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Getting The Deal Through

Global overview

Kevin Cooper, Vaughan Wise-Dolpire and Freddie Courtney

MFB Solicitors

Thursday 09 August 2018

Global sanctions

The impact of international sanctions on the global maritime industry has remained a hot topic, particularly following the lifting of certain sanctions against Iran in January 2016 and the US Trump administration’s recent decision to withdraw from that agreement, the recent thawing of relations between North Korea and the international community and Brexit. Indeed, the blockade of Qatar in 2017 by Bahrain, Saudi Arabia and the UAE, among other countries, in what was said to be a response to Qatar’s support of terrorism, is a comparatively recent example of how economic and political measures can have a significant impact on the shipping industry.

In broad terms, the primary global sanctions regimes are as follows.


On 16 January 2016, Implementation Day, the European Union and the United Nations lifted a number of sanctions against Iran in accordance with the Joint Comprehensive Plan of Action (JCPOA). The JCPOA was signed by the EU3+3 (France, Germany and the United Kingdom and China, the Russian Federation and the United States), following Iran’s agreement not to seek, develop or acquire any nuclear weapons. ‘Snap back’ provisions within the JCPOA allowed for the reintroduction of sanctions if Iran breached the commitments it has made. The ‘snap back’ provisions would not apply with retroactive effect to contracts executed in accordance with the JCPOA during the period of sanctions relief.

The EU adopted several legal actions that implement the JCPOA through UN Security Council Resolution 2231 (2015). These amended the main EU legislation dealing with nuclear-related activities in relation to Iran, namely Council Decision 2010/413/CFSP and Regulation (EU) No. 267/2012. These amendments lifted restrictions against Iran in the following sectors:

  • financial, banking and insurance;
  • oil, gas and petrochemicals;
  • shipping, shipbuilding and transport; and
  • precious metals and currency.

Once the restrictions had been lifted, EU entities began legal trading to Iran, including with Iranian entities. That said, some restrictive EU measures remain in place (but these relate largely to military goods: weapons and items that might be used for internal repression) and some entities and individuals remain listed. This has meant a need for all trades related to Iran to be checked to ensure that they comply with the remaining sanctions.
While this is a positive step for EU entities looking to trade or work with Iran, it is important to be alert to the fact that the US only lifted extraterritorial, or ‘secondary sanctions’. Then, on 8 May 2018, President Trump announced the US’s withdrawal from the JCPOA as a result of which, after a wind-down period, the US would reimpose sanctions that were lifted when the JCPOA was implemented. At the time of writing, the effect of this is yet to be felt, but it is likely to largely impact non-US businesses, as it is re-imposing ‘secondary’ sanctions on persons and companies outside the US dealing with Iranian entities. Indeed, as a result of the US administration’s decision, larger container lines have announced their intention to wind down their operations in Iran and, in the shipping sector, the US’s withdrawal from the JCPOA is likely to have a particular effect on insurance, those involved in the carriage and trade of petroleum products and shipbuilders.


The EU has maintained restrictive measures against Syria. These restrictions include a number of export and import bans, such as a ban on the import, purchase and transport of crude oil and petroleum products from Syria. There are also restrictions on investment, including a ban on investment in the Syrian oil industry. Restrictions affecting the transport sector include an obligation for EU member states to inspect vessels and aircraft if there are reasonable grounds to believe they carry arms, related material or equipment that might be used for internal repression. The US also has sanctions in place against Syria that affect dealings by US persons or those within the jurisdiction of the US.


In July 2014, EU Regulation 833/2014 came into force, imposing economic sanctions on Russia. These were enforced as a consequence of Russia’s failure to comply with EU demands regarding the annexation of Crimea and Sevastopol. This regulation targeted the military, oil and financial services industries and was further amended by EU Regulation 960/2014 in September 2014 and EU Regulation 1290/2014 in December 2014.

The regulation prohibits the following:

  • making available, directly or indirectly, a wide range of technologies (primarily used in energy projects) originating inside or outside the EU, to anybody in Russia or to anyone outside Russia for use in Russia, without prior authorisation;
  • providing, directly or indirectly, associated services necessary for certain categories of exploration and production projects in Russia (including its exclusive economic zone and continental shelf); and
  • to directly or indirectly purchase, sell, provide investment services or assistance in the issuance of, or otherwise deal with, transferable securities and money-market instruments with certain maturities in relation to certain entities that have been designated as subject to sectoral sanctions.

In addition to the above, an EU-wide asset freeze and travel ban was also imposed in March 2014 on those undermining the territorial sovereignty or security of Ukraine and those supporting or doing business with them under Regulation (EU) No. 269/2014, and in relation to those responsible for misappropriating state funds pursuant to Regulation (EU) No. 208/2014. These targeted asset freezes and travel bans on Russia/Ukraine were subsequently extended and were not due to expire until 15 September 2018.

Similarly to the EU, the US has also imposed sanctions on certain sectors in Russia, in addition to sanctions against certain individuals and entities.


