.png)
31st August 2022
In our newsletter 02-22, we gave an overview of the evolving sanctions regimesimposed following the conflict in Ukraine. The European Union (‘EU’) has since issuedclarifications to their sanctions which have been reported by the International GroupP&I Clubs and we take the opportunity to remind our clients of those updated FAQ’s.
Under Article 3J(2)(b) of Council Regulation 2022/576, the importation (including thepurchase or transfer, directly or indirectly) of coal and other solid fuels, including somenamed fertilizers, from Russia is prohibited where the contract for that carriage wasconcluded after 9th April 2022. It was also prohibited to provide finance or financialassistance in respect of such imports.
The International Group sought clarification on the interpretation of this article from theEU due to a number of ambiguities. The EU has since clarified that:
- the provision of insurance does fall under the definition of providing ‘financingand financial assistance’ in respect of such imports;
- the importation of the named cargoes applies only to the importation into theEU; but,
- the prohibition also applies to ‘direct or indirect’ transfer of cargoes, whichincludes carriage of those cargoes to non-EU destinations by an entity subjectto the EU sanctions.
In summary, the prohibition applies to any involvement of an EU entity in carrying thesecargoes from Russia to any destination, including the provision of insurance by theInternational Group P&I Clubs. Most of those P&I Clubs are domiciled or have branch offices within the EU. However,even where P&I Clubs are not domiciled in the EU, the International Group re-insurance programme is heavily dependent on carriers which are domiciled in the EUand therefore the provision of re-insurance is also subject to the above mentionedprohibition.
Therefore, the provision of International Group P&I insurance is prohibited in respectof voyages for coal and other solid fossil fuels from Russia.
For more information or further details on the sanctions regulation, please contact yourusual P.L. Ferrari contact.
This newsletter, and our information archive, can also be accessed at
P.L. FERRARI & CO. S.r.l.
P.L.Ferrari – A Member of the Lockton Group of Companies
This newsletter is intended solely as an overview of the marine market and does not constitute any form of advice. It is based on sources believed to be accurate at the time of printing andwe cannot be held liable for the omission of any information within the newsletter.
15 August 2022
EU sanctions – clarification published on the carriage of certain Russian cargoes including coal andfertilisers
On 10 August 2022 the European Union (EU) published updated FAQs clarifying the application of provisionsrelating to the carriage of certain cargoes from Russia, including coal and other solid fossil fuels as well as certaintypes of fertilizer. As this Circular sets out, these clarifications will have a significant impact on the carriage ofthese commodities by EU entities and the provision of insurance for carriage to any entity regardless of theirdomicile.
On 8 April 2022 the EU published Council Regulation 2022/576 which amended Regulation 833/2014 andcontained the following provisions:
Article 3i
1. It shall be prohibited to purchase, import, or transfer, directly or indirectly, goods which generatesignificant revenues for Russia thereby enabling its actions destabilising the situation in Ukraine, as listedin Annex XXI into the Union if they originate in Russia or are exported from Russia.
2. It shall be prohibited to:
(a) provide technical assistance, brokering services or other services related to the goods and technologyreferred to in paragraph 1 and to the provision, manufacture, maintenance and use of those goods andtechnology, directly or indirectly in relation to the prohibition in paragraph 1.
(b) provide financing or financial assistance related to the goods and technology referred to in paragraph 1for any purchase, import or transfer of those goods and technology, or for the provision of related technicalassistance, brokering services or other services, directly or indirectly in relation to the prohibition inparagraph 1.
3. The prohibitions in paragraphs 1 and 2 shall not apply to the execution until 10 July 2022 of contractsconcluded before 9 April 2022, or ancillary contracts necessary for the execution of such contracts.
4. As of 10 July 2022, the prohibitions in paragraphs 1 and 2 shall not apply to the import, purchase ortransport, or the related technical or financial assistance, necessary for the import into the Union, of:
(a) 837 570 metric tonnes of potassium chloride of CN 3104 20 between 10 July of a given year and 9 Julyof the following year;
(b) 1 577 807 metric tonnes combined of the other products listed in Annex XXI under CN 3105 20, 310560 and 3105 90 between 10 July of a given year and 9 July of the following year;
5. The import volume quotas set out in paragraph 4 shall be managed by the Commission and the MemberStates in accordance with the management system for tariff-rate quotas provided for in Articles 49 to 54 ofCommission Implementing Regulation (EU) 2015/2447 (*).
