Lifting Iranian Sanctions – The Land of Opportunity?
Contemporary Legal Issues Affecting Commodity Traders
In this article, Holman Fenwick Willan (HFW) reviews three major issues affecting those operating in local and global commodity markets: sanctions against Iran, assessing appropriate damages and the interpretation of the terms of a contract.
AFTER SEVERAL YEARS of increasing sanctions against Iran, the recent suspension of some restrictions creates both opportunities and threats for traders in certain sectors. Companies are naturally keen to secure ‘first
mover’ advantage, but they also need to be sure that they understand the legal limits which remain in place and are able to structure transactions (and carry out the necessary due diligence) in a way which minimises the risk of an inadvertent breach of the sanctions which remain. This is a complex area and the temporary suspension of a small number of restrictions imposed by a number of different regulators over a three year period has inevitably resulted in some uncertainty. However, the following general points can be made:
Even when trading in a commodity is permitted, traders should continue to screen their counterparties ...
The great majority of restrictions remain in place. This means that traders need to check very carefully that the particular commodity in question benefits from a specific suspension, that they are not dealing directly or indirectly with any prohibited persons (as the position on prohibited persons remains broadly unchanged), that the trades are entirely within the permitted trade and that they can rely on the support of their bank and insurers. When considering the commodity, it is important
to note that, while there are suspensions in place relating to crude, petroleum products and petrochemicals, other restrictions (such as those on trade in raw and semi-finished metals) remain unaffected. There has been no general relaxation in respect of trade with Iran. Even when trading in a commodity is
permitted, traders should continue to screen their counterparties and any other Iranian entities involved in the transaction. This is because, other than in some limited respects, the asset freezing provisions (and lists of designated individuals and
40 March 2014
entities) remain unchanged. US authorities have stressed in particular that payments to the Iranian port operator Tidewater continue to be prohibited, whatever the cargo in question. The suspensions are time limited, in that they
only relate to trades entered into and executed between 20th
January and 20th July 2014. Companies
therefore need to ensure that they can complete all relevant business by 20th
July 2014.
The commercial impact of the suspensions will depend not only on traders’ appetite for trade with Iran, but also on the willingness of banks and insurers to support this trade and traders should work closely with them. Companies which are involved in the supply of permitted foodstuffs to Iran will be well aware of these issues, but they may find that this becomes a little less challenging than before, as a financial channel to facilitate humanitarian trade for Iran’s domestic needs is due to be established.
For more information contact Daniel Martin, HFW Partner, on +44 (0) 20 7264 8189 or
daniel.martin@
hfw.com
Cargo Delivered Late – Damages assessed by spread of days
A recent English High Court ruling in a late
delivery of cargo case, Galaxy Energy International Ltd v Murco Petroleum Ltd (27th
November 2013)
puts the spotlight once again on the assessment of damages in international sale contract disputes. Here, we review some of the arguments put forward on liability and quantum and the Court’s decision to favour those reflecting the commercial realities of the oil trade. We also consider the broader implications for commodity buyers and sellers.
Background The claimant oil trader, Galaxy Energy
International Ltd (Galaxy), claimed damages for late delivery by the defendant oil refiner, Murco Petroleum Ltd (Murco), of 35,000 mt of fuel oil, sold on an FOB basis. The parties had an ongoing commercial
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