US/EU Iran Sanctions - six month suspension of insurance prohibitions 20/01/14 - 20/07/14 - urgent update

CIRCULAR REF: 2014/008

CIRCULATED TO ALL MEMBERS, BROKERS AND DIRECTORS

Following the US/EU announcements (and publication of relevant regulations/guidance) of a six-month suspension of current sanctions measures relating to certain trade with Iran, including sanctions targeted at insurance arrangements as reported in the Iran Sanctions Update issued on 20 January 2014 North – Industry News: Iran Sanctions Update | www.nepia.com the Group has been continuing engagement with the relevant US and EU regulators regarding the intended operation of the suspension of insurance sanctions.

In relation to the US implementation of the suspension measures, one issue on which the Group has been seeking clarification is the extent to which Clubs, which provide insurance cover to Members during the six-month suspension period in relation to the permitted trades, will be able to respond to liabilities arising during the suspension period, but which may not be crystallised or presented until after 20 July 2014.  The US Office of Foreign Assets Control (OFAC) has advised that it is not presently able to confirm whether the insurance cover provided in respect of liabilities arising during the six-month period will be prohibited from responding after 20 July 2014.

In the circumstances, Members should proceed on the basis that beyond 20 July 2014 (or any extension of the initial six-month period), Clubs will not be able to respond to any claims presented in respect of liabilities arising during the 20 January/20 July suspension period.  This has the effect of rendering the current suspension of sanctions on insurance cover and in particular P&I cover, of very limited, if any, value to shipowners, or to Clubs.  Shipowners should be aware that a Club is unlikely to be in a position to provide security for a claim in circumstances in which a demand under a Club letter of undertaking may be made after 20 July 2014.  Clubs may also be unable to provide Blue Cards to Members who enter into contractual commitments which will include the carriage of Iranian crude oil, petroleum oil (as defined in Annex 1 to Regulation 2014/42/EU) or petrochemical cargoes under which Clubs could be exposed to liability after this date.

Members are strongly recommended not to enter into contracts for transportation of crude oil, petroleum oil (as defined) and petrochemical products which are for a limited period (up to 20 July 2014) permissible by virtue of the US/EU six-month suspension of prohibitions on the carriage of such cargoes without prior consultation with the Club in relation to insurance cover arrangements.  In the meantime the Group will continue its efforts to obtain clarification of the US position on this issue.

All Clubs within the International Group have issued similar circulars.

MIKE SALTHOUSE

DIRECTOR – North Insurance Management Ltd As Managers on behalf of the North of England P&I Association Limited