Ship Operations

New Risks, Liabilities and Technologies in the Maritime Sector

Baris Soyer, Andrew Tettenborn, Baris Soyer, Andrew Tettenborn

• Publisher: Informa Law from Routledge
• Year: 2020
• ISBN:
  9781000175776
• Edition: 1
• Topic: Law
• Subtopic: Civil Law
• Index: Law

This book covers in one handy volume all the major topics associated with ship operations. Carefully, co-ordinated to ensure breadth, relevance and lack of overlap, the topics covered are addressed by authors are the very top of their profession, whether in legal practice or academia, and are presented in a manner which is topical and clear. Part I offers a detailed and critical analysis of issues of contemporary importance concerning new liability regimes and developments. Part 2 discusses how parties, in particular ship operators, attempt in contemporary practice to allocate their risks concerning ship operations. Part 3 evaluates the legal position of those involved in more 'back office' operations. The book provides an invaluable guide to recent legal and practical developments and offers a comprehensive, well-informed and thoroughly practical guide on what is a very complex and developing area of law. It will therefore be of great use to legal practitioners and administrators of ship operations worldwide, as well as students in this area and academics associated with maritime law generally.

PART I

NEW RISKS AND LIABILITIES AFFECTING SHIP OPERATIONS

CHAPTER 1

The role of insurance in sanctions regimes

George Leloudas

1 Insurance sanctions

1.1 Comprehensive sanctions

Sanctions have not always been the weapon of choice in international relations. Until the end of the Cold War, they were sparsely used because they were considered to have inferior “persuasive” value to that of the alternative option of military deployment.¹ It was only in the 1990s that they were seen as a policy tool furthering the aim of the UN to settle differences among states in a non-military manner.

Τhe aim of sanctions is ultimately to rehabilitate non-compliant states through a process of negotiation and bargaining. The argument is that they have the potential to change the behaviour of the targeted states without incurring the devastating humanitarian effects of war. Not surprisingly, the UN made extensive use of this tool in the 1990s, with more than a dozen mandatory sanctions regimes imposed in the course of the decade.²

At that time, the UN regularly made use of comprehensive sanctions, namely, measures that aimed “to prevent the flow to and from a target of all commodities and products” as well as financial resources.³ They were heavily criticised for their adverse humanitarian impact:

[T]he civilian suffering caused by such measures often overshadow their potential political gains; moreover, comprehensive sanctions complicate the work of humanitarian agencies, cause long-term damage to the productive capacity of target nations, and unfairly penalize their neighbors (who are often their major trading partners).⁴

The Iraqi “oil for food” scandal is brought up repeatedly as an example of what can go spectacularly wrong in the enforcement of comprehensive sanctions. It was a humanitarian relief programme intended to halt the humanitarian crisis caused by the comprehensive sanctions against Iraq, but in the end, it simply contributed to the enrichment of the domestic political regime.⁵

1 The first time sanctions were applied by the UN was against Southern Rhodesia by means of SCRes 232 of 16 December 1966, and the second time was against South Africa by means of SCRes 418 of 4 November 1977.

2 R. Pape, “Why economic sanctions do not work” [1997] International Security, p. 90, Watson Institute for International Studies, “Background Paper on Targeted Sanctions”(16–17 July 2004), p. 2 (TFS project) (in file with the author).

3 J Farrall, United Nations sanctions and the rule of law (OUP 2007), pp. 107–108 for a list of comprehensive sanctions imposed by the UN.

4 TFS project (n 2), p. 2.

5 The comprehensive sanctions against Iraq were imposed by means of SCRes 661 of 6 August 1990.

Three major lessons were learned from the unsatisfactory experience of imposing comprehensive sanctions. First, sanctions should be targeted sanctions; they should aim at “the architects of the policies opposed by the international community”,⁶ be they individuals, businesses and/or entire business or administrative sectors, in order to minimise the possibility of humanitarian crises among the general population. Second, the robust enforcement of sanctions was key to changing political behaviour. Enforcing states had to be required to “stick to the script”, actively policing their implementation by commercial and state entities. Third, sanctions needed to provide a carrot together with the stick: as Ban Ki-Moon put it, “[t]he target must understand what action it is expected to take. And partial or full compliance should be met by reciprocal steps from the Council, such as easing or lifting sanctions as appropriate”.⁷

1.2 Targeted financial sanctions

There is consensus that targeted sanctions got off to a rocky start with those imposed against the Haitian government in 1993 and 1994, and since referred to as one of the lowest points in their history⁸:

