UKRAINE NEWS: Reed Smith issues further legal warning on risk of Russia trade

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Global law firm Reed Smith has commented on the latest situation regarding sanctions in the wake of the Ukraine conflict and on the Department for Transport’s guidance on the banning of ships with Russian connections from UK ports. It warns that “any shipping company involved in Russian-UK trade now faces significant challenges” and “potential reputational fall-out”.

Nick Austin, Shipping Partner, said: “The Department for Transport’s guidance on the banning of ships with Russian connections from UK ports is still developing, given that accurately identifying whether a vessel is ‘Russian’ is not as easy it sounds. For example, under the current rules a ship is not Russian just because it has Russian crewmembers or a Russian captain. For the rules to bite, there has to be a stronger link between Russia and the ownership and operation of the vessel itself.

“The restrictions in the underlying legislation run wide and deep, and are bound to have an impact. Significant numbers of Russian-linked tankers carrying crude oil and LNG call at UK ports each year, not to mention ships carrying steel and other goods. Those ships and cargoes will now have to go elsewhere, or more likely never leave Russia at all given the co-ordinated approach between governments.

“At the moment, Russian cargoes themselves are not sanctioned but this could quickly change as discussions at the political level continue.

“An immediate problem is what newly-banned vessels currently bound for the UK are meant to do with their cargo, given they will have separate legal obligations to the UK company they are delivering it to. Add to that the emergence of ‘bottom up’ sanctions being applied informally by dockworkers unwilling to unload Russian cargoes from non-Russian vessels, and it’s clear that any shipping company involved in Russian-UK trade now faces significant challenges.”

Alexander Brandt, sanctions lawyer at Reed Smith, adds that “owners and operators are struggling to keep up with the unfolding sanctions and are concerned that activities that are permitted today, will be banned tomorrow,” with considerable uncertainty now surrounding
the viability of all Russian trade and the “potential reputational fall-out” of such activities.

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