Where an insured ship engages in unlawful trade, there is no cover. In certain severe situations where breach of sanctions has been made with knowledge of the Member, there is a risk that the insurance can cease altogether pursuant to P&I Rule 27 (e) or Charterers’ Liability Insurance Rule 32 (e).
Further, where a Member has exposed or may expose the Club to the risk of being or becoming subject to a sanction, prohibition or other adverse action under certain sanctions regimes, the Club may terminate the period of insurance on such notice as the Club may decide, see inter alia P&I Rule 26 and Charterers’ Liability Insurance Rule 31.
Sanctions legislation affecting the Club and its reinsurers may also impact Club cover. Pursuant to P&I Rule 11 Section 4 and Charterers’ Liability Insurance Rule 18 section 4, liabilities may be excluded from cover in case payment of a claim is likely to expose the Club or any of its reinsurers to any sanction, prohibition or adverse action.
On a final note, the provision of security is always discretionary, see inter alia P&I Rule 12 and Charterers’ Liability Insurance Rule 19. It is important to keep in mind that each situation is unique, and cover issues have to be decided in the light of prevailing circumstances.
Cover under the Club’s FD&D Rules and Charterers’ FD&D Rules
The Club’s FD&D Rules and Charterers’ FD&D Rules contain the equivalent provisions to those contained in its P&I Rules and Charterers’ Liability Insurance Rules. See inter alia concerning unlawful trade FD&D Rule 10 section 2 and Charterers’ FD&D Rule 10 section 2, termination: FD&D Rule 23 and Charterers’ FD&D Rule 22 as well as cesser: FD&D Rule 24 and Charterers’ FD&D Rule 23.
Cover is, as for all FD&D disputes, in the absolute discretion of the Club, see inter alia FD&D Rule 5 and Charterers’ FD&D Rule 5.
Cover under the Club’s Marine insurances
For its Marine insurances, the Club incorporates its mandatory club clause W.10 Sanction limitation and Exclusion Clause. Under the clause, no insurer shall be deemed to provide cover nor be liable to pay any claim or provide any benefit under the insurance to the extent the provision of such cover, payment or benefit would expose the Club, any other insurers involved on the risk or its reinsurers to any sanction, prohibition or restriction due to sanctions.
Marine insurance is provided on market terms of either the Nordic Marine Insurance Plan, ITC or ADS/DTV conditions and are as such also subject to any sanctions clauses that may be mandatorily incorporated in the relevant set of standard terms. By way of example, clause 2-17 of the NMIP is such a clause. For other standard terms, specific sanctions clauses may be customarily used together with them, such as the Joint Hull Committee’s standard clause being used with ITC conditions.
In case Members have any further questions regarding sanctions and Club cover, please contact the Club’s FD&D claims handlers.