Iran sanctions legislation

Iran sanctions

Published: 17 February 2010

New sanctions are likely to be introduced as a response to the Iranian government’s continuing uranium enrichment programme.  Legislative developments are being closely monitored by the International Group and can be summarised as follows.

1. US legislation

A number of Iranian shipping companies (including IRISL and a number of its subsidiary and affiliated companies) are already “specially designated” by the US Treasury’s Office of Foreign Assets Control (“OFAC”). The effect of this designation is to prohibit dealings by US persons (which would include provision of insurance services) with these companies. This prohibition is specifically targeted at the activities of identified Iranian companies and their vessels and does not extend to the wider shipowning community.

Of greater concern and potential impact is proposed legislation to amend the Iran Sanctions Act of 1996 to enhance US diplomatic efforts with respect to Iran and expanding economic sanctions against Iran.

Two pending bills entitled the Iran Refined Petroleum Sanctions Act (“IRPSA”) will, if passed, impose sanctions focused specifically on the exportation of refined petroleum products to Iran. One bill is in the Senate and the other in the House of Representatives.  A reconciliation process is taking place which will determine the final text of the Act.

Under the House bill, sanctions could be imposed against both domestic and foreign entities that;
  (i) provide ships, vehicles or other means of transportation to deliver refined petroleum products to Iran, or providing services relating to the shipping or other transportation of refined petroleum products to Iran,
  (ii) underwrite or otherwise provide insurance or reinsurance for an activity described in clause (i) above, or
  (iii) financing or brokering an activity described in clause (i) above.


The Senate bill provides for the imposition of sanctions against persons who with actual knowledge provide Iran with refined petroleum resources or engage in any activity that could contribute to the enhancement of Iran’s ability to import refined petroleum resources, including
  (A) providing ships or shipping services to deliver refined petroleum resources to Iran,
  (B) underwriting or otherwise providing insurance or reinsurance for such activity, or
  (C) financing or brokering such activity.


The wide drafting under both draft bills could, in relation to shipping activity, include owners, charterers, managers, crew, and, in relation to insurance cover, could include the club in which an offending vessel is entered and its reinsurers. As drafted the sanctions would apply in relation to any of the identified shipping and insurance activities relating to any vessels (regardless of country of flag, registry or beneficial ownership) trading refined products into Iran and notwithstanding that, as a matter of the law governing the relevant contracts of carriage and insurance, the adventure is lawful.

Potential sanctions for transgression could include barring sanctioned persons and companies from access to US financial institutions and blocking of assets and US dollar transactions of an offending insurer located within or routed through the United States. The Group is continuing to monitor developments in relation to the pending legislation and will report on material developments.

2. Club cover

If the bills are passed in their present form they could make a P&I Club liable to sanctions if an entered vessel is involved in the carriage of refined petroleum products to Iran. This would clearly have serious consequences for the Association and all its members.

It is not yet known if the bills will be passed and, if so, what the final wording will be.  There is also the possibility that other states or supranational organisations will impose sanctions during the coming policy year.  Since it is not at this stage known whether there will be any such legislation and, if there is, what form it will take, no changes have been made for the 2010 policy year specifically related to sanctions.  However the Board has the power to introduce rule changes during the course of the year if necessary.

3. UK legislation

The UK Financial Restrictions (Iran) Order 2009 came into effect on 12 October 2009. The material provisions of the Order prohibit the provision of insurance cover to vessels owned, controlled or operated by Islamic Republic of Iran Shipping Line and as a consequence of the Order, no IRISL vessels are currently insured by Group clubs.

The Group has not been advised of any further intended action by the UK authorities in relation to insurance arrangements for other Iranian companies or in relation to trading to Iran, but depending on developments in the United States this possibility cannot be ruled out.

4. Shipowners obligations arising under contracts of carriage

The Group will liaise and coordinate with relevant shipowner associations with a view to the development of appropriate protective clauses for incorporation into charter party and bill of lading contracts.


The position in the US and elsewhere is being monitored and members will be informed of developments.