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UK shipping sanctions on Russian vessels have broad and unknown effects

On the face of it, the UK appears to have introduced a new category of sanctions designation under British sanctions law

New regulations punishing Russia for its military incursion into Ukraine are less than entirely clear and will require considerable due diligence

THE Russia (Sanctions) (EU Exit) (Amendment) (No 4) Regulations 2022, which amend the Russia (Sanctions) (EU Exit) Regulations 2019, prevent certain vessels from entering British ports, as well as authorising the secretary of state for transport to give directions to harbour authorities to restrict the movement of vessels (directing them to proceed to certain areas of a port or remain where they are) and the detention of vessels and restriction on registration of certain ships in the UK.

Vessels targeted by the new sanctions include those flying the Russia flag, registered in Russia or vessels that are owned, controlled, chartered or operated by a designated person or by “persons connected with Russia”.

It is fairly easy to determine whether a vessel is Russia-flagged or even beneficially owned by a designated person. Less clear is what is meant by the targeting of vessels “connected with Russia”.

A person is defined as being connected with Russia if they are a person (other than an individual) who is domiciled or incorporated or constituted under the laws of Russia or if they are an individual or association or a combination of individuals who are ordinarily resident in Russia or located in Russia.

This is potentially a broad category of persons and, given the vessel only has to be chartered by such a person, the due diligence requirements might be considerable.

The regulations also give the secretary of state the power to “specify” a ship as being subject to such sanctions.

The grounds for “specifying” a ship is that the secretary of state considers it to be involved in an activity whose object or effect is to contravene or circumvent the UK’s Russia regulations.

This appears to introduce a new category of sanctions designation under British sanctions law.

The secretary of state must specify a ship by reference to its International Maritime Organization number (or, if not available, by reference to any other means considered appropriate).

It is not clear from the amendments to the regulations where such specifications/designations will be publicised and whether this will be through a different listing from those persons subject to financial sanctions and whose details are published on the UK’s list of consolidated sanctions targets.

These sanctions raise a number of questions for the shipping/commodity industry. There is no derogation for vessels that are already laden and bound for UK ports, in similar ways to the limited derogations that sometimes arise from asset freezes.

This could lead to difficulties with cargoes being transhipped to enter British ports. Even then, any Russian chartering connection may still prove problematic.

Similarly, there are no derogations or exceptions provided in instances where an urgent port call is necessary to preserve life or prevent environmental damage. The knock-on effect of these restrictions on the commodity industry generally is also unknown.

The larger unknown is the extent to which these sanctions, which the UK has been able to implement outside the European Union following Brexit, are complemented by similar restrictions within the EU.

Patrick Murphy is a partner at law firm Clyde & Co

This article first appeared in Insurance Day

 

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