MARITIME SANCTIONS CLAUSES
Richard L Kilpatrick Jr*
Geopolitical challenges are increasingly driving regulatory authorities to employ economic sanctions impacting maritime commerce. These targeted measures, including import and export restrictions and prohibitions on financial services, have mobilised commercial maritime actors to enhance compliance initiatives and adopt innovative contractual risk mitigation techniques. Proactively addressing the possibility of sanctions exposure, shipping industry participants have begun incorporating “sanctions clauses” into commercial agreements, including charterparties, bills of lading, and policies of marine insurance. Exploring this practice, this paper examines sanctions clauses in popular use, analyses recent court decisions evaluating their effectiveness, and offers observations (along with some warnings) on successfully managing maritime sanctions risk by contract.
As regulators increasingly utilise targeted economic sanctions in response to geopolitical challenges, this is creating critical implications for the shipping industry. Deriving from multilateral institutions such as the United Nations and the European Union, or individual states acting unilaterally, sanctions seek to achieve strategic outcomes through coercive regulatory techniques restricting private sector activities. The potency of these measures varies from narrow restrictions on commercial engagement with designated entities to sweeping bans on the trade of certain commodities and services. As policymakers have surveyed the global landscape for economic pressure points, a recent trend has emphasised a technique of limiting access to maritime transport. This approach has generated complex regulatory burdens and exposed shipping industry participants to a distinctive form of geopolitical risk.
Commercial maritime actors have responded by enhancing compliance programmes to avoid violations and reduce the likelihood of harsh enforcement penalties. Yet sanctions compliance has proved a formidable task, requiring industry participants to stay abreast of a web of evolving, politically sensitive, and sometimes fragmented regulatory regimes. Contemplating the possibility of inadvertently running afoul of sanctions, commercial actors have also paired compliance initiatives with innovative risk-shifting techniques. To this end, shipowners, charterers, container lines, insurers and others have begun