The seizure of U.K. flagged tanker Stena Imperio by the Iranian Revolutionary Guard Corps in the Strait of Hormuz in apparent retaliation for Gibraltar’s detention of Grace 1 has unsurprisingly given rise to considerable press reaction. A recurrent theme in news reports is whether the action taken by Gibraltar was legal. Some press reports suggest that the Governments of Gibraltar and the UK were lured into action by the US and have been co-opted into supporting President Trump’s desire to put further pressure on Iran’s economy by squeezing Iranian oil exports. While it may be the case that the US provided the intelligence about the movements and cargo of Grace 1, the Government of Gibraltar was quick to state that there had been “no political request at any time from any Government” to act and that the detention was made “as a direct result only of the Government having reasonable grounds to believe that the vessel was acting in breach of established EU sanctions against Syria”.[1]

So was the detention of Grace 1 legal?

There has been a suggestion that the detention was not legal because the vessel was not owned or controlled by EU persons and because the EU doesn’t impose its sanctions on others outside the Union. However, a closer look at the legislation involved shows that there was a legal basis for the detention and that the origins of that legislation were put in place as early as March this year.

First, in March 2019 Gibraltar enacted the Sanctions Act 2019. That Act provides at Article 6(1) for the automatic recognition and enforcement of ‘international sanctions’. ‘International sanctions’ is defined to include, amongst others, UN sanctions; EU sanctions; and, various restrictive measures imposed by UK.[2] It was intended, according to a newsletter published by The National Coordinator for Anti-Money Laundering and the Combatting of Terrorist Financing of the Government of Gibraltar in April 2019, to ensure that any restrictive measures imposed by both the EU and UK will have effect without the need for further implementing legislation and specifically refers to restrictive measures that may be imposed by the UK under the Sanctions and Anti-Money Laundering Act 2018 .[3]

Subsequently on the 3rd July Gibraltar published the Sanctions Regulations 2019 which specifically give power to the Chief Minister, under Article 5(3) (a), to designate a ship as a ‘Specified Ship’ and to then detain it where the Chief Minister ‘has reasonable grounds to suspect that the ship he has designated in the Notice as a Specified Ship is, has been, or is likely to be, involved in a breach of the EU Regulation…..’.[4] The EU Regulation in question is defined to be EU Regulation No. 36 of 2012 as amended (the ‘EU Syrian sanctions’) which sets out the EU’s restrictive measures against Syria.[5]

Pursuant to EU Syrian Sanctions a number of Syrian persons and entities were listed as designated including, Baniyas Refinery in Syria which was listed in 2014. The intelligence provided to the Government of Gibraltar indicated that Grace 1 was heading to Baniyas Refinery with a full cargo of oil.

The next question that arises is on what basis it can be said that the EU sanctions would have been breached where there was no obvious EU connection in terms of the vessel’s owners or flag state? The answer to that can be found in the EU Syrian sanctions which, like most EU restrictive measures, sets out their scope.

The EU Syrian sanctions apply: [6]

(a) within the territory of the Union, including its airspace;
(b) on board any aircraft or vessel under the jurisdiction of a Member State;
(c) to any natural person inside or outside the territory of the Union who is a national of a Member State;
(d) to any legal person, entity or body, inside or outside the territory of the Union, which is incorporated or constituted under the law of a Member State;
(e) to any legal person, entity or body in respect of any business done in whole or in part within the Union.

While the precise background to the detention has not been explained by the Government of Gibraltar, subsection (e) is very broad. It applies to ‘any person, entity or body’. There is no requirement here that it must be an EU person or entity. It applies ‘in respect of any business’, again this is very wide – shipment of goods is no doubt a type of business that is covered. Finally, it applies where that business is ‘done in whole or in part within the Union’ and as such, a shipment carrying goods to a designated entity would only have to pass through EU waters to be caught. Against this background, Grace 1 loaded with cargo on her way to a designated refinery in Syria would fall within EU sanctions jurisdiction once she entered EU waters.

Under the Sanctions Regulations 2019 a Specified Ship ‘must be detained if it is in BGTW (British Gibralter Territorial Waters);’ and ‘may not leave BGTW unless permitted to do so by an order of the court or where the notice designating the ship as a Specified Ship has been revoked’. It would therefore appear that there was a legal basis for the detention and the Sanctions Regulations 2019 specifically give the Government of Gibraltar power to detain vessels suspected of being involved, or likely to be involved, in breaching the EU Syrian sanctions.

The power to detain vessels given by the Gibraltarian regulations are in contrast to the usual penalties applicable for a breach of EU sanctions. Pursuant to the EU Syrian sanctions, each Member State is required to lay down the penalties that are applicable for breach of the restrictive measures which must be “effective, proportionate and dissuasive”. The penalties vary from Member State to Member State. In the UK, there is a civil penalty regime administered by the UK Treasury’s Office of Financial Sanctions Implementation (OFSI) that gives a scale of penalties of up to £1 million or 50% of the breach, whichever is higher and/or there can be criminal fines or imprisonment. There is currently no power under the UK’s (or other Member States’) Syrian sanctions implementing legislation to detain vessels, however, the UK’s Sanctions and Anti-Money Laundering Act which was passed in May 2018 gave the UK Government power to make sanctions regulations including shipping sanctions.[7] Pursuant to that Act, the UK’s Syrian (Sanctions)(EU Exit) Regulations 2019 were laid before Parliament on 5 April which will take effect after the UK leaves the EU will give power to maritime enforcement officers in certain circumstances to stop and board a ship if the officer has ‘reasonable grounds to suspect that a relevant ship is carrying prohibited goods or relevant goods’.[8]

The crew of Stena Imperio and their families will take little comfort from the fact that there appears to have been a legal basis for the detention of Grace 1. They and many others will no doubt continue to question the political decision-making that lead to the detention given the inherent risk it posed to UK shipping.

Michelle Linderman is a partner at Crowell & Moring’s International Trade Group, in the firm’s London office. An English qualified solicitor with over 20 years of experience, Michelle advises clients – such as international businesses, traders, ship owners, charterers, insurers, financial institutions, and energy companies – on U.K.-specific and cross-border sanctions, including matters that concern national and international trade and financial sanctions. Before joining Crowell & Moring, Michelle was a partner and the Global Head of Sanctions at Ince & Co’s London office. She was seconded to Ince & Co’s Hong Kong office from 2001 to 2004.

[1] Rock Radio, Chief Minister’s statement to Parliament regarding Grace 1, July 2019, https://www.rockradio.gi/local/local-news/chief-ministers-statement-to-parliament-regarding-grace-1/

[2] Gibraltar Laws, Sanctions Act 2019, March 2019, https://www.gibraltarlaws.gov.gi/articles/2019-06o.pdf

[3] Newsletter of The National Coordinator for Anti-Money Laundering and the Combatting of Terrorist Financing of the Government of Gibraltar, April 2019, http://www.gfsc.gi/uploads/NCO%20Sanctions%20Act%202019%20Newsletter.pdf

[4] Gibraltar Laws, Sanctions Regulations 2019, July 2019, https://www.gibraltarlaws.gov.gi/articles/2019s131.pdf

[5] Council Regulation (EU) No 36/2012 of 18 January 2012 concerning restrictive measures in view of the situation in Syria and repealing Regulation (EU) No 442/2011, Official Journal of the European Union, https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:016:0001:0032:EN:PDF

[6] Ibid. [See Article 35]

[7] UK Government, The Syria (Sanctions) (EU Exit) Regulations 2019, http://www.legislation.gov.uk/uksi/2019/792/regulation/90/made

[8] Ibid.