Sanctions compliance by members
- In general, the focus of the sanctions legislation (as far as Members and shipping is concerned) is on the prohibition of any dealings with designated entities and in the case of certain countries, the prohibition of certain trades with these countries. Members are exposed to potentially severe penalties if they know or “should have known” that their actions are in breach of the prohibitions on dealing with designated entities or, in the case of certain countries, prohibitions on trading.
- Accordingly, Members are required to be in a position to show that they did not know or should not have known that the particular trade or transaction was prohibited. In order to be in such a position, it is anticipated that Members would be expected to have in place a reliable system for screening the identities of their counter-parties and where relevant the cargo to be carried, in order to show that they carried out sufficient due diligence. As a first step, Members should check or seek advice on checking the lists of designated entities and targeted cargoes.
- It also follows that Members should keep records of the screening and other inquiries carried out.
- The nature and extent of the due diligence required is likely to depend on a number of factors including the particular trade or country in which the Member is involved. Members are encouraged to obtain specialist legal advice if in doubt about the level of due diligence required, or to contact the relevant authorities directly.
- Members may also wish to incorporate in their contracts provisions which deal with the costs and time of carrying out further investigations of the identity of the cargo interests and the type of cargo to be carried.
- Members may also wish to incorporate in their contracts provisions by which their counterparties confirm that they are not a designated entity under sanction legislation, that they are not acting on behalf of or that they are not directly or indirectly owned by entities which are designated entities under such legislation and that no other parties involved are so designated. Members, however, are advised not to act in sole reliance on such a clause or confirmation from their counterparty.
- Members may also wish to incorporate sanctions clauses which have been developed by industry bodies such as BIMCO and Intertanko but should be aware that they offer only limited protection in the sense that they deal with the consequences of sanction legislation which is introduced after a relevant employment has been commenced. They do not discharge the parties from their screening obligations of their counterparties and, where relevant, the intended cargo against sanction legislation which is already in place before the commencement of the employment.