In recent years, the sanctions landscape has undergone unprecedented transformation. What once shifted gradually now moves at a pace that mirrors the volatility of global politics itself – evident in the sanctions regimes targeting Russia, Iran and Venezuela. Sanctions, and the enforcement of sanctions are also increasingly targeting the maritime industries.

The evolving and overlapping major sanctions regimes of the U.S. Office of Foreign Assets Control (OFAC), the United Kingdom’s Office of Financial Sanctions Implementation (OFSI), the European Union, and the United Nations have broad scopes of application and can affect wide range of commercial contracts in the maritime sector.  

Whilst this article does not delve into the fundamentals of sanctions, multi-disciplinary law firm Helmsman LLC  focuses on the practical challenges and contractual mechanisms to mitigate legal risks: 

MT: What are the sanctions risks relating maritime deals?

Maritime deals can be heavily impacted by the imposition of sanctions and related restrictions, targeting not only designated individuals and entities but also vessels and parties indirectly linked through beneficial ownership, control structures, vessel activity or economic resources. Some considerations are:

• Financing: Financiers are wary of any dealings with sanctioned entities, and a breach of applicable sanctions laws would almost invariably trigger an event of default.
• Maritime insurance: Insurers may decline coverage or reject claims where there has been non-disclosure of sanctions-related risks or a breach of applicable sanctions laws.
• Vessel sale and purchase:

1. Buyers may face commercial penalties, asset freezes if it purchases a vessel which is designated or it’s past operations or ownership have sanction-ties.
2. Buyers’ and Sellers’ reputations may be affected if vessels which they are associated with (even if only in the past) may become embroiled in “shadow fleet” activity.

• Cargoes: Operators may be concerned about the provenance of the cargo they are carrying. While the trade may in and of themselves be legal, dealing with a sanctioned counterparty may result in the operator being exposed to sanctions enforcement.

MT: What contractual protections can be included to mitigate sanctions risks in maritime deals?

Careful drafting and inclusion of dedicated sanctions clauses is critical in maritime transaction documents. Robust sanctions clauses have become increasingly standard in vessel sale and purchase agreements, charterparties, and financing documents, and have grown more nuanced serving to allocate risks of enforcement, clarify parties’ rights and obligations in response to investigations, and provide legal flexibility to terminate or suspend performance in the event of sanctions-related disruption. Such clauses frequently incorporate tailored language addressing sectoral sanctions, indirect ownership or control risks (such as the “50 Percent Rule” under the major sanctions regimes) and mechanisms like currency toggles or fallback payment arrangements to navigate restrictions on sanctioned financial systems.

Two recent cases examine this area. In Havila Kystruten AS v STLC Europe Twenty Three Leasing Ltd [2022] EWHC 3166 (Comm), subsidiaries of Havila Group (Havila) entered into sale and leaseback transactions involving four newbuild vessels with GTLK, a Russian-owned leasing company. Following GTLK’s designation under EU sanctions in April 2022, it terminated the bareboat charters (BBCs) and demanded full termination payments from Havila. The English court made two key findings:

1. The sanctions clause (Clause 4.3) of one BBC excused Havila from its obligation to maintain insurance on the vessel where doing so “would or might in its reasonable opinion constitute a breach of” any of the applicable sanctions, and therefore cancellation of the vessel’s insurance did not constitute a termination event.
2. While a cross-default termination event occurred under two remaining BBCs, Havila’s obligation to pay the termination sums were not rendered void. Crucially, Havila was held to have lawfully discharged its payment obligations by paying the termination sums into a frozen account, as no alternative payment mechanism had been agreed in the event of sanctions.

In Gravelor Shipping Ltd v GTLK Asia M5 [2023] EWHC 131 (Comm), two vessels were bareboat chartered to a Cypriot charterer by owners who were in the GTLK group. Following the outbreak of the Russo-Ukrainian war, the owners were designated under EU and US sanctions regimes. The charterer exercised its purchase option under the relevant bareboat charters, paying the purchase price in US dollars to an account nominated by the owners. The English court also adopted a pragmatic approach and reaffirmed key principles regarding sanctions and contractual performance:

1. Payment into a frozen account constitutes valid performance of contractual obligations where sanctions prevent the use of conventional banking channels, based on the sanctions payment restrictions clause in the bareboat charters.
2. Sanctions designation alone does not render contractual obligations void. The court gave commercial effect to sanctions clauses, recognising that they are intended to allow lawful performance of contracts to continue despite sanctions, rather than to terminate or frustrate the contract at the outset.

While these two cases provide some clarity when faced with a counterparty who becomes sanctioned, legal uncertainty remains. The applicability and effect of sanctions clauses depends heavily on precise drafting, especially in light of the evolving and extraterritorial nature of sanctions regimes. Parties should carefully consider their transaction structures, contractual obligations to comply with sanctions, and the rapidly shifting geographical contexts.

MT: What are some other practical tips for managing sanctions risks in maritime deals?

Managing sanctions risks ultimately comes down to thorough preparation, ongoing vigilance and robust contractual protections.

• Oftentimes, maritime transactions involve a web of special purpose vehicles. This makes it essential to look beyond the name of the counterparty and to assess beneficial ownership, control structures and the vessel itself – examining trading history, voyage routes, port calls and insurance arrangements to identify potential links with sanctioned jurisdictions or “shadow fleet” activity.
• Watch for red flags that warrant further investigation. Indicators such as flag hopping, frequent ownership transfers, use of intermediaries or shell companies, and voyage irregularities may indicate sanctions evasion.
• Incorporate protective clauses, such as warranties and covenants, that confirm sanctions compliance, require prompt notification of relevant developments and allow for suspension of obligations if sanctions impede performance.

Taken together with continuous monitoring, these measures provide a practical defence against sanctions exposure in maritime deals.

Photo credit: Helmsman
Published: 2 March, 2026