Underwriters at the International Union of Marine Insurance (IUMI) annual conference in Zurich have been told they face a sanctions nightmare over Iran as the European member states look to implement the latest round of sanctions.

Such is the concern of the marine insurance industry over the rising tide of sanctions both against Iran and other states and organisations that it was standing room only for the Legal and Liability Sub-committee session. Delegates heard Peter Crowther, Partner at law firm Dewey LeBeouf, warn the European Union's latest sanction directive passed in July, contained a level of significant uncertainty which may leave the market unable to offer insurance coverage for aircraft and vessels heading to Iran to deliver any type of cargos or goods.

He warned that under the directive, which is due to be fully ratified this month, the sanctions state that underwriters cannot offer insurance or reinsurance to any firm or persons which come “under the jurisdiction of the Iranian government”.

“If you take this on face value any vessel or aircraft which enters Iran’s airspace or territorial waters is technically under the jurisdiction of the Iran Government,” he said. “If I was asked, my advice at this point while it does not clearly state the point I would view the sanction to be those vessels or aircraft which are permanently under Iranian jurisdiction and not temporarily visiting.”

However he explained: “With all EU sanctions the individual member states are required to implement the sanctions, enforce them and also derive the penalties for their breach.

“While I may have a personal view, history has shown us that the individual member states may well take a harder line than the EU sanctions so you will need to get clear guidance from individual states on how they interpret the jurisdiction debate.”

He highlighted the fact the UK had banned dealings by UK business with the Iranian state shipping line two years before the EU sanctions but had done so under the anti-terrorism laws and not trade sanctions.

Crowther warned that EU individuals would be bound by the sanctions wherever they operated in the world, so if a citizen of a member state was working in a country where no such sanctions existed they would still be prosecuted by the EU for breaking the sanctions.

He also delivered a clear warning to marine underwriters and brokers not to look to find ways to get round the sanctions.

“I have always been amazed at the ingenuity of the insurance market to find ways around such prohibitions in the past,” he said. “However the EU sanctions contain a clear anti-avoidance clause and you can be prosecuted simply for examining ways in which you can avoid the sanctions.”

He said the United States was toughening up its sanctions and that the past practice where US employees have left meetings prior to any decisions being made will no longer hold water and that US citizens are likely to be prosecuted if their employers are breaking sanctions.

“As we have seen in recent months Barclays has settled a legal action with the United States government over sanction breaches for slightly short of $300 million. There are fines for each individual breach and as such they can quickly mount up.”

He said underwriters had to tread carefully and ensure they were fully aware of the breadth of the sanctions and what they would cover.

“I have not seen such a blanket sanction on the supply of reinsurance and insurance like this before,” he added.