1. 7 th Annual Marine Money Gulf Ship Finance Forum, Wednesday, 9 th March 2011 SANCTIONS AND THEIR IMPACT ON SHIPPING:An Overview Tony Rice Tel: +44 (0)20 7264 8315 tony.rice@hfw.com

2. Sanctions and their impact on Shipping: an Overview  Summary of Sanction Regimes  UN  US  EU  Some key questions  Impact on Shipping  What's ahead?  Summary

3. Sanctions and their impact on Shipping: an Overview  Summary of Sanction Regimes  UN  Purpose(1)restriction on import/export of prohibited items/technology/services/investments (2)financial sanctions on target entities (3)prohibition on activities linked to nuclear proliferation  UN Security Council Resolutions (1)No. 1737 (2006) (2)No. 1747 (2007) (3)No. 1803 (2008) (4)No. 1929 (2010)

4. Sanctions and their impact on Shipping: an Overview  Summary of Sanction Regimes  UN Prohibitions – application includes (1)use of Member State ships (2)insurances (3)financial assistance/services (4)investment (5)brokering

5. Sanctions and their impact on Shipping: an Overview  US -US Iranian Transaction Regulations (1)US Treasury OFAC (2)"US person" focus (3)blanket restriction

6. Sanctions and their impact on Shipping: an Overview  Summary of Sanction Regimes  Comprehensive Iran Sanctions, Accountability & Divestment Act 2010 ("CISADA") (1)State Dept (expands ISA 1996) (2)extraterritorial focus – foreign companies (3)energy focused – "knowingly" provides -refined petroleum products ("RPPs") (diesel, gasoline, jet fuel and aviation gasoline) -goods/services which facilitate maintenance or production of RPPs -goods/services (e.g. Insurance, finance or transport) which could contribute to enhancement of ability to import RPPs (4)adds 3 new sanctions to the ones listed in ISA 1996 : forex, banking transactions (i.e. all USD transfers) and US property transactions (5)role of US banking system in international trade/commerce

7. Sanctions and their impact on Shipping: an Overview  Summary of Sanction Regimes  EU -Council Regulation No. 668 (26 July 2010) (1)broadened original 2007 published list of designated target entities (IRISL, Bank Mellat, Bank Melli, Bank Sedarat) (2)no impounding of IRISL vessels or cargos or detention of crews -Council Decision (26 July 2010) (1)implemented UN SCR No. 1929 – but goes further (2)wide ranging prohibitions and measures in trade, financial services, energy, transport and asset freezing

8. Sanctions and their impact on Shipping: an Overview  Summary of Sanction Regimes  EU (cont'd) -Council Regulation No. 961 (27 October 2010) (1)implements the CD of 26 July 2010 (2)comprehensive and robust – extends UN Security Council Resolutions (3)restrictions include: -Iran banking sector -investment in Iranian oil and gas industry (finance or JVs) -access to EU insurance and bond markets -services to Iranian ships and aircraft (no cargo loading/unloading in EU ports for IRISL ships) -asset freezing (including IRISL and subsidiaries) -export/import of stipulated goods, technology and equipment

9. Sanctions and their impact on Shipping: an Overview  Summary of Sanction Regimes  EU (cont'd) (4)applies within EU territory; to all ships in EU; to all EU nationals and companies

10. Sanctions and their impact on Shipping: an Overview  Some Key Questions  Who are your counterparties and are they persons who are the subject of sanctions?  Are any of the persons in the contractual chain in that position?  If an owner/charterer, are you satisfied that the cargo does not fall within the sanctions legislation?  Can you make/receive payments from counterparties?  Can you obtain insurance?

11. Sanctions and their impact on Shipping: an Overview  Impact on Shipping  uncertain terrain for companies/banks and their advisors  increased costs and regulatory burden (particularly regarding reporting/auditing obligations)  difficult business decisions must be made by non-US entities  variations in implementation by member states  unclear interpretation and State Dept. guidelines for CISADA  extraterritoriality of CISADA and US banking system sanctions  shippers, traders, banks, insurance companies – all affected

12. Sanctions and their impact on Shipping: an Overview  What's ahead?  so far only one single CISADA enforcement  State Dept. indicate not looking to aggressively enforce – prefer to encourage voluntary action  HFW/US State Dept. Forum  global tours by State Dept. officials  enforcement of EU sanctions by member states  crude next?  BIMCO sanctions clause; insurance contracts; ship finance loan agreements  Libya

13. Sanctions and their impact on Shipping: an Overview  Summary  comprehensive, wide-ranging and robust  unprecedented universal support (China; Russia)  extreme caution  due diligence and related costs  developing situation

14. 7 th Annual Marine Money Gulf Ship Finance Forum, Wednesday, 9 th March 2011 SANCTIONS AND THEIR IMPACT ON SHIPPING:An Overview Tony Rice Tel: +44 (0)20 7264 8315 tony.rice@hfw.com