Article 3j
1. It shall be prohibited to purchase, import, or transfer, directly or indirectly, coal and other solid fossilfuels, as listed in Annex XXII into the Union if they originate in Russia or are exported from Russia.
2. It shall be prohibited to:
(a) provide technical assistance, brokering services or other services related to the goods and technologyreferred to in paragraph 1 and to the provision, manufacture, maintenance and use of those goods andtechnology, directly or indirectly in relation to the prohibition in paragraph 1.
(b) provide financing or financial assistance related to the goods and technology referred to in paragraph 1for any purchase, import or transfer of those goods and technology, or for the provision of related technicalassistance, brokering services or other services, directly or indirectly in relation to the prohibition inparagraph 1.
3. The prohibitions in paragraphs 1 and 2 shall not apply to the execution until 10 August 2022 of contractsconcluded before 9 April 2022, or ancillary contracts necessary for the execution of such contracts.
The texts of Annex XXI and Annex XXI as referred to above can be found in Council Regulation 2022/576.
It should be noted that certain types of fertilisers (of which Russia is a major producer) are included in the list ofcommodities said to generate significant revenues for Russia as set out in Annex XXI and thus subject toprohibitions in Article 3i.
It seemed clear to Clubs and their advisors that on a plain reading of both Articles 3i and 3j the prohibitionsaround the carriage of Russian fertilisers and coal and other solid fossil fuels related only to their import into theEU and not to carriage to non-EU destinations. The provisions were subject to a wind-down period in any eventuntil 10 July 2022 and 10 August 2022 respectively for sale contracts concluded before 9 April.
The EU issued FAQs on 17 April and 14 June 2022 but these appeared to clarify only that EU entities wereprohibited from purchasing Russian such cargoes intended for delivery both into and outside the EU but nototherwise being involved in their carriage.
Further FAQs were issued on 10 August however – i.e. the date on which the wind-down period for coal andother solid fossil fuel cargoes expired – which cast significant doubt on the previous interpretation industry hadplaced on the wording of Articles 3i and 3j. The text of these latest FAQs can be found here. They appeared tosuggest that the prohibitions in these Articles were in fact intended to have wider impact than just carriage intothe EU and could impact of the carriage of such cargoes from Russia to any other country.
The International Group (IG) consequently sought immediate clarification from the EU Commission regarding themeaning of these latest FAQs, the scope of the EU prohibitions and potential impacts on both Members andClubs.
The EU have made it clear to the IG that whilst the reference to “import” in the Articles is indeed just limited toimport into the EU, the other restrictions on direct or indirect transfers are intended to equally apply to non-EUdestinations. It therefore now the case that the involvement of an EU entity in the carriage of Russian fertilisersand coal or other solid fossil fuels to any destination whatsoever and whether inside or outside the EU would bein breach of EU sanctions.
Furthermore, the EU Commission has clarified to the IG that the prohibition on the provision of “financialassistance” in sections (2)(b) of both Article 31 and 3j and which includes insurance and reinsurance servicesprevents any entity subject to the jurisdiction of the EU from providing insurance and reinsurance for the carriageof Russian fertilisers and coal and other solid fossil fuel cargoes regardless of destination.
Most of the Clubs that comprise the IG are subject to the jurisdiction of the EU. All IG Clubs, including those thatare domiciled outside the territory of the EU, rely on a reinsurance programme that is heavily dependent on theparticipation of reinsurers that are domiciled within the EU. If any of the IG Clubs are prohibited under thesesanctions from contributing their share of any Pool claim, the individual Member will bear the shortfall inaccordance with their Club’s sanctions rules. The same principle will apply for claims above US$100 million if anyEU domiciled reinsurers on the IG reinsurance programme are prohibited under these sanctions from paying theclaim.
With no suggestion of the EU being willing to grant a further wind-down period to allow the consequences ofthese latest FAQs to be absorbed by industry, the impacts as set out above for Members involved in these tradeshave immediate effect. Any Members with questions are strongly encouraged to contact their Club.
Members are also reminded that EU Sanctions do not apply extra-territorially. Article 13 of the Regulationprovides that they apply:
- within the territory of the EU
- on board any aircraft or any vessel under the jurisdiction of a Member State
- to any person inside or outside the territory of the EU who is a national of a Member State
- to any legal person, entity, or body, inside or outside the territory of the EU, which is incorporated orconstituted under the law of a Member State
- to any legal person, entity, or body in respect of any business done in whole or in part within the EU.
All the IG Clubs have issued similar circulars.
