INSIGHT: Iran Sanctions
Latest changes & additions
On 8 May 2019 Iran has suspended its commitments under the JCPOA to sell surplus of enriched uranium in exchange for natural uranium, and to make excess heavy water available on the open market. Iran urged the E3, Russia and China to fulfil their banking and oil commitments to Iran in the next 60 days, otherwise Iran may not respect the current limits on uranium enrichment and may take measures to modernise the Arak heavy water reactor and suspend implementation of other obligations under the JCPOA. More details in Press Release.
Period after 8 May 2019
The one year anniversary of the withdrawal from the JCPOA was marked by a further significant escalation of US Sanctions against Iran, the target on this occasion being the iron, steel, aluminium, and copper sectors which the White House has described as Iran's largest non-petroleum related source of export revenue. Executive Order issued on 8 May 2019 authorised blocking sanctions against persons engaged in any of a wide range of activities which support these industries. The new measures apply to "any person" and are not limited to US persons.
On 7 August 2019 OFAC amended the Iranian Sector and Human Rights Abuses Sanctions Regulations to implement the Executive Order 13871, “Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran”.
This amendment marks the end of a wind-down period expiring on 6 August 2019. Regulations also expand sanctions by blocking all property and assets in the US of any entity/person:
- operating in iron, steel, aluminium or copper sector of Iran; or
- engaging in transactions for sale/supply/transfer to Iran of goods and services used in connection with these sectors; or
- engaging in transactions for purchase, sale, transport, marketing from Iran of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products; or
- materially assisted, provided financial material or technological support to such entities/persons.
The E.O. also opens for imposing sanctions on foreign financial institutions if they have after 8 May 2019 conducted or facilitated any transaction prohibited under the E.O.13871.
OFAC also published several new FAQs related to the E.O. 13871.
On 24 June 2019, President Trump issued a new Executive Order implementing another set of sanctions targeting Iran.
The latest sanctions place the Supreme Leader of Iran, the Supreme Leader's Office, certain individuals associated with it as well as a number of senior Iranian military commanders on the SDN list. US property belonging to the people and entities added to the SDN list is now blocked, and foreign persons or financial institutions who transact with these people or entities may also be sanctioned.
Articles post 8 May 2019:
Debevoise & Plimpton
New US Sanctions Target Non-US Firms' Transactions with Iran's Metal Sector
13 May 2019
Freehill Hogan & Mahar LLP
New US sanctions against Iran affect metals sectors
9 May 2019
Period after 5 November 2018
On 25 March 2019, the US Treasury department published the OFAC Advisory to the Maritime Petroleum Shipping Industry. This repeats the US commitment to aggressively target those involved in activities which are sanctionable under US law, highlights "Deceptive Shipping Practices" and sets out its expectations regarding the risk mitigation measures.
The Advisory identifies deceptive shipping practices including disabling Automatic Identification System (AIS). More information on AIS monitoring including implications for P&I cover is available here.
OFAC issued an amendment to the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR), in furtherance of the President’s 8 May 2018 decision to cease the United States’ participation in the Joint Comprehensive Plan of Action. This regulatory amendment became effective from Monday 5 November 2018 which marked the end of 180-day waiver period. The United States intends now to fully enforce the sanctions that have come back into effect (that were waived or lifted in connection with JCPOA). The regulation re-lists as SDNs individuals and entities that were previously listed under E.O. 13599, including 50 banks, NIOC; NICO or any entity owned or controlled by those. Full list of designations made on 5 November 2018 is available here.
OFAC also issued updated FAQs relating to the end of 180-day wind-down period. The provision or delivery of goods or services and/or the extension of additional loans or credits to an Iranian counterparty after 4 November 2018 — even pursuant to written contracts or written agreements entered into prior to 8 May 2018 — may result in the imposition of US sanctions.
US also sanctions providing SWIFT banking/payment services to sanctioned Iranian financial institutions. In practice, banks refuse to handle any financial transactions with an Iranian nexus.
FAQ643 specifically addresses the issue of payment of (re)insurance claims made after 5 November 2018 but arising from an incident that occurred prior to that date. OFAC advises that such payments may create sanctions exposure if for example they involve a sanctioned entity.
FAQs confirm that exemption for sale of agricultural commodities, food, medicine or medical devices to Iran is valid.