Pursuant to UN General Assembly Resolution 68/262 of 27 March 2014, Crimea and Sevastopol continue to be considered part of Ukraine. EU authorities have continued to condemn what is considered to be the illegal annexation of Crimea and Sevastopol, with restrictions having been introduced in response to this annexation, which try to restrict trade and assistance to the region, including assistance to the energy industry in the territory.

Various legislation has been imposed by the EU in relation to Crimea/Sevastopol. In December 2014, the latest EU Regulation on Crimea/Sevastopol came into effect (Regulation (EU) No. 1351/2014). The restrictions contained in this regulation have replaced a number of the earlier restrictions, and are more extensive in scope.

Pursuant to the current restrictions, it is prohibited to import goods into the EU that have originated in Crimea/Sevastopol, and to provide direct or indirect financing or financial assistance, insurance and reinsurance related to such import.

It is also prohibited to sell, supply, transfer or export certain goods and technology to any natural or legal person, entity or body in Crimea/Sevastopol or for use in Crimea/Sevastopol that relate to the following industry sectors:

  • transport;
  • telecommunications;
  • energy; and
  • the prospecting, exploration and production of oil, gas and mineral resources.

In addition, it is prohibited to provide technical assistance, or brokering, construction or engineering services directly relating to infrastructure in Crimea/Sevastopol and to provide services directly related to tourism activities in Crimea or Sevastopol. There are also a number of restrictions that curtail investment in Crimea/Sevastopol, including restrictions on real estate in the region, ownership or control of entities in Crimea/Sevastopol and the creation of any joint venture.


The EU, UN and US have all imposed sanctions against the Democratic People’s Republic of Korea (North Korea).

The EU restrictions are wide-ranging and include, among others:

  • requirements for cargo inspections on all cargo going to or from North Korea by sea or air, or which has been brokered or facilitated by North Korea or its nationals, or which is being transported on North Korean flagged aircraft or maritime vessels;
  • a prohibition on North Korea and its nationals from chartering aircraft or maritime vessels, a prohibition on member states or their nationals from providing crew services to North Korea;
  • a restriction on providing helicopters and vessels to North Korea;
  • a prohibition on the import of petroleum products from North Korea;
  • prohibitions on the transfer of funds to and from North Korea unless the funds are for a specific purpose listed in the Regulation;
  • a prohibition on the transfer of funds to or from North Korea unless they fall within a specific exception;
  • a prohibition on investment in certain commercial activities and financing and financial assistance for trade with North Korea; and
  • a prohibition on services incidental to mining or manufacturing in the chemical, mining and refining industry.

There are various other prohibitions and restrictions and anyone considering doing business with a North Korean connection should review the legislation carefully. At the time of writing, the recent thawing in relations between North and South Korea, and the intervention of the US Trump administration, may result in an easing of sanctions over time.

EU sanctions post-Brexit

The UK’s departure from the EU is likely to have an impact on the sanctions landscape. While nothing is likely to change in the immediate future (as with other areas of EU law, the UK will continue to implement EU regulations after the UK has officially notified the EU of its wish to leave the EU), going forwards, the UK is likely to be able to decide its own economic sanctions but will be unable to influence the decisions of the EU. This may well add an additional layer of complexity.

While it is not clear what path the UK will take in relation to sanctions post-Brexit, it is probable that the UK will continue to favour the use of economic sanctions as a tool of foreign policy. Indeed, it was announced in June 2017 that a new international sanctions bill would form part of the UK’s post-Brexit legislative programme. Further, without the need to achieve agreement between all the EU member states, the UK will be free to impose whatever restrictions it considers to be appropriate, and will be able to act quickly.

Whatever happens in the UK/EU discussions, it is clear that the sanctions landscape will remain a complex one. Compliance officers, particularly those working in companies affected by UK jurisdiction, will now have to contend with potentially differing US, EU and UK sanction regimes.

Environmental measures

The global shipping industry continues to promote a range of initiatives aimed at minimising damage to the environment from shipping.

The Ballast Water Management Convention 2004 came into force on 8 September 2017. The convention requires ships to manage their ballast water to remove, render harmless, or avoid the uptake or discharge of aquatic organisms and pathogens within ballast water and sediments. The aim is to halt the spread of invasive aquatic species that can have an adverse effect on local ecosystems and affect biodiversity.

The International Maritime Organization’s (IMO) International Code for Ships Operating in Polar Waters (the Polar Code) entered into force on 1 January 2017. The IMO has stated that the Polar Code is intended to cover the full range of shipping-related matters relating to navigation in waters surrounding the two poles:

  • ship design, construction and equipment;
  • operational and training concerns;
  • search and rescue; and
  • the protection of the unique environment and eco-systems of the polar regions.

