Mike J C Salthouse, Chairman, International Group Sanctions Committee & Global Director (Claims), North P&I Club
Posted on: 12 October 2020
In July 2020 the UK Government, Office of Financial Sanctions Implementation (OFSI) produced a guide for the Maritime industry. Following hot on the heals of the recent US Government Maritime Advisory published in May, many will wonder whether the UK Government publication assists industry or simply introduces another layer of complexity for those striving to keep up to date with a bewildering array of sanctions legislation.
The International Group of P&I Clubs of course welcomes any initiative by Government that seeks to introduce clarity as to what is and is not permitted by way of compliance; and it is reassuring to see that much of what is said mirrors the earlier US Advisory. However, in doing so the Guidance – in the same way as the earlier US Advisory – over emphasises the value of certain practices as an aid to compliance. Specifically, the UK guidance emphasises the importance of an unexplained loss of an AIS signal and Ship to Ship cargo transfers as indicators of possible sanctions breaking. The Guidance also suggests that parties should consider the use of so called AIS switch off clauses in their contractual arrangements.
The Guidance is right to highlight such practices as indicators of possible sanctions breaking activity but in common with the US Advisory ignores the practical difficulties in doing so. There are many reasons why an AIS signal may be lost and attaching contractual consequences to the loss of a signal can create contractual uncertainty. Similarly, STS operations are routine and whist it is right to question them in certain circumstances both the Guidance and the Advisory ignore the difficulties in verifying an explanation for such activities when it is provided in response to a challenge. The reality is that deliberate sanctions breakers don’t normally admit the true purpose of their activity and given that neither the switching off of AIS equipment or an STS operation is unlawful it is difficult to know what action the US and UK Governments expect shipowners to do in response to the explanation provided.
An area of obvious difference between the two documents lies in their treatment of Iran. Both documents ignore the fact that following the US withdrawal from the JCPOA in May 2018 European businesses previously engaged with Iran have been placed in an impossible position, either breaking EU law should they respect US secondary sanctions or US law should they continue to perform contracts legalised following the relaxation of sanctions by the JCPOA. Business deserves better from both the UK and the US governments than for that inconsistency to be ignored. A properly constructed compliance procedure does not have that luxury.
The inconsistent application of sanctions is a problem that is only going to grow in complexity and scale for business. If two allies can produce contradictory sanctions regimes, then it is only a matter of time before nations that do not share a US / UK view of the world introduce their own counter sanctions. For shipowners and the maritime industries that will create an impossible compliance burden.