The Missiles, manoeuvres and measures – a miscellany of new sanctions

Alongside brief commentary on recent developments, this article reviews some important but increasingly forgotten background matters.

Sanctions are part of the heavy artillery of economic warfare, and ban or curtail commerce in order to pressurise offending regimes. With severe penalties for breach they are strict - and often strict liability - provisions which can have a huge impact on trade.

Developments

On 2nd August the U.S. took further such steps against long standing targets Iran and North Korea and relative newcomer Russia. President Trump signed into law H.R. 3364, Countering America's Adversaries Through Sanctions Act (the “Act”) which requires the imposition of additional U.S. economic sanctions with respect to Iran, North Korea and Russia. The latter is revisited for its continuing activities in the Crimea and Ukraine and alleged involvement in the U.S. election, and the former two for missile development, which in North Korea’s case has more recently outpaced all measures, at least in seizing world headlines.

North Korea is so long and heavily sanctioned that (in terms of legal commentary) further ratcheting, which, following the apparent hydrogen bomb that North Korea is believed to have detonated underground on Sunday 3rd September, appears to be imminent, surely makes no difference. However, Russia sees a tightening of rules in place since only March 2014, and Iran is further sanctioned just after the second anniversary of the derestricting JCPOA and less than seven months beyond its Implementation Day.

Russia

The portion of the Act dealing with Russia is entitled Countering Russian Influence in Europe and Eurasia Act of 2017 (the “New Russia Sanctions Act”), builds upon existing Ukraine-related sanctions and effectively codifies them. By measures including asset-blocking, exclusion from the U.S. and direct financial steps, Russia faces new sanctions in respect of pipeline development, railway, metals and mining activities, defence and intelligence agency transactions, cybersecurity and certain crude oil projects. There is also specific adjustment to some of the main Crimea/Ukraine-related provisions, which are unusual in that, rather than forbidding certain activities, they restrict how they may be done. Under the previous measures it was lawful to deal with many of the listed entities, provided only that one allowed less than 90, or in some cases 30, days credit. A major change will reduce 30 days to 14 and 90 to 60.
  
The New Russia Sanctions Act also expands the scope of prohibited transactions with respect to the financial services and energy sectors (Sectoral Sanctions and their Directives), introducing a lower (to the previous 50% or more) threshold of interest of 33% or more for sanctions targeting. A Russian energy project, for example, in which a sanctioned person holds 33% or more interest will be a sanctions target.

Aimed at Russia’s financial system, these sectoral sanctions, as they are known, plainly mean that great care is needed when selling, or chartering out, to any affected entity. The contract or fixture must mandate payment of all sums (e.g. the purchase price, demurrage, deviation expenses and any freight balance) within the relevant period, or risk breach. The above would mean for example very careful consideration of common terms that make a freight balance payable a short time after the voyage.

Post charter (or other contract) follow-up must also be rigorous, and should involve procedures that prevent forbearance or informality evolving or simply slipping into an ancillary settlement deal allowing impermissible credit.

Iran

On 14th July 2015 the JCPOA was concluded. Adoption Day followed on 18th October, and Implementation Day three months later saw the lifting of all nuclear-related restrictions. But that is still subject to conditions and exceptions, and a number of other sanctions remain, including those concerning missile technology and weapons of mass destruction (WMD) sanctions (the restriction will continue to be in place until Transition Day in October 2023), arms embargo, alleged human rights abuses, activities connected to the so-called regional destabilization (Syria, Yemen) and restrictions regarding the trade control licensing requirements for export credit and (re)insurance for export to Iran of certain goods and technology related to nuclear items, graphite, metals and software designed for use in nuclear and military industries.

This theme continues; the section of the Act dealing with Iran is entitled Countering Iran's Destabilizing Activities Act of 2017 (the “New Iran Sanctions Act”) and builds upon existing U.S. sanctions against Iran, with further (largely blocking and exclusion) measures directed at the Revolutionary Guard, provisions that seek to counter the development of ballistic missile program, WMD and additional arms embargo.

Just as for Russia, a number of individuals and companies are wholly proscribed, such that it is illegal to deal with them at all. This is the list of Specially Designated Nationals - SDNs, in OFAC shorthand. Though probably imminent, there has been no further addition to this yet, and no relaxation, either. If people or bodies are caught by any current sanction structure, dealing with them remains unlawful. It makes no difference that sanctions that applied for some other reason have been lifted.

Nationality and territory

The key sanction trigger of “U.S. persons” was and remains expressly outside the JCPOA. Subject only to specific licensing, that lifting of nuclear-related sanctions is confined to "those directed towards non-U.S. persons", i.e. anyone/thing not within a detailed listing very much like, though not identical to, the OFAC definition.

