TO ALL OWNERS AND MEMBERS 16 February 2012 Dear Sirs SANCTIONS AGAINST IRAN AND IMPACT ON CLUB COVER Sanction regimes have continued to develop in relation to several states, but especially in relation to Iran. The board of the club has made changes to the class rules of the club to clarify that no claims will be covered if they arise out of an unlawful trade or if it is unlawful to provide insurance thereof. Further sanctions have been imposed upon Iran by the UK, US and EU following the report of the International Atomic Energy Agency into Iran’s nuclear programme. UK sanctions On 21 November 2011 HM Treasury imposed new financial restrictions against Iran under the Financial Restrictions (Iran) Order 2011. Financial institutions (including insurers such as the club) are required to cease business relationships and transactions with all Iranian banks, including their branches and subsidiaries, and the Central Bank of Iran. This means that UK credit and financial institutions are prohibited from entering into transactions or business relationships with these entities and continuing existing transactions and business relationships with them, unless licensed to do so by HM Treasury. Accordingly, the club would be prohibited from making any payments through any bank which are ultimately paid to an Iranian bank. This limits the extent to which the club can make payments to claimants or service providers such as local correspondents and surveyors. It also limits the ability of the club to undertake to make a payment to or via an Iranian bank. This impacts on the club’s ability to assist owners/members trading in this region. The effect of the UK sanctions is limited to UK financial institutions. However, given the impact that it has on the club and all UK banks, it may have far-reaching consequences to any ship operator wanting to use a UK bank to make payments to Iran. .. /... 2 US sanctions Also on 21 November 2011, the US issued further sanctions under Executive Order 13590 designed to increase Iran’s economic isolation. EO 13590 applies extra-territorially and targets Iran’s petroleum and petrochemical industries. Previous US sanctions targeted the provision of refined petroleum products to Iran and Iran’s ability to develop and maintain refineries and domestic RPP production. The EO sanctions the sale, lease, or provision of goods, services, technology, or support to Iran that could directly and significantly contribute to the enhancement of Iran’s ability to develop petroleum resources located in Iran. The development of petroleum resources is expressly defined as “to explore for, or to extract, refine, or transport by pipeline, petroleum resources”. Iran is defined as the physical territory of Iran plus its marine areas, such as its continental shelf and exclusive economic zone. The prohibition on developing Iran’s petroleum resources thus prohibits the development of Iranian offshore oil exploration, extraction and transportation. Sanctions may be triggered if a single transaction has a fair market value of $1 million or more, or if a series of transactions with the same entity have a fair market value of $5 million or more in a twelve-month period. The EO also expressly prohibits the sale, lease, or provision of goods, services, technology, or support to Iran that could directly and significantly facilitate the maintenance or expansion of its domestic production of petrochemical products. Sanctions may be triggered if a single transaction has a fair market value of $250,000 or more, or if a series of transactions with the same entity have a fair market value of $1 million or more in a twelve-month period. The US Government has also identified Iran as a jurisdiction of ‘Primary Money Laundering Concern’ under section 311 of the USA Patriot Act. This now effectively bars all transactions with Iranian entities in US dollars regardless of whether such transactions are sanctionable. These sanctions should be read in conjunctio