In two judgments last year, the English High Court examined the sanction clauses in detail. In any event, it was the parties` refusal to pay under an agreement, the risks being mentioned in the context of the U.S. extraterritorial (“secondary” sanctions. The Court of Justice`s decisions in these cases raise a number of issues relating to the development of sanction clauses and emphasize the need to carefully consider the scope of the treaty and the impact that U.S. sanctions may have on its performance. After Lamesa cynergy borrowed the funds, the Russian owner of Lamesa was designated under U.S. sanctions. The name also allowed the U.S. government to impose counter-sanctions on foreign financial institutions that “knowingly permitted a significant financial transaction on behalf of the Russian owner.” As a result, Cynergy refused to pay interest to Lamesa and based itself on the sanction clause and the risk of secondary sanctions resulting from the designation. Lamesa objected and complained about the unpaid interest. The sanction clause included the standard wording developed by the Joint Hull Committee for the London market. However, this formulation is unusual in other treaties.
The crucial question was whether the “exposure” to sanctions in this clause was as follows: in Lamesa Investments Limited/Cynergy Bank Limited1, the Court was prepared to apply a surprisingly broad interpretation of when a sanction clause would apply. This contrasts with the more restrictive approach adopted last year against Aegis Managing Agency Limited and others 2 as part of Mamancochet Mining Limited. In this case, the EU regulation on blocking was also examined. The regulation is essentially intended to reduce the extraterritorial effects of foreign sanctions, including the secondary sanctions imposed by the United States on Iran against non-U.S. persons. In the event that insurers were allowed to invoke the sanction clause to oppose the payment, the applicant put forward the following three arguments on the basis of the EU blocking regulation: the Tribunal distinguished exposure to sanctions and exposure to the risk of sanctions. This is a simple point that can be clarified in the contractual clauses when the broader effect is contemplated. In particular, insurers and ship brokers should not rely on old contract models and ensure that new policies have a broad scope and have specific consequences. For example, insurers and brokers could include the term “exposure to the risk of sanction” or “behaviour that the competent authority may consider prohibitable or punishable.” There seems to be negotiations. A more balanced clause would include tailored restrictions, including the fact that the party benefiting from the clause should act reasonably and on the basis of consistent information. – Obiter`s remarks are a positive commercial interpretation. This may provide some comfort to a party who is working carefully to put in place a sanctions exclusion clause and who relies on the fact that the clause is not necessarily considered a violation of the EU`s blocking regulation.
Again, the effect of these types of clauses will be very significant, including the date on which the clause was introduced and depends on the form of the term. On the other hand, in Mothercochet Mining Limited/Aegis Managing Agency Limited e.a.5, Teare J found that the mere possibility of imposing U.S. secondary sanctions was not sufficient to include the sanction clause of the Joint Hull Committee (as adopted by the Joint Cargo Committee).