Global law firm Reed Smith has warned that, while the sanctions landscape affecting Russia was still rapidly developing and that ‘the devil will be in the detail’, the scope and severity of sanctions was likely to have an impact on major parts of the shipping industry for some considerable time.
Nick Austin, Shipping Partner, said that “the market is scrambling to get to grips with what the sanctions mean in practice, and the steps they need to take. The market will have to keep close tabs on the regulations as they are published by the authorities”, adding that “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.”
Austin noted that owners and charterers were looking closely at their fixtures to understand their legal rights under traditional war clauses. But he warned that these provisions came in different shapes and sizes, and so would need to be reviewed carefully.
Reed Smith Shipping Partner Sally-Ann Underhill warned that “the US sanctions are broad-reaching on finance and trade. The complexity of the position and the different approaches between the US, 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.”
She also noted that the issues went 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.”
Finally Underhill noted that redelivery was also becoming an issue again as rates rise and charterers were deciding to keep vessels even when notices of redelivery had been tendered.