After various delays, on 19 February 2024 the EU Commission issued its FAQ guidance on Article 3q of Council Regulation (EU) No. 833/2014 (as amended). The FAQ document provides some key clarifications sought by the market. However, some uncertainties remain
Continue Reading EU Clarifies Article 3q for Tanker S&P Market

In a previous update posted on our Trade Compliance Resource Hub on 20 December 2023 (Christmas comes early for G7 operators – EU adopts 12th package of sanctions against Russia, changes to the Price Cap Model), we explored the EU’s latest package of sanctions against Russia in general terms.

One of the key novelties in this package, introduced by way of article 3(q) of Council Regulation (EU) 2023/2878 (the “Regulation”), that we want to focus on in this briefing is the introduction of an obligations framework around the sale of tankers, and more specifically “for the transport of crude oil or petroleum products”. The self-declared aim of the Regulation is to introduce “transparency” into the sale of this asset class by implementing both back-looking (for any transfer having occurred between 5 December 2022 and 19 December 2023) and forward-looking notification requirements and, in some cases, a pre-approval requirement.

That tankers have been used in circumventing trade-oriented sanctions is beyond dispute, and the widespread references made to the activities of the “dark fleet” is testimony to that. While the purpose of the policy is well understood, the devil is in the detail and the Regulation raises several issues in relation to its practical application and effectiveness.

The policy purports to apply to any owner of such tanker which is an “EU person” in the usual meaning of the term. The applicability of the Regulation to EU registered corporate ship owners is obvious, and merely theoretical in relation to natural persons. A non-EU corporate body being the registered owner is more frequent in practice and some may be tempted, taking a narrow interpretation of the Regulation, to hide behind the corporate veil to disregard the Regulation completely. Based on the EU’s history of intolerance towards, in the context of other article 3 restrictions, and especially in relation to Russian seaborne oil, arguments that a vessel is not an EU vessel but merely beneficially owned or managed by EU persons, this would probably not be prudent. Also note that the EU has clarified through published FAQs that such restrictions apply to vessels “owned, chartered and/or operated by EU companies or nationals”.

In terms of the transactions encompassed by the Regulation, the first point to note is that there is uncertainty in the semantics, as the concepts of “sale” and “transfer of ownership” are used interchangeably throughout article 3(q) when they actually refer to two distinct stages of a sale and purchase transaction (S&P), the former being the entry into a memorandum of agreement (MOA) and the latter, the delivery of the vessel pursuant to the MOA. Also, while the restrictions obviously apply to a sale contract (on usual BIMCO or Nipponsale forms), a transfer of ownership following the exercise of a purchase option in the context of the tail-end of a financial bareboat chartering would also fall within the scope of article 3(q). Where the bareboat charters do not contain the appropriate forward-looking sanctions wording; the owners could find themselves in a difficult spot.

The Regulation also prohibits sales where the vessel is “for use in Russia”, notwithstanding the nationality of the prospective buyer. This is a more complex issue to address in day-to-day sale and purchase transactions. Pending further clarification from the EU, ship owners should insist on including appropriate buyers’ representations and warranties in their MOAs as to the intended use of the vessel and ideally receive a full indemnity from the buyers in case of breach of the representation. Such wording should be carefully drafted, for example so as to include any new sanctions packages between signing of the MOA and delivery.

Another uncertainty will result from the number of different sanctions monitoring entities involved across the EU. The requirements in article 3(q), resulting from an EU regulation, should be uniform across all EU jurisdictions. However, in practice, we expect there to be potential divergence between jurisdictions on the approach to notification requirements. A good example is the Maltese notification template, which requires the resident entity to complete the information required by article 3(q)(4) specified above. But it also requires a “brief explanation regarding the merits of the case/transfer”, which is not explicitly part of the Regulation. As member states continue to implement new monitoring templates, ship owners may face delays when ensuring compliance – the list of information to provide could differ between flag states. Again, inclusion of an information undertaking, or even a wider assistance one, from buyers to help sellers comply with their obligations under the Regulation should be considered.

Clarifications on the practicalities of the Regulation are awaited and our sanctions team have raised these issues with the relevant actors at the EU level. The deadline set as 20 February 2024 for the “looking back” report period is fast approaching. In the meantime, ship owners looking to dispose of their tankers should take a prudent approach, run enhanced Know Your Client checks (KYCs) and include appropriate wording in any MOA to minimize sanctions-related risks, given these are not covered in the standard BIMCO/Nipponsale forms.Continue Reading The 12th package of EU sanctions against Russia: impact on the tanker S&P market

On 14 December 2023, the two EU co-legislators, the Council of the EU and the European Parliament, provisionally reached an agreement on the Corporate Sustainability Due Diligence Directive (CS3D). In essence, the Directive sets out an obligation for companies to comply with human rights and environmental due diligence and provides for an enforcement mechanism with

On 18 December, the EU announced their 12th round of sanctions targeting Russia. This comes against the backdrop of a flurry of Russia sanctions related activity and a number of designations of third country actors believed to be engaged in price-cap circumvention.
Continue Reading Christmas comes early for G7 operators – EU adopts 12th package of sanctions against Russia, changes to the Price Cap Model

International efforts to seize assets of sanctioned Russian oligarchs and dispose of them in a timely fashion continue to face obstacles. Among these assets are the TANGO and AMADEA, two superyachts that were seized in the spring of 2022. More than a year and a half later, the TANGO and AMADEA are stuck in legal limbo. Taxpayers fund the staggering cost of upkeep, which (for full upkeep) can per annum be ten percent of a yacht’s total value. The costs include wages for a skeleton crew, insurance, docking fees, diesel supply and general maintenance.  Licenses from multiple jurisdictions are often needed to process transactions relating to a frozen asset, making payment for these services even more complicated and time consuming. Continue Reading Superyacht seizures and financing risk associated with sanctions

After many rumors of potential changes to the U.S. policy on Venezuela, on October 18, 2023 the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued four general licenses, representing a significant shift in its Venezuela sanctions program.  Most pertinent for the shipping industry, certain sanctions that were in place against Petróleos

After Venezuela’s government and its political opposition agreed on electoral guarantees for 2024 presidential elections, the Office of Foreign Assets Control (OFAC) issued four general licenses suspending select sanctions:

  • General License 44 temporarily authorizes all transactions related to Venezuelan oil and gas sector operations, including producing, lifting, selling, and exporting oil or gas from Venezuela

At the forefront of addressing the global challenge of climate change is the effort to reduce carbon.

In their latest podcast, Pittsburgh’s energy transactional partner, Ryan Haddad and Brussels’ international trade and customs partner, Yves Melin explore how Carbon capture, utilization, and sequestration (CCUS) and the Carbon Border Adjustment Mechanism (CBAM) could interact in the

The recent English Court of Appeal judgment on Mints & others v PJSC National Bank Trust & PJSC Bank Otkritie Financial Corporation [2023] EWCA Civ 1132 (“Mints”) on 6 October 2023 discussed several fundamental issues pertaining to concepts under the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”) and the secondary sanctions regulations thereunder, in particular the Russia (Sanctions) (EU Exit) Regulations 2019 (the “Regulations”).
Continue Reading UK Sanctions – What is “Control”?