The new measures define a “United States person”, again in a way that is similar but not the same. Thus, parties should, as previously, first carefully consider these provisions and identify what, and crucially who, their own relevant people or entities are.

It does not stop there. The existing and wide concept of "facilitation" finds echo here in extraterritorial provisions which penalise any “foreign person” (in essence not a “United States person”) who commits or causes a breach of the legislation and extensive other provisions referred to in it.

It must be remembered, too, that sanctions are specific in origin, and not universal in effect. For topical example, the U.S. sanctions Venezuela but the EU does not, and with Tunisia it is the other way round. Similarly here, the recent sanctions are by the U.S. There is nothing new from the EU.

In adding new measures, amending some previous rules and tightening others that have perhaps now become dangerously familiar, this legislation has added a further layer of complexity to an already difficult matrix. Parties should (i) ensure that their counterparty identity checks are thorough, so they know who they are dealing with (ii) measure their commercial activities against the new scope of sanctions and (iii) promptly seek advice if in any doubt.

OFAC will issue regulations implementing the new sanctions.

If you would like to discuss any point or topic in this article please contact Maryam Taher and Paris Pantelis.


Category: News


The Legal 500 2022 - M Taher & Co Solicitors again ranks among the leading UK shipping law firms

We are pleased to announce that we have maintained our ranking as one of the UK’s leading shipping law firms in the Lega...

Read More

Merry Christmas and Happy New Year

Dear Clients and Friends of the Firm,  We would like to wish you, colleagues and families happy and safe holiday...

Read More

The Legal 500 2021 - M Taher & Co Solicitors ranked again among the leading UK shipping law firms

We are delighted to have maintained our ranking as one of the UK’s leading shipping law firms in the Legal 500, and for ...

Read More

COVID-19 Announcement

Dear clients and friends of the firm,   Our office swiftly adapted its working arrangements to follow the govern...

Read More

The main marine impact of COVID 19

It may seem a lot further back, but just over 7 weeks ago on 31 December the first reports of what is now called COVID19...

Read More

Maryam Taher awarded the Freedom of the City of London

On 21 January Maryam Taher received the Freedom of the City of London at a formal ceremony at the Chamberlain’s Court. T...

Read More

2020 vision - Current core sanctions issues are a good guide to what next year will bring

Sanctions regimes continue to target countries who would otherwise be main players in the hydrocarbon and other commodit...

Read More

Volcafe v CSAV [2018] UKSC 61 - what changes are needed?

Introduction This landmark case concerns the burden of proof under rule 2 of Articles III and IV of ...

Read More

90 or 180, wind-down and legacy: Iran, 8 May and the JCPOA

Introduction   On 8 May 2018 President Trump announced US withdrawal from the JCPOA and phased reintroduction of ...

Read More

War - Whether, Where and What?

This article looks at one particular charterparty and also sale contract provision in a volatile and changing world. Eve...

Read More

Sanctions following the Salisbury incident?

We write to outline this firm's relevant expertise on matters that may now arise. There has been much media specu...

Read More

Fiona Trust v Privalov - Cross-undertakings in the context of Freezing Orders - the sting in the tail?

If a Claimant with a good arguable case shows that the Defendant will probably move his assets beyond reach, the courts ...

Read More

The Legal 500 2017 - M Taher & Co Solicitors ranked among the leading UK shipping law firms

We are delighted to have maintained, for the third consecutive year, our ranking as one of the UK’s leading shippin...

Read More

The Missiles, manoeuvres and measures – a miscellany of new sanctions

Alongside brief commentary on recent developments, this article reviews some important but increasingly forgotten backgr...

Read More

The “NEW FLAMENCO” - Causation and credit

Defendants often argue that their breach of contract created no loss, or that injury resulted at least partly from somet...

Read More

Important OFAC Iran FAQs update providing additional clarity as to what would happen in the event of a sanctions snapback under the JCPOA (M.4 and M.5)

Amidst increasing political tension and uncertainty as to the future of the landmark nuclear deal, OFAC issued on 15 Dec...

Read More

Latest Significant Court of Appeal Ruling

The Court of Appeal dismissed Grand China Logistics Holding (Group) Co Ltd appeal and upheld that the obligation to pay ...

Read More

The new Iranian Petroleum Contracts (IPCs)

Following Implementation Day, Iran has progressively increased its oils production from 814,000 barrels per day (bpd) to...

