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OFAC Updated Ukraine Licenses

On 6 April 2018 OFAC designated 7 Russian oligarchs, 12 companies owned by them, and 17 Russian government officials as part of its Ukraine sanctions programme. Simultaneous with those designations, OFAC also issued General License 12, which gave US persons until 5 June 2018 to wind down ongoing contracts and transactions with United Company Rusal PLC (“Rusal”), being the world’s second largest producer of aluminium, as well as a major cargo shipper. On 23 April, OFAC issued two new licenses, General Licenses 12A and 14, which lessen the impact of the sanctions insofar as they relate to Rusal. General License 14 authorises the winding down of “operations, contracts, or other agreements, including the importation of goods, services, or technology into the United States…”…involving Rusal up to 23 October 2018.

These sanctions and licenses apply to US persons. However, to the extent that a non-US person conducts business with Rusal, where that business is significant, non-US persons may be subject to US sanctions, and so the new licenses are of direct relevance to non-US persons. Business conducted by non-US persons with Rusal up to 23 October 2018 will not be considered “significant” , as they are now activities for which US persons now do not require a license up to that date, as long as the underlying contract was entered into before 6 April 2018

To the extent that it is possible to comment on the legal implications of General License 14 in general terms, Members are asked to note as follows:

  1. Where General License 14 speaks of “transactions and activities….that are ordinarily incident and necessary to the maintenance or wind down of operations, contracts, or other agreements….”, this appears to be wide enough to include continued performance (carriage/cargo delivery,etc ) under such contracts entered into prior to 6 April 2018, as well as the performance of all related transactions/activities, as long as they are completed by 23 October 2018.
  2. The provision of insurance by the Club for such shipments performed before 23 October 2018 would also appear to be lawful. However, it would appear that any payments relating to claims arising from such shipments would also have to be completed by the cut-off date of 23 October 2018. This leaves open the possibility that it may not be possible for the Club to pay claims liabilities arising prior to 23 October 2018, which remain unresolved after that date. 

Members whose trades are affected by these sanctions are strongly advised to take legal advice from US lawyers which takes into account the specific nature of their contracts, the trade and parties involved, etc, given the potentially serious consequences of breaching US sanctions. It should be borne in mind that OFAC could withdraw or amend the licenses at any time, and/or OFAC could designate other parties which are involved in Rusal’s trades, potentially making further performance by shipowners/operators unlawful or at least problematic.  Continued performance of affected contracts should therefore be managed with great care, and Members are advised to remain alert to the possibility of changes to the sanctions landscape.

Copies of the various licenses, as well as a related set of OFAC FAQs can be downloaded from the links set out below.  We also include an article reproduced with the kind permission of Club correspondents in New York, Freehill Hogan and Mahar LLP, which follows up from their article of 12 April.

OFAC FAQs Related to General License 14 (0.20 MB)
OFAC Ukraine General License 12 (0.35 MB)
Russia-Ukraine-General-License12A (0.21 MB)
Russia-Ukraine-General-License14 (0.30 MB)
FHM Article Ukraine Sanctions 24 April 2018 (0.60 MB)