Partners Simon Kavanagh, Daniel Pilarski, David Osborne and Christine Bader at Watson, Farley & Williams have highlighted some recent developments and forthcoming changes in the sanctions landscape. There have been developments and changes which would increase the importance of compliance, most likely complicate the task and which have particular relevance for the maritime industry, the writers said.
The use of sanctions as a foreign and security policy tool had led to a proliferation of sanctions regimes. These sometimes had conflicting requirements. However, they used broadly the same tools: prohibitions or restrictions on trading, exports and imports and freezing and blocking of funds, and it was this that made them of particular relevance to shipping.
The US and UK authorities recognized this, said WFW. Compliance by the shipping industry was essential to the effectiveness of sanctions regimes. It was no surprise therefore that in recent months both the relevant US and UK authorities had issued “guidance” to the maritime industry.
The guidance from both the US and UK authorities, although different in tone, focused on the recognition of illicit practices and the measures required or suggested to ensure compliance.
WFW said that this guidance required careful consideration and it came at a time when the sanctions landscape was changing.
To date the principal sanctions regimes for those operating in international markets had been those of the US and the EU. However, the writers noted that for UK businesses the position would be changed and complicated by the UK’s departure from the EU.
From the end of the Brexit transition period, EU sanctions will cease to be applicable in the UK and its own regime will take effect under the Sanctions and Anti-Money Laundering Act 2018 (SAMLA).
The UK regimes (like the EU regimes) will have extra-territorial effect in some respects and will not apply only to UK persons.
SAMLA includes extensive provisions empowering the imposition of sanctions affecting shipping.
As a result of the potential extra-territorial application of the EU and UK regimes, in some cases both the EU and UK regimes will apply. In these instances, for companies with an interest in the UK, it will therefore be necessary to check the UK regime in addition to the EU regime.
WFW warned that “in some cases they will have differing provisions and it will be necessary to comply with both. If there are not just differences, but conflicts, complex issues will arise.”
The writers observed that similar complexities had existed for decades resulting from the application of US sanctions. However, the Trump Administration has dramatically expanded the use of secondary sanctions and the EU has enhanced its anti-boycott legislation, leading to the real possibility of conflicting requirements where it is not possible to comply with both.
WFW said that, against this background of increasingly complex sanctions regulation and ever-closer attention by the relevant authorities, it will be important to have a full understanding of the sanctions applicable to the business, the risks posed in the relevant activity and the due diligence and compliance measures required to
address those risks. In the context of specific transactions, the contractual terms should be tailored to manage the risks.