In October 2016, the IMO Marine Environment Protection Committee agreed that IMO member states should develop a road map to reduce CO2 emissions from the international shipping sector in line with the Paris Agreement adopted by the parties to the UN Framework Convention on Climate Change. The aim was to agree and adopt a strategy to reduce greenhouse gas emissions from ships, with a revised strategy expected to be adopted in 2023. The IMO met in London in 2018 and the agreement reached represented a significant change in climate ambition for a sector that represents 2–3 per cent of global carbon dioxide emissions. It set an emission pathway of ‘at least’ 50 per cent of 2008 levels by 2050, with the ambition of increasing the cut towards 100 per cent after 2050 if possible. It signals to the industry the clear need for a move away from reliance on fossil fuels: from the 2030s we can expect new oceangoing vessels to be powered by zero-carbon renewable fuels. Also in October 2016, the IMO adopted a global CO2 data-collection system for ships, which came into force on 1 March 2018, requiring the fuel consumption of all major vessels to be reported and totalled, intended to provide the IMO with far more accurate fuel consumption data.

Ship recycling

Ship recycling is also on the rise, partly owing to overcapacity in the market, but also due to regulatory pressures. However, ship recycling raises environmental concerns. According to the European Maritime Safety Agency, most ship recycling takes place in South Asia, often on tidal beaches and in dangerous conditions that lead to health risks and extensive pollution of coastal areas. Furthermore, old ships contain many hazardous materials, including asbestos, PCBs and large quantities of oil and oil sludge. As a result, there have been a number of international regulatory initiatives designed to ensure that ship recycling is done in an environmentally sound manner.

The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (the Basel Convention) is an international treaty that came into force in 1992. It aims to reduce hazardous waste generation and promote environmentally sound management of hazardous wastes, wherever the place of disposal. It also aims to restrict the transboundary movements of hazardous wastes, except where this is perceived to be in accordance with the principles of environmentally sound management. The exact regulatory requirements are, however, dependent on the national law of each contracting state party. The Basel Convention also permits party states to impose additional requirements to those laid down by the Basel Convention, in order to better protect human health and the environment.

In addition, The Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships (the Hong Kong Conven­tion), an IMO convention, was adopted on 15 May 2009 but is not yet in force. It will enter into force 24 months after ratification by 15 states representing 40 per cent of the world’s merchant shipping by gross tonnage, provided that those states’ combined maximum annual ship recycling volume is not less than 3 per cent of their combined tonnage. Nonetheless, the IMO has issued several guidelines to assist member states with the early implementation of the convention. The Hong Kong Convention focuses on environmentally sound recycling. Among the main requirements are:

  • the performance of an initial survey to verify and produce the inventory of hazardous materials;
  • a ship-specific recycling plan; and
  • the recycling must take place at an authorised ship recycling facility.

In the EU, on 30 December 2013, the Ship Recycling Regulation (EU) No. 1257/2013 entered into force, with the aim of reducing the negative impact linked to the recycling of EU-flagged ships. The regulation was based on the Hong Kong Convention and was designed to implement the convention quickly, without waiting for its ratification and entry into force. In addition, on 19 December 2016, the European Commission issued Decision (EU) No. 2016/2323 establishing the European list of ship-recycling facilities pursuant to the Ship Recycling Regulation. The regulation provides, among other things, that ships flying the flag of an EU member state can only be recycled at one of the facilities included in the list. In order for a facility to be approved and included in the list, it must comply with the requirements set out in the regulation. The first edition of the list, published in December 2016, included 18 European recycling yards considered to be safe for workers and environmentally sound in accordance with the regulation’s requirements. However, the European Community Shipowners’ Association argued for ship recycling facilities in non-EU countries to get EU recognition in order to raise standards worldwide. On 7 May 2018, the European Commission published a new list containing 21 facilities within the EU but, so far, all applications from non-EU facilities are still being considered.

Cybersecurity measures

The extensive ransomware attack that hit almost 100 countries in May 2017 is only one of many incidents that have highlighted the increased global cyber threat in recent years. Indeed, that attack was soon followed by the Petya cyber-attack in June 2017 that affected a number of large companies around the world, including the Danish transport and logistics group AP Moller-Maersk. The cyber-attack was reported to have resulted in the shutdown of the group’s IT systems in multiple offices çaround the world.

In 2017, the IMO Maritime Safety Committee approved various measures intended to enhance maritime security, including adopting a resolution that cyber risk management form part of ships’ safety management systems going forward. This was followed by BIMCO’s revised cybersecurity guidelines. Among other things, the second edition includes guidance on:

  • the need to ensure appropriate insurances are in place to deal with any losses arising from a cyber incident;
  • how to ensure an effective response to such an incident, including having a team of personnel or external experts in place to take the appropriate action; and
  • how to effectively segregate networks on board.

The Trump administration has also made it clear that cybersecurity is one of its top priorities.

The General Data Protection Regulation

Owing to the recent wealth of ‘resubscribe’ emails, companies and individuals even outside the EU will be aware of the introduction, on 25 May 2018, of the EU’s General Data Protection Regulation, which governs the control and processing of personal data. It applies to processing carried out both by organisations operating within the EU and those outside the EU that offer goods or services to individuals in the EU, and is intended to harmonise data privacy laws across Europe, as well as to give greater protection and rights to individuals. Breaches can result in large fines and it has been reported that the purchase of cyber insurance has been boosted by companies’ concerns about cyber-attacks leading to breaches.

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