The Lloyd's Market Association (LMA) has published a new model wording for use by marine (hull) underwriters, addressing the position where a transit fee, toll or other charge is paid for a vessel to pass through Iranian territorial waters or otherwise to transit the Strait of Hormuz.
The LMA said, "Under the clause, insurers have no liability to indemnify any such payment and, where such a payment has been made, are discharged from obligations in respect of the relevant vessel. This clause carves back any charges levied as payment only for such specific maritime or navigational services rendered to the vessels that are legally permissible under the United Nations Convention on the Law of the Sea (UNCLOS) and any sanctions clause."
A guidance note and Sanctions and Terrorism Tables have been produced to assist insurers in using the clause.
The clause and guidance have been developed in light of legal and regulatory concerns arising where insurers become aware, or should through due diligence become aware, that a transit fee has been paid. It is intended to sit alongside existing sanctions wording.
The LMA said, “All contracting parties are free to agree to different conditions/ amend the model clauses as they see fit; the LMA does not protect its intellectual property rights over model clauses. It is for underwriters to decide whether or not any contractual language is acceptable on any given risk.”