regulatory costs, are not actually housed within a government agency structure.
64
Instead, some of the most popular flags of convenience utilize private entities to
facilitate their operations. The Republic of the Marshall Islands is a prime example.
Although it is one of the most utilized flag States in the world, the registry itself is
actually controlled by a ‘privately held maritime and corporate registry service’
based in Reston, Virginia, USA.
65 The Liberian registry is another similar example.
66 For ship registries of this kind, the burden of sanctions compliance regarding
prohibitions on vessel renaming/re-registration is actually imposed on privately
facilitated registries rather than only the UN Member States themselves.
67
Among the various sanctions tactics in the maritime sector, the prohibitions on
marine insurance coverage on sanctioned vessels has created perhaps the most
commercial controversy. UNSC Res 1929 (2010) requires Member States to prevent
‘insurance or re-insurance’ over vessels linked to Iran’s weapons programmes.
Particularly in the Iran context, marine insurance providers immediately expressed
concern over such mandates, including some in the industry bemoaning being used
as a tool of international policy.
68 The uncertainty sparked particular ire in the
United Kingdom, since London has long been home to the world’s largest marine
insurance market at Lloyd’s.
69 In response, adopting a similar approach to shipowners in the charterparty context, insurers have begun including sanctions clauses
in their policies of marine insurance in order to hedge against the risk of breaching
sanctions. These clauses allow termination of insurance cover on grounds of illegality if UN sanctions put the insurer at risk of non-compliance. Various versions of
these clauses have been promulgated for different types of marine insurance, including hull and machinery policies, cargo policies, and P&I Club rules.
70 In recent
years, a string of cases in the English courts have hinged on the impact of sanctions
on insurance policies.
71
64 Anderson (1996).
65 For more information on the Marshall Islands flag, see the website of International Registries, Inc.
at https://www.register-iri.com/index.cfm?action¼about.
66 For more information on the Liberia flag, see the website the Liberian Registry http://www.liscr.
com/about-liberian-registry.
67 Prohibitions on certification of blacklisted vessels raises similar challenges of placing international obligations on privately controlled vessel certification organizations.
68 Osler (2017).
69 North Korea, while similarly subject to UN Resolutions prohibiting insurance coverage, has
perhaps caused less outcry among industry participants. While the sanctions are equally harsh in
that insurance and re-insurance of blacklisted vessels is prohibited, North Korea has weaker
historical integration with the global economy than Iran. The primary challenge for insurers in
the North Korea context is to remain cognizant of deceptive practices such as re-naming and
re-registering vessels, which can impact compliance when agreeing to provide cover for new
customer vessels.
70 See e.g. Lloyd’s, Sanctions Guidance – Sanctions Clauses, 17 October, 2014.
71 See e.g. IRISL v Steamship Mutual Underwriting Association [2010] EWHC 2661; Arash
Shipping v Groupama [2011] 2 Lloyd’s Rep 607; Mamancochet Mining Ltd v Aegis Manageing
Agency Ltd [2018] EWHC 2643.
9 The Impact of UN Sanctions on Commercial Shipping Activities
171
64
Instead, some of the most popular flags of convenience utilize private entities to
facilitate their operations. The Republic of the Marshall Islands is a prime example.
Although it is one of the most utilized flag States in the world, the registry itself is
actually controlled by a ‘privately held maritime and corporate registry service’
based in Reston, Virginia, USA.
65 The Liberian registry is another similar example.
66 For ship registries of this kind, the burden of sanctions compliance regarding
prohibitions on vessel renaming/re-registration is actually imposed on privately
facilitated registries rather than only the UN Member States themselves.
67
Among the various sanctions tactics in the maritime sector, the prohibitions on
marine insurance coverage on sanctioned vessels has created perhaps the most
commercial controversy. UNSC Res 1929 (2010) requires Member States to prevent
‘insurance or re-insurance’ over vessels linked to Iran’s weapons programmes.
Particularly in the Iran context, marine insurance providers immediately expressed
concern over such mandates, including some in the industry bemoaning being used
as a tool of international policy.
68 The uncertainty sparked particular ire in the
United Kingdom, since London has long been home to the world’s largest marine
insurance market at Lloyd’s.
69 In response, adopting a similar approach to shipowners in the charterparty context, insurers have begun including sanctions clauses
in their policies of marine insurance in order to hedge against the risk of breaching
sanctions. These clauses allow termination of insurance cover on grounds of illegality if UN sanctions put the insurer at risk of non-compliance. Various versions of
these clauses have been promulgated for different types of marine insurance, including hull and machinery policies, cargo policies, and P&I Club rules.
70 In recent
years, a string of cases in the English courts have hinged on the impact of sanctions
on insurance policies.
71
64 Anderson (1996).
65 For more information on the Marshall Islands flag, see the website of International Registries, Inc.
at https://www.register-iri.com/index.cfm?action¼about.
66 For more information on the Liberia flag, see the website the Liberian Registry http://www.liscr.
com/about-liberian-registry.
67 Prohibitions on certification of blacklisted vessels raises similar challenges of placing international obligations on privately controlled vessel certification organizations.
68 Osler (2017).
69 North Korea, while similarly subject to UN Resolutions prohibiting insurance coverage, has
perhaps caused less outcry among industry participants. While the sanctions are equally harsh in
that insurance and re-insurance of blacklisted vessels is prohibited, North Korea has weaker
historical integration with the global economy than Iran. The primary challenge for insurers in
the North Korea context is to remain cognizant of deceptive practices such as re-naming and
re-registering vessels, which can impact compliance when agreeing to provide cover for new
customer vessels.
70 See e.g. Lloyd’s, Sanctions Guidance – Sanctions Clauses, 17 October, 2014.
71 See e.g. IRISL v Steamship Mutual Underwriting Association [2010] EWHC 2661; Arash
Shipping v Groupama [2011] 2 Lloyd’s Rep 607; Mamancochet Mining Ltd v Aegis Manageing
Agency Ltd [2018] EWHC 2643.
9 The Impact of UN Sanctions on Commercial Shipping Activities
171