Member Article

Following from the recent geopolitical developments in Ukraine, there has been a heightened interest in international sanctions. Through this series of articles, we aim to provide a general overview of the notion of sanctions, consider the local framework through which sanctions function in Malta, illustrate the general obligations which subject persons are required to observe vis-à-vis sanctions and discuss a general overview of the sanctions imposed by the EU against Russia.

 In this sixth article, we shall consider the salient aspects on the EU sanctions imposed on Russia in relation to the sale of tanker vessels.

On the 18^th of December 2023, the Council of the European Union issued several additional measures against the Russian Federation through its 12^th wave of sanctions in response to the Ukraine war. One of the latest measures taken was that of addressing the sale or transfer of ownership of tankers for the transport of crude oil or petroleum products listed in Annex XXV of Council Regulation 833/2014.

The rationale behind this restrictive measure is that of curtailing Russia’s ability to sustain the Ukraine war through the monitoring of the sale of tankers to third countries. This 12^th wave of sanctions incorporates measures to closely monitor the sale of tankers to third countries and prevent the use of these tankers to transfer oil above the cap imposed by EU legislation.

Since the start of the conflict in Ukraine, and the subsequent increase in restrictive measures issued against Russia, there has been an increase in the use of a “shadow fleet” by Russian state. The term “shadow fleet” refers to older vessels that are anonymously owned and/or have a corporate structure designed to hide their beneficial owners, and which are utilised for the purpose of trading sanctioned oil and engaging in other deceptive shipping practices.

Article 3q of Council Regulation 833/2014, prohibits the sale, or other transfer of ownership, directly or indirectly, of tankers for the transport of crude oil or petroleum products listed in Annex XXV of Council Regulation 833/2014, whether or not originating in the EU, from any national of a Member State, natural person residing in a Member State, and a legal person, entity or body which is established in the EU, to any natural or legal person, entity or body in Russia or for use in Russia.

The Sanctions Monitoring Board (the “SMB”) notes that it is empowered, in terms of sub-paragraphs (2) and (3) of Article 3q of Council Regulation 833/2014, to authorise the sale or other transfer of ownership of tankers for the transport of crude oil or petroleum products listed in Annex XXV, in terms of the conditions which they may deem appropriate. Decisions on such requests for authorisation for the sale or transfer of ownership shall not be given where the SMB has reasonable grounds to believe that the tanker would be used to transport, or be re-exported to transport, such crude oil or petroleum products originating in Russia or exported from Russia for import into the EU in breach of Article 3m (of Council Regulation 833/2014) or for transport to third countries at a purchase price per barrel exceeding the prices indicated in Annex XXVII of Council Regulation 833/2014.

Article 3q of Council Regulation 833/2014 also considers the reporting obligations on the sale, or other transfer of ownership of any tankers. Sub-paragraph (4) of Article 3q stipulates that

any sale or other arrangement entailing the transfer of ownership of tankers for the transport of crude oil or petroleum products by a national of a Member State, a natural person residing in a Member State, and a legal person, entity or body which is established in the EU to any third country shall be notified immediately to the SMB where the owner of the tanker is a citizen, a resident or is established. There is no additional guidance available at this stage as to how quickly such a sale is to be notified at the date of drafting this document.

The notification to the SMB shall contain, at least, the following information: the identity of the seller; the identity of the purchaser; where applicable, the incorporation documents of the seller and the purchaser, including the shareholding and management; the IMO ship identification number of the tanker; and the call sign of the tanker.

It is to be noted that where a sale or other transfer of ownership of tankers as described in Article 3q of Council Regulation 833/2014 has occurred after the 5^th December 2022 and prior to the 19^th December 2023 is to be notified to the SMB before the 20^th February 2024. The SMB notes that, in terms of Article 16 of the National Interest (Enabling Powers) Act, it may request additional information in the course of its assessment of the notification.

For this purpose, the SMB has provided a specific template accessible on its website https://smb.gov.mt/standard-templates/,  which must be duly completed when submitting such notifications. The notification and any supporting documentation are to be submitted by email to [email protected] and by post to: The Sanctions Monitoring Board, 16, Triq il-Kukkanja, Santa Venera, Malta

This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Dr. Edmond Zammit Laferla or Dr. Zachary Galea

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