[T]he sanctions were applied erratically in most instances: first to the leaders only, then to their families, and still later to the elite supporters of the regime. By the time all the targets were publicly identified, they had ample time to move and protect their financial assets.⁹

Despite this experience, their use gained popularity. The blunder in Haiti was dismissed as a problem of implementation, with the failure of the Iraqi and former Yugoslavian comprehensive sanctions accelerating their use as an alternative instrument of coercion. The UN reformed its sanctions philosophy early in the present century to reflect these lessons and proceeded to make more frequent use of targeted financial sanctions. In that respect, it followed the example of the USA, which used its central role in global finance to impose targeted financial sanctions, often with extraterritorial effects, following the demise of the USSR.¹⁰

What, however, brought targeted financial sanctions to the attention of a broader international audience was the aftermath of 9/11. What the UN did was to use the financial world as one of the main means of pressure and to widen the scope of sanctions to cover “non-state actors that include individuals, business entities, political organizations and the third parties who provide their support”.¹¹ Coincidentally, the first time the UN imposed financial sanctions on a stand-alone basis was against the Taliban by means of Security Council Resolution 1267 of 15 October 1999. This required states to “[f]reeze funds and other financial resources, including funds derived or generated from property owned or controlled directly or indirectly by the Taliban, or by any undertaking owned or controlled by the Taliban”.¹² Following 9/11, their use was generalised against various terrorism-related and WMD-related targets.¹³

6 Th Biersteker, “The emergence, evolution, effects, and challenges of targeted sanctions” (2004), p. 2 (Biersteker report).

7 Speech of Ban Ki-Moon to the Symposium on Enhancing the implementation of United Nations Security Council sanctions (New York 30 April 2007) (in file with the author).

8 Initially, targeted sanctions were imposed by means of SCRes 841 of 16 June 1993, with comprehensive ones applied by means of SCRes 917 of 6 May 1994.

9 Biersteker report (n 6), p. 3.

10 See M Rathbone, P Jeydel, & A Lentz, “Sanctions, sanctions everywhere: forging a path through complex transnational sanctions laws”, 44 Georgetown Jo. Int. Law 1055 (2013).

11 K Alexander, Economic sanctions. Law and public policy (Palgrave Macmillan 2009), p. 27.

12 para 4(b).

13 For a list of targeted financial sanctions imposed by the UN until April 2004, see TFS project (n 2), p. 6.

The common feature of post-9/11 financial sanctions regimes is an aim to cut-off the access to capital of targeted states, individuals, businesses or business sectors. In that sense, financial sanctions put the burden for changing the behaviour of the targets on the global financial system via vigorous monitoring, reporting and due diligence requirements. The enforcing states police the provider of the capital rather than the target itself. In addition, the transparency requirements imposed in the aftermath of the recent financial crisis incidentally enable the closer monitoring of financial institutions for sanction breaches.¹⁴

It is not a coincidence that between 2010 and 2018, the USA imposed a string of hefty fines against several international banks for sanctions violations.¹⁵ Their prevalence was based on the belief that targeted financial sanctions remedy the drawbacks of comprehensive and trade sanctions:

Firstly, financial sanctions target only the rogue-party’s assets, or the assets of a given organization whose policies are inconsistent with international norms. Secondly, financial sanctions are, in theory, easier to enforce than traditional trade sanctions, which call for blockades, massive enforcement costs, monitoring costs, etc. In addition, sanctions aimed at delaying/denying credit, or monetary grants to targets are theoretically much easier to monitor.¹⁶

1.3 How successful are targeted financial sanctions?

Measuring the actual success of targeted financial sanctions is a notoriously difficult task, as they often come as part of a wider package of policies. The most sophisticated study on the effectiveness of sanctions so far suggests that they are “at least partially successful in 34 percent of the cases that we documented”.¹⁷ They are mostly successful when modest policy changes are pursued, such as the release of prisoners (51%); however, their utility decreases to 31% when they aim to achieve regime change and democratisation, and to 21% when they aim to disrupt military adventures.¹⁸ The study suggests that targeted sanctions are not a panacea for all the ills of international relations, but provides clear evidence that they have a significant role to play.

14 G Hakimdavar, A strategic understanding of UN economic sanctions (Routledge 2014), p. 146 (Hakimdavar).

15 For the list, see Refinitiv “Fines for banks that breached US OFAC sanctions” (2019) <https://www.refinitiv.com/content/dam/marketing/en_us/documents/infographics/fines-for-banks-that-breached-us-sanctions-infographic.pdf>; (last accessed 2 February 2020).

16 Hakimdavar (n 14...