The Russia – Ukraine conflict has dealt another blow to a sector that had already been suffering significant volatility due to the Covid-19 pandemic.
Vessels have been attacked and held hostage, sanctions on Russia have halted business dealings and the act of trying to extract Russian entities from global supply chains have proved challenging.
“The whole infrastructure of reassurances is fraying at the edges in relation to shipments cargoes moving in and out of the area, not assisted, of course, by the sanctions on Russian banks, which is actually affecting the movement of money,” said Richard Turner, the President of the Union of Marine Insurance UK, at a panel discussion during Singapore Maritime Week.
To deal with the unfolding situation in Russia, sanctions committees have been created within the P&I clubs to ensure that proper advice is being provided to ship owners on how to comply with sanctions and what the rules mean for them.
“I should say that the speed with which sanctions have been promulgated in this particular instance, has been way faster than anything we’ve seen before and is more wide ranging as well,” Shaw said.
According to Nicola Loh, Head of the Regulatory and Compliance Practice at JTJB, one common issue faced by shipping companies is whether to collect payment arising from a transaction involving a party that has just been designated.
“There is a need to ensure that there is no designated party involved and sanctionable activity carried out in the transaction though this may pose some difficulties as it requires the companies to not only check on the vessel, the type of cargo carried and the direct contractual parties but also all the parties in the chain” said Loh. It is particularly challenging as it is common for shipping companies to have complex corporate structures involving multiple layers of ownership, Nicola explained.
There are currently more than 100 ships caught up in the Russia-Ukraine war, many have been attacked and subjected to weapons.
All of Russia’s waters were added to the list of high-risk locations by London’s marine insurance market and the move has already increased the cost of shipping, as well as add significant logistical pressures.
The Joint War Committee, which includes Lloyd’s Market Association’s syndicate members and representatives from London’s insurance company market, are monitoring and influencing the insurance premium considerations of underwriters.
So far, insurers have raised the cost of providing cover for merchant ships sailing through the Black Sea.
The supply chain implications are also massive. Russia and Ukraine account for more than 25% of the world’s trade in wheat, 60% of global sunflower oil and 30% of global barley exports, according to the Food and Agriculture Organization of the United Nations.
“It is absolutely prudent for shipping companies to seek legal advice in cases where there is any doubt on the interpretation and scope of application of the sanctions regulations and the applicable contractual clauses which their counterparty may seek to rely on,” Nicola added.
If you have been exposed to additional layers of risk and challenges due to the Russian – Ukraine situation and would like to know more about how to manage your sanctions risk, please do get in touch with Nicola Loh.
JTJB has specialised in Maritime and International Trade law practice since its formation in 1988. Today, JTJB’s maritime practice is anchored in Singapore with a network of offices across the region to serve the client’s maritime needs in Singapore and in the region. With its experience, specialist focus and dedicated network of trusted legal professionals in this region, JTJB is well placed to serve the maritime sector, and to handle and serve clients’ legal needs anytime, anywhere.