1 FEBRUARY 11, 2010 CIRCULAR NO. 06/10 TO MEMBERS OF THE ASSOCIATION Dear Member: ISLAMIC REPUBLIC OF IRAN: UNITED STATES AND UNITED KINGDOM CURRENT AND PENDING ECONOMIC SANCTIONS LEGISLATION: “ENABLING” RULE CHANGE FOR 2010 Members may be generally aware of current and pending legislation in the US and the UK prohibiting, or imposing further sanctions/potential sanctions in relation to, dealings with Iran and/or Iranian entities and trading activities involving Iran and/or Iranian entities. The purpose of this Circular is to describe a number of recent developments which affect, or will potentially affect, Members and, indeed, clubs at large. They are summarized below for the guidance of Members who are also asked to note the incorporation of an additional Rule dealing with these issues for the forthcoming policy year. The purpose of the new Rule is described in greater detail toward the end of this Circular. US legislation A number of Iranian shipping companies (including IRISL and a number of its subsidiary and affiliated companies) are already “specially designated” by the US Treasury’s Office of Foreign Assets Control (OFAC). The effect of this designation is to prohibit dealings by US persons (which would include provision of insurance services) with these companies. This prohibition is specifically targeted at the activities of identified Iranian companies and their vessels and does not extend to the wider shipowning community. Of greater potential impact, however, is proposed legislation to amend the Iran Sanctions Act of 1996 to enhance US diplomatic efforts with respect to Iran and to expand the ambit of economic sanctions against that country. Two similar, but not identical, bills pending in Congress – H.R.2194 and S.2799, both entitled the Iran Refined Petroleum Sanctions Act (IRPSA) – would, if passed, seek to impose new trade sanctions focused on Iran, specifically on the exportation of refined petroleum products to Iranian ports. Both pieces of legislation have recently passed each of the two chambers of the US Congress, the House of Representatives and the Senate. (H.R. 2194 passed in the House of Representatives and S.2799 passed in the Senate). For a bill to become an Act or law in the United States, it must pass both chambers in identical form. Where, as is the case with the current bills, there are similar, but not identical, bills from each chamber, a process of reconciliation is initiated in which representatives from both bodies (the House and the Senate) meet to negotiate a reconciled bill. That reconciliation is not confined to mere middle ground between the two versions, but can also include new approaches. Once the language is made uniform, each chamber must vote again to 2 approve the reconciled language. The bill is then sent to the President for signature or, as happens in rare instances, veto. Congress can override a presidential veto by a two-thirds vote of both chambers. Under the House version of IRPSA, sanctions could be imposed against both domestic and foreign entities which: i. provide ships, vehicles or other means of transportation to deliver refined petroleum products to Iran, or providing services relating to the shipping or other transportation of refined petroleum products to Iran; ii. underwrite or otherwise provide insurance or reinsurance for an activity described in i. above. The Senate bill provides for the imposition of sanctions against persons who with actual knowledge provide Iran wit