New European Union Measures against Iran—Council Regulation 267/2012 dated 23 March 2012 Frequently Asked Questions – issued on 19 April 2012
On 23 January 2012，The European Union Foreign Affairs Council agreed to introduce further measures impacting on trade that would or could support
the furtherance of the Government of Iran’s nuclear aspirations.
Specifically the Council has introduced new measures to prohibit the trade and transportation of crude oil, petroleum products and petrochemical
products. The new measureswere set out in Council Decision 2012/35. On 23 March 2012 the Council issued Regulation 267/2012 implementing
the provisions of the Decision and repealing Regulation 961/2010. The Group has since corresponded and met with the UK Treasury to discuss
the interpretation and application of the Regulation.
The FAQs which follow, and which should be read in conjunction with the FAQs issued on 8 February 2012, substitute the FAQs issued on 27 March
2012 and cover the ollowing current issues;
The legal Status of EU Council Regulation 267/2012; The effect of the "grace periods"; Impact on shipowners, Impact on the cover provided by clubs 。It should also be noted that the FAQs address solely the ramifications of Council Regulation 267/2012 and do not address other nationally or internationally
applicable anctions measures which may impact on trade to and from Iran and the provision of insurance and reinsurance cover in relation thereto.
1. What is the legal status of the Regulation?
The Regulation is effective from 24 March 2012 and gives effect, subject to the modifications therein, to Council Decision 2012/35. It also repeals and
replaces Regulation 961/2010.
The provisions of the Regulation, in so far as these relate to the shipment of Iranian crude oil, petroleum and petrochemical cargoes and the insurance
arrangements relating thereto, are effective from the dates stipulated in the Regulation, in particular in the provisions contained in Articles 11 – 14.
2. What is the effect of the "grace periods" provided for in Articles 12 and 14 in the Regulation?
The Regulation reaffirms the two "grace periods” for the continuation of the performance of contracts which were concluded prior to 23 January 2012:
(i) For petro-chemical products, until 1 May 2012,
(ii) For crude and petroleum products, until 1 July 2012.
In the absence of definitive guidance, it should be assumed that the grace periods will expire at 2359 on 30 April and 2359 on 30 June respectively.
The provisions contained in the Decision relating to ancillary contracts remain unaltered.
New carveouts are provided in relation to the provision, directly or indirectly, of third party liability insurance and environmental liability insurance and
reinsurance until 1 July 2012
(in respect of Iranian crude oil and / or petroleum products) and 1 May 2012 (in respect of Iranian petrochemicals). P&I insurance will fall within
the scope of these carve outs. The effect of these carve outs is to make it clear that as an exception to the general prohibition in Articles 11 and 13 on the provision of insurance and reinsurance related to
the import, purchase or transport of crude oil petroleum products and petrochemical products respectively, P&I cover may continue to be provided
but only up to 1 July 2012 in respect of the insurance and reinsurance of the transportation of Iranian crude oil and petroleum products and 1 May 2012
in respect of transportation of petrochemicals, and always subject to the provisions of Articles 12 and 14 ( which are addressed under question 3 below).
It is important to note that the new exception to the general prohibition on insurance and reinsurance only applies up to the respective cut off dates, and
that the prohibited cargoes must be discharged, and/or Iranian bunkers consumed, before the end of the carveout periods to avoid any possibility of
contravening a clubs sanctions rules.
New provisions are included in the Regulation which require the contractual performing party to give a minimum 20 working days’ notice
of the activity or transaction to the competent authority of its Member State. There remains some ambiguity in the drafting regarding which contracts
are intended to be covered by this notification requirement and whether this would extend to ancillary contracts uch as transportation contracts but
the prudent approach would be to assume that the requirement would apply to an EU shipowner transportingcrude oil, petroleum or petrochemical
products to EU or other destinations. In practice this could give rise to problems where late notification of,
or change of, voyage orders prevent a shipowner from giving the requisite minimum notice. In such circumstances shipowners should give as much
notice as possible to the relevant Member State competent authority of the intended activity or transaction. It does not appear that this notice requirement
would extend to a shipowner which is not established in an EU member state.
Following the inclusion of the new carveout in relation to third party liability insurance and environmental liability insurance and
reinsurance cover noted above, the minimum 20 working days notification requiremen will not however apply in relation to P&I insurance or
reinsurance cover arrangements.
3. How will the relevant prohibitions in the Regulation impact on shipowners
(i) EU Shipowners
The relevant wordings in Articles 12 and 14 of the Regulation permit the continuing import or transport by EU regulated shipowners of
crude oil, petroleum products and petrochemical products loaded or originating in Iran up to the respective cut off dates of 1 July 2012
and 1 May 2012 always provided these are pursuant to pre 23 January 2012 contracts (or pursuant to contracts ancillary thereto).
