Triton 2025 - Magazine - Page 44
LEGAL
PAGE HEADER
particular, have always carried out
satisfactory due diligence when 昀椀xing,
the focus was on good 昀椀nancial
standing and legitimate business
operations.
However, as a result of sanctions
regulations more comprehensive due
diligence is required and must extend
beyond direct charterers to include subcharterers, cargo interests, shippers,
and receivers. In today’s regulatory
climate, ignorance is not a defence, it is
seen as a compliance failure.
Furthermore, voyage orders to
sanctioned ports or terminals can
create severe liabilities. A charterparty
may appear compliant at inception,
but if charterers subsequently direct
a vessel to a newly sanctioned
destination, owners need watertight
contractual language to refuse
such orders without breaching their
obligations.
In 2019 the US sanctioned two
subsidiaries of China’s COSCO Shipping
Group for transporting Iranian oil.
As a result, several COSCO vessels
were blacklisted almost overnight. If
your charterparty lacks an effective
sanctions clause; it can leave owners
trapped between breaching sanctions
or breaching charter obligations.
Great consideration must be taken
to ensure that the necessary, and
tightly worded clauses regulating each
parties’ rights, obligations and defences
in connection with sanctions are
incorporated.
Bills of Lading: Small
Documents, Big Risk
Bills of lading are often treated as an
administrative formality, but in reality
they carry signi昀椀cant sanctions risks.
As negotiable documents of title, they
have the potential to implicate parties
in sanctions breaches.
One major concern is the presence
of sanctioned parties in the sale
transaction. If the shipper, consignee,
or notifyingmen party is subject to
sanctions, the shipowner or operator
could be directly exposed. It is essential
to conduct thorough screening of all
named parties, not just at issuance but
44 / Triton 2025
throughout the chain of endorsement
and transfer.
The nature and origin of the cargo
must also be carefully examined.
Transporting goods such as
Russian-origin crude oil or Iranian
petrochemicals can trigger a sanctions
liability, even if the documentation
initially appears clean. Veri昀椀cation
of cargo documents and certi昀椀cates
of origin must form a central part of
compliance processes.
There is also now a growing risk of
fraud and misrepresentation. We
have seen the rise of sophisticated
schemes to disguise the origin of
sanctioned goods and circumvent
sanctions regulations. Due diligence
must incorporate active scepticism
and critical veri昀椀cation of cargo and
documentary evidence, particularly
when operating in high-risk regions.
It was reported that a number of
operators were 昀椀ned for transporting
Syrian oil under falsi昀椀ed documentation
and in connection with which the vessel
tracking data had also been altered.
The bills of lading had been tampered
with so as to mask the true origin of the
cargo, and owners’ failure to carry out
the necessary due diligence left them
exposed.
Several companies have faced
secondary sanctions for transporting
Venezuelan crude oil after PDVSA
was sanctioned where bills of lading
listed clean consignees, however, the
actual end buyers were sanctioned
entities, and the cargo originated from
sanctioned ports.
Practical Steps:
Strengthening Your Due
Diligence
Good sanctions due diligence requires
a proactive and thorough approach.
Enhanced counterparty screening is the
starting point. This goes beyond simple
name checks and should include
investigations into adverse media,
ultimate bene昀椀cial ownership, vessel
tracking, historical port calls, and
vessel operations and trading patterns.
It is equally important to draft tailored
sanctions clauses. Relying on generic
industry templates is no longer suf昀椀cient.
Legal counsel should be engaged to
create clauses that are speci昀椀cally
designed to reflect your company’s
trading patterns and risk tolerance.
Active monitoring is critical. Real time
alerts for sanctions developments
that could impact current voyages
or 昀椀xtures must be in place by using
sophisticated software and regularly
accessing the numerous sanctions
lists and/or databases available.
Compliance is a continuous obligation,
not a one-off exercise.
The scrutiny of bills of lading must also
be rigorous. A structured review process
should be implemented for the issuance,
endorsement, and transfer of these
documents. Detailed examination of the
parties involved, the nature of the cargo,
and the transportation routes is essential.
Finally, fostering a strong compliance
culture across the organisation is
paramount. Every employee must
understand that managing sanctions
risks is a shared responsibility.
Final Thoughts: Hope Is
Not a Strategy
In turbulent times of political
unrest and reactive and proactive
governments, the current sanctions
landscape dictates that hope is
not a viable strategy. Outdated
assumptions and complacency can
lead to severe 昀椀nancial penalties and
reputational damage. Forward thinking
operators are embedding compliance
considerations into every aspect of
their contractual and documentary
processes, and while the obligation of
compliance has admittedly generated
as much work as it has frustration, it is
important to remember that sanctions
were never implemented to make
anyone’s life easier, on the contrary.
Unfortunately, however, while the
primary aim is obviously to target the
perpetrator, those who could potentially
facilitate the business of a sanctioned
entity are also indirectly implicated.
Your charterparties and bills of lading
can either serve as your shield against
sanctions risks or become liabilities
that expose you to enforcement
actions.
