Special Clauses for Sanctions Act
25 February 2011 No.10-031
| Please refer to our Special Circular No.10-006 of 25 June 2010 regarding the "Special Clause for Iran Sanctions Act" and No.10-014 of 6 October 2010 regarding the "Amendment of the Rules of the Association" |
| The following special clauses will be introduced and applied to insurance contracts of all vessels from 25 February 2011. |
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"Special Clause for Sanctions Act" The Association shall not be liable to a Member in respect of that part of any liabilities, costs and expenses which is not recovered by the Association from reinsurers to any such reinsurance contracts (including but not limited to the Pooling Agreement, the Group Excess Loss Reinsurance Contract and other reinsurance contracts specially arranged by the Association) because of a shortfall in recovery from such reinsurers by reason of any sanction, prohibition or adverse action against them by any state or international organization or the risk thereof if the payment were to be made by such reinsurers. |
| As you know well, in order to cope with the "the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (USA)(hereinafter referred to as CISADA)" which came into effect 1 July 2010, the Association has introduced the "Special Clause for Iran Sanctions Act" to the insurance contracts of all ocean-going vessels with effect from 25 June 2010. As the results, if a Member has exposed or will expose the Association to a material risk of being or becoming subject to a sanction, prohibition, restriction or other adverse action by a competent authority or government, which may materially affect the Association, the Association may be entitled to cancel the contract of insurance by invoking the Rule 11.3 (3) . Then our Association introduced the amendment to the same effect to the Rules of the Association with effect from 1 November 2010 while simultaneously terminating the "Special Clause for Iran Sanctions Act". |
| New sanctions clauses have been introduced in the reinsurance contracts of the Association for 2011 policy year. The purpose of such sanctions clauses introduced by the reinsures is to protect the reinsurers themselves against exposure to any sanctions, prohibitions or restrictions by states and international organizations. In this respect, it may be envisaged the situation where payment of a claim or provision of cover by the Association does not expose the Association themselves a sanction risk but the reinsurers (including another associations in the International Group of P&I Clubs) refuse to pay by reason of a sanction risk to which they are exposed (eg. in another jurisdiction). In order to deal with such situation, the above clause is introduced. |
| The International Group of P&I Clubs strongly recommend the member clubs to introduce the above clauses and please be advised that most clubs have already introduced it. |