Although politics have featured heavily in reports surrounding the seizure of Iranian-owned VLCC Grace 1, perhaps the most interesting legal aspect of the incident is that Gibraltar enacted the legal pretext underpinning the seizure just one day before it occurred
EU Regulation 36/2012 gives the Chief Minister of Gibraltar powers to designate a vessel as a “Specified Ship” if there are “reasonable grounds” to suspect that the ship has been or is likely to be in breach of EU regulations.
Under the Sanctions Regulations 2019, a Specified Ship “must be detained if it is in BGTW (British Gibraltar Territorial Waters)” and it “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unless permitted to do so by an order of the court or where the notice designating the ship as a Specified Ship has been revoked”.
HM Government of Gibraltar has confirmed that the vessel was well inside Gibraltar’s territorial waters when boarded, and the vessel remains detained under an Order of the Chief Justice of the Supreme Court of Gibraltar. Under the Sanctions Regulation, an application must be made to the Court if the vessel is held for longer than 72 hours, so it is probable that the detention has already been subjected to judicial review.
As a Specified Ship, Grace 1 can only be detained for a period not exceeding 90 days, unless an application is made for its forfeiture or proceedings are initiated against any person connected to the Specified Ship or its cargo. If that happens, then Grace 1 could be held until those legal proceedings have concluded.
The Supreme Court of Gibraltar has broad powers and may order the forfeiture of the Specified Ship; the cargo carried; or both the Specified Ship and the cargo carried. And separate legal action against Grace 1 in the US is also a possibility.
If American courts remain consistent in their decisions to seize vessels involved in sanction-busting trades, Grace 1 may end up a subject of forfeiture action in the US. In fact, Grace 1’s case has parallels with the US-backed detention of the North Korean vessel the Wise Honest in May 2019 in Indonesia which saw the first seizure of a vessel under the US civil asset forfeiture procedure, which is more often aimed at financial assets.
Both the UK and US seem to have been tracking Grace 1 for some time ahead of the seizure action, following its laborious route around South Africa rather than through Suez where discharged oil is more closely monitored. Speculation that the US had been pushing for European action ahead of the seizure is rife, with reports citing Spanish authorities’ accounts that the Grace 1 seizure stemmed from a US request to the UK.
If the matter was part of recent discussions between UK Prime Minister Theresa May and US President Donald Trump, the UK may have obtained reassurances that the US would not use court action to intervene further. If not, and if the vessel is forfeited by a warrant of the US Court, then the main concern for UK operators will be the extent to which Iran will continue to blame the UK.
Some circumstances surrounding the vessel seizure remain unclear, but it seems that the operation was led by the Gibraltar police. They sought support from the UK Government who sent in the Royal Marines. Gibraltar authorities confirmed that the vessel was carrying crude oil, and once the vessel entered EU waters, there was a pretext for action. Allegedly, Grace 1 was in contravention of EU’s Syrian Sanctions, carrying crude cargo for delivery at the Baniyas Oil Refinery, which is controlled by Syrian president Bashar al-Assad and has been subject to restrictive measures listed by the EU in July 2014 pursuant to Regulation (EU) No 36/2012.
Under the regulation, provision of “economic resources” of any kind to a listed person or entity is prohibited. Against this background, it would have been difficult for the UK to refuse to act.
Boarding of vessels by Royal Marines in support of law enforcement is not unusual. There have been high profile cases of vessel interdictions in the English Channel, and it is understandable that the UK Government has roundly dismissed the suggestion that it has acted wrongly.
Reportedly, Grace 1 had been flagged in Panama, and flag states are typically asked for permission ahead of a vessel seizure, which did not happen. Following the seizure, however, Panamanian authorities have suggested that the vessel’s registration was cancelled in May this year due to the vessel being implicated in illegal activity. The statement begs the question whether Grace 1 had any flag at all. If not, that fact would offer another legal pretext for the vessel’s seizure.
The Iranian Government has suggested that they will carry out a similar boarding and seizure of a British vessel if Grace 1 is not released. Currently, Iran’s threat to retaliate for Grace 1’s seizure by seizing a British vessel is aimed at securing release of their VLCC. Iran has already approached at least one British-operated vessel, but whether the threat includes UK-flagged vessels remains unclear. This escalation and recent attacks against tankers in the Straits of Hormuz and off Fujairah mean managers and operators would be wise to take the threat seriously.
A threat in the volatile Straits of Hormuz is a viable one, and some serious questions must be raised as how to protect UK tonnage from boarding and seizure by sea or air.
There is very little a crew can do to resist such a boarding. Current regulations mean that private armed guards cannot be deployed on British shipping other than in the High-Risk Area off Somalia. That could be reviewed, but private maritime security guards will be very circumspect in opening fire on military forces determined to seize a vessel for political point scoring.
UK military Vessel Protection Detachments come with their own logistical problems but may be something that UK shipping interests will insist on. They may prove a viable deterrent against action by Iran but they may well also serve as an additional trigger point in a very sensitive area.
The Grace 1 seizure has clearly increased tensions in the already strained international relationship with Iran, and Grace 1’s fate will be watched with some concern by owners, operators and the war risk insurance market.
Tatham & Co partner Stephen Askins specialises in maritime law and is involved in issues arising from trading in complex environments. He has particular expertise in dealing with kidnappings and hijackings and advising maritime security companies.
Michelle J Linderman is a partner and member of Crowell & Moring’s International Trade Group. Michelle advises international businesses, traders, shipowners, charterers, insurers, financial institutions, and energy companies on UK-specific and cross-border sanctions, including matters that concern national and international trade and financial sanctions.