The import or transport by EU shipowners pursuant to post 23 January 2012contracts is prohibited. “Transport” would include carriage
of fuel as bunkers.
(ii) Non-EU Shipopwners
Non-EU regulated shipowners may also continue to transport such cargoes or bunkers for delivery in the EU subject to pre 23 January contractual
arrangements (or pursuant to contracts ancillary thereto) up to the respective cut off dates. Thereafter nonEU shipowners may continue
to transport such cargoes but only to non-EU destinations, subject always to any other applicable sanctions legislation.
The cargo prohibitions are specific to the named cargoes and do not include LNG and LPG cargoes. To the extent however that vessels
transporting such cargoes might take on Iranian bunker fuel, this could separately trigger trading and/or insurance prohibitions.
4. How will the insurance and reinsurance prohibitions in the Regulation impact on P&I cover
All International Group clubs have included within their rules either express sanctions cover termination or exclusion provisions or
imprudent or improper trading cover exclusion provisions.
The effect of those rules is to withdraw or exclude insurance cover or preclude recovery in relation to liabilities incurred whilst
a vessel is performing sanctionsor prohibition offending voyages. To the extent that a shipowner undertakes such a voyage,
his liabilities will not be insured by his International Group Club. Not all International Group clubs are incorporated, domiciled
or regulated within the EU. In relation to the shipment of the prohibitedcargoes originating from Iran for delivery inside and outside
the EU, how will the amended measures relating to third party liability and environmental liability insurance and reinsurance, apply
to EU and non-EU regulated clubs?
(i) Cargoes for delivery within the EU Pursuant to Articles 12.2 and 14.2,
EU and non-EU regulated clubs will continue to be able to provide cover to EU and non-EU shipowners until the
relevant cut-off date of 1 July 2012 or 1 May 2012 respectively. Where however the transportation is pursuant
to a post 23 January contract, the voyage would contravene the requirements of Article 12 and Article14 of the
Regulation (permitting only performance of 23 January 2012 contracts or contracts ancillary thereto) and would
trigger clubs sanctions cover exclusions with the result that notwithstanding the carveouts in Articles 12.2 and 14.2
shipowners will not be covered in relation to such voyages.
(ii) Cargoes for delivery outside the EU
(a) EU regulated clubs
Pursuant to Articles 12.2 and 14.2, EU and non-EU regulated clubs will continue to be able to provide cover to EU and non-EU shipowners until the relevant cut-off date of 1 July 2012 or 1 May 2012 respectively. Where however the transportation
is pursuant to a post 23 January contract and is performed by an EU shipowner, the voyage itself would contravene the
requirements of Article 12 and Article 14 of the Regulation (permitting only performance of pre23 January 2012 contracts or
contracts ancillary thereto) and would trigger clubs sanctions cover exclusions with the result that notwithstanding the carve-outs in Articles 12.2 and 14.2, shipowners will not be covered in relation to such voyages. If however the transportation is
pursuant to a post 23 January contract, and is performedby a nonEU shipowner and the cargo is not destined for the EU,
such voyage will not contravene the Regulation and insurance and reinsurance cover may continue to be provided up to
the relevant cut-off date but not beyond
(b) Non-EU regulated clubs
The International Group clubs which are not EU regulated will not be directly subject to the insurance
prohibitions contained in Regulation.
In relation to cover provided by such clubs to EU and non-EU owned or flagged vessels
trading prior to the relevant cut-off date with prohibited cargoes to the EU , such transportation,
provided pursuant to a pre-23 January 2012 contract would be permissible and would not trigger the clubs
sanctions cover exclusion provisions.
Where however the transportation is pursuant to a post 23 January contract, the voyage would contravene the
requirements of Article 12 and Article 14 of the Regulation and cover would be impaired by operation of
the clubs sanctions cover exclusions as noted under paragraph (a) above.
Furthermore, even where the transportation does not breach the provisions of the Regulation (eg. in the case of a voyage by a non-EU owned or flagged vessel to a non-EU destination, whether pursuant to a pre-or post-23 January 2012 contract), the non-EU club’s rights of recovery under the International Group pooling arrangements from clubs which are EU regulated will be impaired,
and rights of recovery under the International Group Reinsurance Contract and other reinsurances taken out for the benefit of
the clubs members will also be impaired. The nonEU regulated International Group clubs have however ncorporated provisions
in their rules to exclude cover where, as a result of sanctions measures, the pool and/or
reinsurersare themselves subject toprohibitions on cover/payment.