A recent executive order imposing economic sanctions on entities â€œdetermined to be contributing to the Somalia conflictâ€ has mariners struggling to understand both the intent of the order and the effect it will have on the industry. Executive Order 13536, issued in April by President Barack Obama, blocks payments and other transfers of assets by U.S. persons to certain people or groups.
|A boarding party from the U.S. Navy guided-missile destroyer USS Farragut boarding a Somali skiff on Feb. 2, in the Gulf of Aden. An executive order issued by U.S. President Barack Obama bans ransom payments to certain groups, including two people associated with Somali pirates. (Photo courtesy U.S. Navy)|
Some in the maritime industry fear such sanctions would prohibit shipowners from making ransom payments to Somali pirates who hijack their vessels and crew. Two of the 11 individuals named in an annex to the order are affiliated with known Somali pirates.
â€œAny payments that would go to those two individuals would be prohibited, and any party knowingly making those payments would be in violation,â€ said John Kimball, an admiralty law expert with Blank Rome LLP.
But in Kimballâ€™s interpretation, thatâ€™s not the intent of this order. He believes the true target of the sanctions is terrorism, not piracy. In addition to the named individuals, the annex prohibits the transfer of assets to al-Shabaab, a Somali Islamist terrorist group believed to have ties to Al Qaeda.
Shortly after the order was issued, government leaders met with industry leaders in Washington, D.C., to explain the orderâ€™s intent and restate the Obama administrationâ€™s opposition to piracy.
â€œ(They) were at pains to make it clear,â€ said Kimball, who believes the maritime industryâ€™s concern over the order is misplaced.
Last year, with piracy incidents like the attempted hijacking of Maersk Alabama on the rise, Secretary of State Hillary Clinton said U.S. policy is to not authorize ransom payment, and subsequent statements by other administration officials followed, Kimball said. Rumors began circulating in the maritime industry that the United States and England were trying to reach an agreement prohibiting ransom payments.
â€œI think there was an initial reaction that said, â€˜Oh, this is the order thatâ€™s going to have that effect,â€™â€ Kimball said. â€œBut I believe this order will have very little effect on the industry.â€
Justin Mitchell and Carlos Tamez, admiralty and maritime law attorneys with Hill Rivkins LLP, agree that the order caught the industry off guard.
â€œBut I donâ€™t know what the intent was,â€ Mitchell said. And until the government issues more complete regulations for this order, discussion is limited to speculation and interpretation.
â€œThis could be a useful tool depending on its interpretation by (the Office of Foreign Assets Control, or OFAC),â€ Mitchell said. â€œWe just need to wait until the regulations are promulgated to see whether their effects are positive or negative on the maritime industry. It has the potential for both.â€
The confusion lies in the uncertainty about how the order will be enforced and prosecuted. Violating the order carries criminal penalties of up to 20 years in prison and $1 million in fines per incident, and civil penalties up to twice the amount of the transaction, Mitchell said.
To that end, shipowners can â€” and should â€” contact OFAC immediately in the event of a ransom situation, he said. Shipowners can check any specific names of pirates against OFACâ€™s record of Specially Designated Nationals and Blocked Persons, the SDN List, accessible on the OFAC Web site.
However, in a typical ransom transaction, a representative of the shipowner or insurer delivers cash to the deck of a ship from a helicopter â€” thereâ€™s no easy or effective way to identify pirates or their affiliations.
Tamez said that doesnâ€™t necessarily matter for shipowners. â€œIf you violate the order,â€ he said, â€œyouâ€™re culpable whether you did it intentionally or you just didnâ€™t know. Checking with OFAC shows good faith, but might not necessarily absolve you from culpability.â€
Marti Adams, a U.S. Department of Treasury spokesperson, said OFAC cannot comment on the intent of the order, or the level to which the office will prosecute violations.
â€œIf (shipowners) know someone is on the list, they should apply to OFAC for a specific license to engage with a designated entity,â€ she said. â€œWeâ€™d seek foreign policy guidance from the State Department, and handle it on a case-by-case basis.â€
Adams encouraged shipowners to call OFACâ€™s compliance hotline for counsel in the event of a ransom situation.
Often ransom payments are the only action available to shipowners. Until the administration issues regulations that more clearly interpret this order, they need to protect themselves from prosecution while doing what they can to protect vessels and crews.
The full text of Executive Order 13536 can be read online at http://www.ustreas.gov/offices/enforcement/ofac/legal/eo/13536.pdf.