CML Working Paper: Sanctions: Between a Rock and a Hard Place

ABSTRACT

Sanctions have been tied to the world of shipping and international trade since at least the time of Ancient Greece. In recent years, however, sanctions have been brought back to the forefront of the shipping industry with the imposition of new sanctions regimes by the US, UK and EU, among others, which are complicated, overlapping, possibly conflicting, and especially punishing if one is found to be in breach. This has led to an explosion in litigation relating to these sanctions regimes, creating significant sanctions risks for operators in the industry. In this context, this paper discusses the fundamental concepts of sanctions, addresses the difficulties and risks created by them, and focuses on the contractual mechanisms that parties have relied on to address sanctions risks, namely force majeure and sanctions clauses. This paper also examines three recent cases where the use of these contractual mechanisms has been tested in the context of contracts of sale, financing and transport and highlights the lessons to be learned from these decisions.

Keywords: Sanctions, risk, sanctions clauses, force majeure, letters of credit, sale, contract of affreightment

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