In November 2018 Significant Reduction Exemptions (SREs) of 180 days' duration were given to eight countries, China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey, enabling them to continue to import of petroleum and petroleum products from Iran pursuant to section 1245(d)(4)(D) of the NDAA 2012. On 22 April 2019, the State Department announced in a Press Statement that the SREs would not be extended and will expire on 2 May 2019. Informal guidance provided by the State Department suggests that voyages commenced before but not completed by 2 May may not be protected by the SREs.
Period 8 May - 4 November 2018
On 7 August 2018 in light of US decision to cease participation in the JCPOA as announced on May 8, 2018, the President Issued New Executive Order «Reimposing Certain Sanctions with Respect to Iran" OFAC has published new FAQs relating to today's Executive Order and updated existing FAQs. The 90-day wind-down period announced on 8 May 2018 expired on 7 August 2018 and the 180 period expired on 4 November 2018.
More information is available on US Treasury's website here.
8 May 2018 announcement
On 8 May 2018 President Trump announced his decision to end the US participation in the JCPOA. It was apparent from the OFAC FAQs issued on the same date that the administration intended to restore sanctions which were in force prior to Implementation Day on 16 January 2016, reversing the relief agreed to by the previous administration in the JCPOA. This included the restoration of secondary sanctions against non-US entities, and targeting of Iranian shipowners and ships, transactions involving crude oil, petroleum products and petrochemicals and relisting over 400 entities individuals and ships on the SDN List. The wind-down period for most shipping related sanctions expired on 4 November 2018.
Parties to pre-8 May contracts were expected to use this period to wind down their Iran-related activity and "new business" entered into after 8 May mostly fell outside of the scope of the relief and owners seeking to enter into contracts after 8 May were urged to seek specialist legal advice.
The remaining parties to the JCPOA (France, Germany, UK, EU, Russia and China) pledged to support the Agreement – see EU below.
The snap back of US sanctions have had a major effect on shipowners and their insurers.
The comments below and elsewhere in INSIGHT should be read in the light of the important developments consequential upon the 8 May announcement.
Articles post 8 May 2018:
United States fully reimposes secondary sanctions on Iran
13 November 2018
Iran sanctions: The English Court steers a course
16 October 2018
Iran Sanctions: Steering a course through difficult waters
30 August 2018
Freehill Hogan & Mahar
Executive Order re-imposes the U.S. secondary sanctions against Iran
14 August 2018
Freehill Hogan & Mahar
US withdraws from Iran nuclear deal secondary sanctions against Iran re-imposed
14 May 2018
Re-Imposing U.S. Sanctions on Iran: Key Issues for Global Business
11 may 2018
Clyde & Co
The JCPOA: The New US Position is Now Clear . . . Sort of
10 May 2018
Trump pulls out of Iran nuclear deal: Sanctions reimposed
10 May 2018
The Trump Administration Pulls the Plug on the Iran Nuclear Agreement
9 May 2018
After announcement by President Trump on 8 May 2018, EU confirmed that it continues to support JCPOA. On 6 June 2018 European Commission published amended version of the Council Regulation (EC) No 2271/96. The updated EU Blocking Statute came into force on 7 August 2018, see Commission Delegated Regulation (EU) 2018/1100.
The Blocking Statute allows EU operators to recover damages arising from the extra-territorial sanctions within its scope from the persons causing them and nullifies the effect in the EU of any foreign court rulings based on them. It also forbids EU persons from complying with those sanctions, unless exceptionally authorised to do so by the European Commission in case non-compliance seriously damages their interests or the interests of the Union.
To assist EU operators with the implementation of the updated Blocking Statute, the Commission has published a Guidance Note to facilitate the understanding of the relevant legal acts as well as a document explaining its effect (EU Commission Q&As).
On 31 January 2019, France, Germany and the UK (together, the E3) announced the creation of Instrument for Supporting Trade Exchanges (INSTEX) – a Special Purpose Vehicle for facilitating legitimate trade between European businesses and Iran.
The E3 Joint Statement notes that INSTEX will focus "initially on the sectors most essential to the Iranian population – such as pharmaceutical, medical devices and agri-food goods", and that its long term aim is for it to open up to "economic operators from third countries who wish to trade with Iran".
As the situation remains very complex, we encourage members considering any transactions with Iranian element to carry out thorough due diligence and seek legal advice.
On 16 January 2016 International Atomic Energy Agency verified implementation by Iran of the nuclear-related measures under the JCPOA and the "Implementation Day" was announced.
