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Reed Smith briefing on Russia sanctions

Posted on: 2 March 2022

Global law firm Reed Smith’s shipping lawyers comment on the current situation with regards to the latest Russia sanctions and the impact on the shipping and commodities industries and more generally.

Partner Nick Austin said: “There is no doubt that the developing sanctions landscape is going to have a major impact on large parts of the shipping industry. But the devil will be in the detail. The market will have to keep close tabs on the regulations as they are published by the authorities. The market is scrambling to get to grips with what the sanctions mean in practice, and the steps they need to take.

“Related industries in the region that rely on shipping, like the bunker supply market, may also be affected given their traditional reliance on credit, and in the face of the co-ordinated global approach to isolate Russia and its financial sector.

“Owners and charterers are looking closely at their fixtures to understand their legal rights under traditional “war clauses”. But these provisions come in different shapes and sizes, and so need to be carefully reviewed.

“The picture is developing rapidly, but the scope and severity of the sanctions is likely going to be felt by the shipping industry for some time.”

Partner Sally-Ann Underhill said: “The recent sanctions have had a huge impact on the shipping industry, and the transportation sector in general. Whilst the world has been used to sanctions against Russia, for some time, the new sanctions go a step further.

“The U.S. sanctions are broad reaching on finance and trade. The complexity of the position and the different approaches between the U.S., EU and UK sanctions mean that each case has to be considered on its own facts. The impact of vessels not being allowed into UK ports is that owners and cargo interests are struggling to work out what to do with their vessels and cargoes. Payment is becoming difficult and is likely only to get worse as matters progress. Credit terms need to be considered carefully.

“But the issues go much further. War risk clauses, safe port provisions and force majeure / exceptions clauses are all coming under scrutiny. Owners with Russian crew on board are considering what steps they need to take and what difficulties they may face at certain ports. And those with Ukrainian crew on board are facing issues when their crews ask to be repatriated.

“Redelivery is also becoming an issue again as rates rise and charterers decide to keep vessels even when notices of redelivery have been tendered.”

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