Read More

Legal 500, 2016-17 Edition

We are delighted to announce that M Taher & Co has again been recognised as one of the UK’s leading shipping firms i...

Read More

M Taher & Co participated in the 1st International Networking Congress held in Saint Petersburg and Moscow, Russia on 27th-29th June 2016

Our senior partner, Maryam Taher, attended a series of events, organised by the European Centre of Legal Cooperation (...

Read More

The EU prolongs the Economic Sanctions against Russia for an additional 6 months

On 1st July 2016, the EU Council prolonged the Economic Sanctions on Russia until 31st January 2017. The measures were i...

Read More

M Taher & Co attended Posidonia 2016

We were delighted to attend the “Posidonia 2016 International Shipping Exhibition” in Athens, Greece earlier this month....

Read More

Moscow City Bar Council in cooperation with the World Trade Organisation – Geneva 21st - 22nd March 2016 – Presentation on the "EU Sanctions in relation to Russia"

Maryam Taher was invited by the First Vice President of Moscow City Bar, Dr. Gerni Reznik, to give a presentation, on Tu...

Read More

Case T3/2014/2545 Sarkandi & Ors – v – Secretary of State for Foreign and Commonwealth

T3/2014/2545 Before Lord Justice Richards, Lord Justice Sullivan and Lord Justice McFarlane, The Queen on the applicatio...

Read More

Ocean Capital Administration and Others Re-listing

Further to our recent update about the EU Council's intention to re-list our clients, they have now done so. Please se...

Read More

EU set to re-impose sanctions on more Iranian shipping companies

Following the judgment of 22 January 2015 in Ocean Capital Administration GmbH and Others v Council of the European Un...

Read More

EU Council re-lists Gholam Hossein Golparvar for alleged connection with IRISL

Following the judgment of 12 December 2013 in Nabipour and Others v Council of the European Union (Case T-58/12) in whic...

Read More

Admission to the Roll

We are pleased to announce that on 8 January 2021 our trainee Helen Schlemminger was admitted to the Roll of Solicitors....

Read More

JCPOA Dispute Resolution Mechanism – Good move or gamble?

The ‘E3’ – the European participants in the Joint Comprehensive Plan of Action (‘JCPOA’) – have triggered the plan’s Dis...

Read More

What if there is no voyage?

Voyage charterparties often involve claims for demurrage, detention, deviation and other additional transit or port expe...

Read More

First Maritime Conference on Business Opportunities in Iran-Post Sanctions. Piraeus, Greece.

M Taher & Co Solicitors recently hosted the First Maritime Conference on Business Opportunities in Iran-Post Sanctio...

Read More

Nabipour and Others v Council of the European Union (Case T-58/12)

This case concerned an application for annulment in part of certain Council Decisions and Regulations in relation to Ira...

Read More

Good Luck Shipping LLC v Council of the European Union (Case T-57/12)

This case concerned an application for annulment in part of certain Council Decisions and Regulations in relation to Ira...

Read More

Islamic Republic of Iran Shipping Lines (IRISL) and Others v Council of the European Union (Case T-489/10)

This case concerned an application for annulment in part of certain Council Decisions and Regulations in relation to Ira...

Read More

Best UK Sanctions Firm 2021

We are delighted and honoured to have been awarded by SME News in the Legal Awards 2021 as: Best UK Sanctions Firm 2...

Read More

Publication of Updated Iranian Transactions and Sanctions Regulations

OFAC is amending the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR) to expand the scope ...

Read More

Trade Receivables Securitisation – How to undertake a Survey or Audit

Understanding the key processes and adhering to best practice is essential for the smooth and successful completion of a...

Read More

M Taher & Co Solicitors’ 10 Year Anniversary Reception

M Taher & Co marked the success of the last 10 years with a champagne reception at the Fishmongers’ Hall on Tuesday ...

Read More

Courts’ semantic wrangling comes to an eventful end - Lloyd’s List

A commonly used phrase in insurance policies provokes a yawning gap in interpretation. TAKE this simple aggregation word...

Read More

The Khian Sea waste disposal incident

On August 31, 1986, the cargo ship Khian Sea, registered in Liberia, was loaded with more than 14,000 tons of non-toxic ...

Read More

A long journey

A container ship travels the equivalent of three-quarters of the way to the moon and back in one year during its regular...

Read More

Where the term Charter-party comes from?

For hundreds of years, written contracts covering the leasing of a ship have been known as “charter parties.” The term “...

Read More

The Team

We are an international law firm based in the Lloyds Building, the world's leading centre for insurance, in the heart of the financial district in the City of London.

Read More