In practice it means that most of the sanctions imposed by the EU on Iran are now lifted, see Council Decision (CFSP) 2016/37 as well as "secondary sanctions" imposed by the US, please see US announcement here.
The continuing primary sanctions against US reinsurers created a risk of a potential shortfall on the International Group's reinsurance programme. The IG arranged "fall-back" cover as a short term solution (see IG Circulars published on 19 March 2016 and 14 April 2016). The removal of US domiciled reinsurers from the IG programme from 20 February 2017 removed the need for fall-back cover. Resolving the risk of reinsurance shortfall was greatly assisted by "General License H" which has been revoked by OFAC on 27 June 2018 and replaced with a new general license authorising wind down of transactions previously permitted under General License H by 4 November 2018.
Main changes in the EU sanctions:
- Prohibition on trading with Iran in dual-use equipment, precious and other listed metals, diamonds and graphite replaced with prior authorisation
- Prohibition on transactions relating to Iranian oil & gas industry and related services; provision of bunkering and supply services to Iranian vessels and software has been removed
- Prohibition on providing insurance and reinsurance in Iran and to Iranian persons has been removed
- Prohibition on fund transfers to and from Iran has been removed
- Most of the listed companies and persons under Iran sanctions are de-listed (from ca. 93 people and 467 entities to 29 and 94 respectively)
Please note that listings under anti-terrorism and human-rights sanctions will remain in force as well as arms embargo.
Main changes in the US sanctions:
- "Secondary sanctions" on Iran primarily targeting non-US persons conducting business with Iran, including energy, banking, shipbuilding and shipping sanctions are removed
- Primary sanction for US persons and companies remain in place (including USD clearance, provision of US origin goods). Exemptions apply to few areas such as food, medicine and the aviation sector
- Anti-terrorism, human rights sanctions as well as arms embargo remain in place
As noted at the top of this page, the removal of secondary sanctions will be removed in accordance with Trump's announcement on 8 May 2018.
US domestic law also required the President to certify Iran's compliance with the JCPOA at 90 day intervals.
The EU and US reserved the right to "snap back" sanctions on Iran if Iran is found to have violated its obligations under JCPOA.
As US retains its "primary sanctions", US insurers and reinsurers may be unable to meet their obligations and pay a claim with an Iranian nexus. This could apply to both Iranian vessels and any other vessel having a casualty or claim in Iran, or with an Iranian connection. Under our Rules and Terms & Conditions (Rule 32.6, Article 26.1.5 in Owners Fixed T&C; 25.1.6 in the Charterers T&C; 18.2 in Offshore T&C and 35.2 in Yachts T&C), the shortfall from reinsurance is not recoverable - for mutual entries, see IG information above.
Banks have historically adopted a very conservative approach when it comes to Iran and this has continued even after Implementation Day. Many banks refuse as a matter of policy from processing any transactions with any kind of connection to Iran.
It is important to ensure appropriate due diligence measures are undertaken before engaging in any activity. You should consider whether transaction involves a designated person or entity; whether a certain trade product or material is restricted, and how and to whom payments will be made.
Iran will remain a difficult place to do business so if in doubt you should seek legal advice. It is also recommended to consider including a contract clause permitting either suspension or termination of the contract in the event new sanctions are imposed.
How individual members will be affected will depend on a wide variety of factors and it is not possible for this website to provide comprehensive or conclusive advice. The intention is to provide some general comments, convenient access to relevant materials and news of latest developments. Members should not act in reliance solely on the information provided here. They must make their own enquiries and take legal advice which can take account of their circumstances.
Members should also note that any loans granted on the security of their vessels are likely to include a requirement that insurance is at all times maintained on conditions acceptable to their bank.
JCPOA - Joint Comprehensive Plan of Action - July 2015
On 14 July 2015, the six states involved in negotiations with Iran (US, Russia, China, UK, France and Germany together with the EU - known initially as "P5+1" and later as "E3/EU+3") announced a diplomatic agreement on a Joint Comprehensive Plan of Action (JCPOA) which opens the way for the restoration of trade activates with Iran by lifting the trade, energy, insurance and banking embargoes that have been incrementally imposed by the EU and US since 2009.
The Plan provides for extensive relief from existing sanctions and details are set out in Annex II of the JCPOA. However, the lifting of sanctions will happen in stages and subject to certain requirements being met. On 18 October 2015 all the parties to JCPOA have formally adopted the deal ("Adoption Day"). Details of the implementation process are contained in Annex V of the JCPOA.
