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Mandatory rules imposed on shipping and their insurance cost
were lifted unless the trade is with a party with whom dealing is specifically
prohibited. Despite this, continuing sanctions by the US government that
prevent American parties from having dealings with Iranian entities (known
as “primary” sanctions) have a knock-on effect in relation to non-American
parties that are otherwise not now subject to US sanctions.
This is because US banks and US-connected insurers and re-insurers are still
restricted by US sanctions and face significant penalties for their breach. So,
for example, in general terms it is still unlawful for US banks to knowingly
be involved in Iranian trade. This means that shipowners involved in Iranian
trade will need to avoid using US dollars and the US banking system when
making or receiving payments in connection with that trade. More practically,
many banks not domiciled in the US may refuse to participate in Iranian trade
because they fear that it may have negative implications for their ability to
operate in the US.
Furthermore, the continuation of US primary sanctions continues to impact
upon the ability of US insurers and re-insurers to provide cover for claims
involving Iranian trade/parties. This impacted on the ability of US insurers/
reinsurers to participate in the International Group of P&I Clubs excess loss
reinsurance programme, which is relevant to payments for large claims (over
USD80m).
8
P&I Clubs and, indeed, any insurers also have to be aware of the risk of “snap
back” i.e. the possibility that sanctions may be reintroduced at any time by
the US or EU if it is felt that Iran has reneged on its commitments not to
develop nuclear weapons. This risk of snap-back has to be reflected in any
security that a P&I Club provides for Iranian related claims, i.e. the wording
of the security will need to make clear that the Club will only be able to pay
claims in the event that sanctions are not re-introduced.
Furthermore, the need for shipowners to ensure that they are not dealing
with a party that is on the US or EU list of prohibited parties means that any
owner considering performing Iranian trade will need to be able to show that
they have fully complied with due diligence requirements in the event that it
turns out that a party involved in the trade is, indeed, prohibited.
8. Since the date of this presentation the problem created by the inability of US insurers/
reinsurers has been resolved by their effective withdrawal from the excess loss
reinsurance programme. Furthermore, as from 20 February 2017 the level at which the
excess loss reinsurance programme will apply to claims has been increased from USD80m
to USD100m.