General information on the Ukraine situation
28.2.2022
General information on the Ukraine situation
Due to the situation in Ukraine, the EU, UN, the UK, and the US, among others, have all enacted new countermeasures in the form of sanctions against Russia, Russian counterparties, and Belarus. The situation is developing rapidly, and any sanction regime currently in force may be subject to significant change at very short notice.
It is important that clients ensure that they fully comply with the sanction legislation and that there is no risk whatsoever of becoming a subject of any sanctions. It may be difficult to know what measures exactly need to be taken to be compliant, and therefore, we strongly recommend that external legal advice is sought to ascertain the legality of the actions planned.
In general, sanctions issued by the EU, the UN, the UK, and the US are following the same line, to various extent.
The sanctions are targeting designated individuals and entities (for instance through asset freezes), which is why it is important to know the controlling interests of all involved parties.
The sanctions also target import and export to and from Russia within certain sectors (arms, dual use-goods, energy, transport, and technology), and to and from Belarus (arms, dual use goods, technology used in military purposes, tobacco, petroleum, and potash). Additionally, all import and export to and from Luhansk and Donetsk in Ukraine is prohibited.
To cut Russian financing, the sanctions target the Russian banking market and key state-owned companies, including the exclusion of sanctioned banks from the SWIFT-system, which will severely complicate financial transactions. Financial sanctions also target the Belarusian government and state-owned companies.
Further information can be found on the following websites. As the situation is rapidly evolving, we recommend monitoring at least these websites for updates.
EU: https://www.consilium.europa.eu/en/press/press-releases/
UK: https://www.gov.uk/government/latest?departments%5B%5D=office-of-financial-sanctions-implementation
US: https://home.treasury.gov/news/press-releases
Additionally, the following sanctions tools are provided for individual searches:
EU/UN: https://www.sanctionsmap.eu/#/main
UK: https://sanctionssearch.ofsi.hmtreasury.gov.uk/
US: https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-list-search-tool
Clients who are involved in any trade with Russian or Belarusian interests are strongly recommended to consider their position and risks in respect of not only the prevailing sanctions but also any other possible risks and exposures that may be encountered in Russia, Belarus, and Ukraine due to the military action in Ukraine.
If clients however are planning to conclude new agreements with their counterparties and the business involves any Russian or Belarusian aspects, it is advisable to consider and review the suggested terms and conditions extra carefully to ensure that, as a minimum, relevant sanction clauses are included in the agreement. An efficient sanction clause may assist clients to derogate from their obligations under the agreement or perhaps even terminate the agreement, should a party become a sanctioned person or entity at a later stage.
Even though the trade or a call to Russia would be lawful, problems may arise if, for example, a casualty takes place in Russian waters. There are many persons and entities on sanctions lists, and if any such person or entity gets involved, for example in the salvage operations or turns out to be a claimant, Alandia may not be able to assist with providing a security or even worse, to pay compensation under the insurance contract.
It may be difficult to make payments to Russia even if the transaction would be lawful. Many of the Russian banks are sanctioned, but in addition banks in general have strict compliance policies and avoid being involved in transactions with potential sanctions exposure. We are expecting these challenges to increase due to recent sanctions already imposed, as well as any new measures which will be targeted against Russia.
We kindly remind our clients that in general, failure to comply with the EU, the UN, the UK, and the US sanctions legislation will have implications for the insurance cover.
Please note however, that the insurance cover shall not be prejudiced only because a client is trading to Russia. If the client has performed due diligence thoroughly and is complying with the relevant sanction legislation, the insurance cover is to remain intact, subject to applicable terms and conditions. This of course will be finally determined on a case-by-case basis.
Finally, we would like to remind our clients that Ukrainian and Russian waters in the Black Sea and the Sea of Azov have been added to Joint War Committee (JWC) Hull War, Piracy, Terrorism and Related Perils Listed Areas on 15 February 2022.
Therefore, Alandia has given a notice in respect of the Areas of Perceived Enhanced Risk to come into line with the JWC’s Listed Areas. Alandia has announced that the new Listed Areas will be incorporated into all War Risk Insurance Policies where Alandia is the Leading Underwriter. The new listed areas will take effect from 1 March 2022 (please see https://alandia.com/news/jwla-028-black-sea-and-sea-of-azov/).
We urge all our clients to be observant of any sanctions which may regard their business and trade to and from Ukraine, Russia, and Belarus. We would also like to remind that it is the client’s obligation to carry out thorough due diligence before making a call to any port in Ukraine or Russia or concluding an agreement with any party possibly having a controlling interest in Russia or Belarus.
Please contact your underwriter for further information.