On 16 January 2016 after verification by the International Atomic Energy Agency of nuclear-related measures implemented by Iran, Implementation Day was announced. It means that Iran has met its commitments under the deal and the EU and US lifted the sanctions as agreed under JCPOA.
In practice it means that most of the sanctions imposed by the EU on Iran are now lifted, see Council Decision (CFSP) 2016/37 as well as "secondary sanctions" imposed by the US, please see US announcement here.
For more details on changes in EU and US sanctions see respective tabs "US" and "EU".
It is important to remember that JCPOA contains a snap-back provision, allowing the EU and US to reinstate sanctions related to Iran nuclear program. The snap-back will not be introduced momentarily as JCPOA has an inbuilt Dispute Resolution Mechanism. Sanctions will not apply with retroactive effect. In case of snap-back contracts concluded while relief was in place, will be allowed some time to wind down, however, there will be no grandfathering of contracts enter before snap-back.
The next milestone in JCPOA is Transition Day, which will occur either (a) eight years from Adoption Day (that is to say eight years from 18 October 2015) or (b) upon a report from the IAEA, together with confirmation from the UN Security Council, that all nuclear material in Iran remains in peaceful activities, whichever is earlier. Transition Day will mark the next stage in the easing of sanctions, when further terminations and amendments will be made.
'UN Security Council Resolution (UNSCR) Termination Day' will occur ten years from Adoption Day (that is to say ten years from 18 October 2015), provided that the provisions of previous resolutions have not been reinstated. On this day, all provisions and measures imposed by the UN Security Council will terminate, and the UN Security Council will no longer be seized of the Iran nuclear issue.
Within this timeframe, the E3/EU+3 (or the P5+1) will meet at the ministerial level every two years, or earlier if needed, in order to review and address progress and to adopt appropriate decisions.
United Nations (UN)
On 20 July 2015 the Security Council unanimously adopted Resolution 2231/2015 endorcing the JCPOA.
Resolutions 1696 (2006), 1737 (2007), 18093 (2008), 1835 (2008), 1029 (2010) and 2224 (2015) are now recalled but can be reinstated in the event commitments under JCPOA are not complied with.
Resolution 2231 (2015) shall terminate ten years from Adoption Day, i.e. on October 18, 2025 when UN Security Council will conclude consideration of the Iranian nuclear issue.
More information can be found here.
As a party to JCPOA, EU is following the schedule outlined in the agreement. On 16 January 2016 ("Implementation Day") EU has announced lifting of sanctions in consistency with Annex V of the JCPOA - see Joint statement by EU High Representative and Iranian Foreign Minister. In spite of President Trump's refusal in October 2017 to certify Iran's compliance with the JCPOA as required under US domestic law, the EU has made clear its determination to stand by the Agreement as demonstrated by this statement published on 16 October 2017.
In practice it means that the following is now permitted:
- Transactions relating to Iranian oil and gas industry and related services (including provision of vessels, P&I insurance)
- Provision of insurance and reinsurance in Iran and to Iranian persons (including the Government of Iran)
- Provision of bunkering, technology, repair and classification services to Iranian-owned or Iranian-contracted vessels
- Fund transfers to and from Iran (without any prior notification or authorisation)
- Provision of guarantees to Iranian entities
- Most of the listed companies and persons under Iran sanctions are de-listed
Prior authorisation is still required from the competent authority of the relevant EU Member State for:
- The sale, supply, transfer or export of:
- Goods and technology for military, missile, nuclear use or that could contribute to nuclear activities - listed in Annexes I or II of Council Regulation 267/2012
- Software designed specifically for use in Iran's nuclear or military industries - listed in Annex VIIA of Council Regulation 267/2012
- Graphite and raw or semi-finished metals listed in Annex VIIB of Council Regulation 267/2012
whether or not originating in the EU, to any Iranian person/entity or for use in Iran
- The purchase, import or transport from Iran of goods and technology listed in Annexes I or II of Council Regulation 267/2012, whether or not originating in Iran
- The provision of (i) technical assistance or brokering services and (ii) financing or financial assistance, related to:
- Goods and technology listed in Annex I or II Council Regulation 267/2012
- Software listed in Annex VII Council Regulation 267/2012
- Graphite and raw or semi-finished metals listed in Annex VIIB Council Regulation 267/2012
to any Iranian person/entity or for use in Iran
- Before entering into any arrangement with an Iranian person/entity or any person/entity acting on their behalf or at their direction that would enable them to participate in or increase its participation in commercial activities involving
(i) uranium mining,
(ii) production or use of nuclear materials listed in Part 1 of the Nuclear Suppliers Group list (set out in Regulation 1861) or
(iii) technologies listed in Annex II Council Regulation 267/2012
Please note that certain sanctions related to arms embargo, nuclear-related activities, anti-terrorism and human rights violations are still in place:
- The sale, supply, transfer or export to Iran, of all military goods and technology
- The sale, supply, transfer or export of missile-related goods and technology and provision of bunkering or any other servicing of vessels carrying cargo as listed in Annex III of Council Regulation (EU) 267/2012
- The import from Iran of military and missile-related goods and technology
- Investment in Iranian enterprises engaged in manufacture of military goods, and a ban on investment by an Iranian person in a commercial activity related to production or use of missile-related goods
- Measures concerning inspection of cargoes to and from Iran and those relating to provision of bunkering and ship supply services for items that remain prohibited are still in place
- The sale, supply, transfer or export of equipment which might be used for internal repression as listed in Annex III of Council Regulation (EU) 264/2012
In addition, restrictive measures remain in place against individuals and entities who remain listed in Council Regulation 267/2012 and in Council Regulation 264/2012, as well as under EU terrorism and other EU sanctions regimes.
Further guidance on EU measures can be found in the Information Note on EU sanctions.
The UK Treasury maintains a Consolidated List of parties subject to sanctions under EU and other Regulations. The List can be found here and is the most convenient way of checking whether individuals or entities are named in EU Regulations. The List is regularly amended and it is essential that members include as part of their risk assessment a check of the up to date Consolidated List. It is also important to note that the restrictions apply to funds and economic resources "belonging to, owned, held or controlled by" by listed persons or entities. The restrictions therefore may apply if assets are owned by an entity which is not on the list but are nonetheless under the control of a listed person or entity.
As noted at the top of this page President Trump has announced that US participation in the JCPOA will cease.
In pursuance of the tougher US policy towards Iran, the Administration has designated the Islamic Revolutionary Guard Corps (IRGC) and four other entities.
On 16 October 2017, the EU issued a statement confirming its determination to stand by the JCPOA. While expressing concerns about ballistic missiles and increasing tensions in the region, the EU reiterated that these should be addressed outside the JCPOA.
On 2 August 2017 President Trump signed into law the "Countering America's Adversaries Through Sanctions Act" (CAATSA).
CAATSA did not introduce significant changes to the Iran sanctions program, focusing on sanctions targeting Iran's ballistic missile and weapons of mass destruction programs (and any support to it) and further enforcement of sanctions against Islamic Revolutionary Guard Corps. CAATSA also limited the President's ability to waive sanctions against Iran.
On Implementation Day (16 January 2016) US met its commitments under JCPOA by lifting "secondary sanctions" (i.e. against non-US persons). The sanctions lifted by the US on Implementation Day were with respect to:
- Purchase, acquisition, transport of Iranian gas, petroleum, petroleum and petrochemical products as well as services related to development of petroleum resources of Iran, production of refined petroleum products in Iran
- Financial, material, technological or other support as well as goods and services for any activity within energy, shipping and shipbuilding sector of Iran (including National Iranian Oil Company, the Naftiran Intertrade Company, National Iranian Tanker Company)
- Sale, supply or transfer to and from Iran of precious metals or specified metals such as aluminium, steel, coal (unless linked to military or nuclear use)
- Insurance, re-insurance, brokering, transportation, financial services required for the above activities (including to NIOC, NITC and IRISL or their affiliates)
- Transactions with Iranian banks, including the Central Bank of Iran and in Iranian currency as well as Iranian financial instruments
- Provision of port, bunkering, inspection, classification, lease and other services for Iranian vessels
NB! Tidewater, a port operating company on the SDN List that is owned by Iran's Islamic Revolutionary Guard Corps (IRGC), remains on the SDN List after Implementation Day, and transactions by U.S. and non-U.S persons with Tidewater continue to be sanctionable.
US persons remain prohibited from engaging in any business with Iran with the exception of:
- export, re-export, sale, lease or transfer of commercial passenger aircraft and related services exclusively for civil use
- US controlled or owned foreign entities that are licensed under General License H (see more info below) to engage in activities consistent with JCPOA
- Import of Iranian-origin carpets and foodstuffs
In practice it means that US origin goods (10% or more of US origin) cannot be directly or indirectly traded to Iran and transactions in US dollars for any Iran-related business is prohibited.
Secondary sanctions continue to apply to trade in graphite, raw and semi-finished materials where these will be used in connection with the military or ballistic missile program of Iran or if the materials have potential nuclear end-use, unless approval is received in accordance with procedures set out in the JCPOA.
Certain persons and entities (including but not limited to company linked to IRGC and some Iranian banks) remain on the SDN list and any transactions with them remain prohibited both for US and non-US persons.
Sanctions related to support for terrorism, human rights abuse in Syria and otherwise, ballistic missile programs remain in force, meaning that new sanctions and listing can be added.
OFAC has also issued several General Licenses related to JCPOA Implementation. General License H (See Iran General Licence H) authorises certain transactions by foreign entities owned or controlled by a US person. General License H also authorises US persons to establish or alter their corporate policies and procedures to the extent necessary to allow US-owned or controlled foreign entities to engage in transactions involving Iran that are permitted under the general licence. OFAC has published guidance stating General License H is intended to allow senior management, board members and employees of the US parent to be involved in initial decision-making regarding whether to engage in activities with Iran, as well as establish or alter their policies and procedures. At this stage, it is unclear what consequences the tougher Trump policy on Iran will have for General License H.
General License H does not authorise US-owned or controlled foreign entities to engage in any transactions involving:
- The direct or indirect export or re-export of goods, technology, or services from the United States (without separate authorisation from OFAC)
- Any transfer of funds to, from, or through the US financial system
- Any entity on the SDN List or any activity that would be prohibited by non-Iran sanctions administered by OFAC if engaged in by a US person or in the United States
- Any military, paramilitary, intelligence, or law enforcement entity of the Government of Iran, or any officials, agents, or affiliates thereof
With the primary sanctions against Iran in place and continued effective US trade embargo against Iran, members are therefore strongly advised to evaluate US "involvement" in their transaction, including a check of the SDN List and continue to apply due diligence protocols in respect of trade with Iranian interests.
In connection with reaching Implementation Day, US has issued several documents:
- Executive Order 13716 revoking E.O. 13574, 13590, 13622, 13645 and sections 5-7 of E.O. 13628
- FAQs relating to lifting of certain US sanctions under JCPOA on Implementation Day
- General License H
- Guidance relating to the lifting of certain sanctions under JCPOA on Implementation Day
Consequences for Charter Parties?
A. Sanctions clauses and the snap back provision
BIMCO and INTERTANKO sanctions clauses should remain in charter parties.
However to take care of any snap back provision in the sanction regime the BIMCO Sanctions clause may need to be amended or a new clause added to specifically cater for what happens to the charter party and obligations in the event of a snap back situation.
If members are considering now to do business in Iran and Syria, members should consult lawyers to review any proposed contracts and advise on amended clauses to deal with this and the compliance obligations in general.
B. Payment of hire or freight what currency?
Given the difficulties outlined above that USD may attract, members may wish to explore payment made in a different currency. However this is a commercial matter for members to consider and is also one which an eternal lawyer specialized in sanctions can assist with.
Rules and Cover
Members absolutely MUST do their own due diligence and the position remains that while Skuld can give guidance ultimate responsibility for compliance rests with members.
Our Rules contain exclusion of liability for liabilities, costs or expenses where payment by the Association or the provision of cover in respect thereof may expose the Association to the risk of being subject to a sanction, prohibition or any adverse action (Rule 30.4.6).
We also continue to exclude the liability of the Association towards the member when there is a shortfall due to an inability to recover reinsurance or pool contributions from other insurers or P&I Clubs which are themselves unable to pay due to sanctions legislation (Rule 32.6). In addition we have a provision giving the Association the right to terminate cover where, in the opinion of the Association, the member has exposed or may expose the Association to the risk of being or becoming subject to a sanction, prohibition, restriction or other adverse action by a state or international organisation or competent authority (Rule 3.3.2a). The same provisions are also included in the Terms & Conditions governing Skuld's fixed premium covers.
US primary sanctions can cause possible shortfall due to irrecoverable reinsurance contributions from US reinsurers. If there is no liability under an LOU or blue card, as per Rule 32.6 and equivalent in fixed T&Cs, the member will be unable to recover from the Association and the member bears the shortfall.