War risk insurers have refused to pay the Greek owners of a VLCC seized and detained by Iranian armed forces for over a year their $49m claim, citing concerns about violating US sanctions.
Iranian troops backed by fast patrol boats and helicopters seized the 309,000-dwt VLCC Niovi (built 2005) in May 2023 because of a three-year-old dispute over an alleged Iranian oil cargo as it was passing through Oman territorial waters, according to court papers.
Eight armed and uniformed members of the Islamic Revolutionary Guard Corps (IRGC) ordered the ship to turn off its tracking and communication equipment and sail to Iran where the vessel has remained ever since, off the port of Bandar Abbas.
Piraeus, Greece-based Niovi owner Grand Financing Co and ship manager Smart Tankers sued insurers after they refused to pay out on their $43.75m claim for constructive total loss.
The owners said the seizure act was illegal under Iranian and international law as the ship was exercising the right of innocent passage at the time.
The companies claimed a further $4.5m from costs including bunkers, port expenses and wages for the 29-strong crew of Filipinos and Sri Lankans and the Greek master.
A Lloyd’s of London insurer and Fidelis Insurance Ireland, which supplied war risks cover, claimed in court papers filed in October that the policy included a sanctions exclusion clause covering decisions made by the European Union, UK and US.
The insurers claimed that meant they could not pay the Greek companies because US laws stated that no US citizen could be part of any transaction related to “goods … controlled by the Government of Iran” such as the ship, according to defence documents filed in the London courts.
The defence said that two senior figures at the insurers were US citizens — which meant the payment could not be made.
Even if it could, payments would be made in dollars through US banks, which would also breach sanctions, said lawyers for the insurers.
The operation targeting the Niovi has echoes of the helicopter-borne operation to seize the Galaxy Leader later in the year by the Houthi group in Yemen.
The owner of the Bahamas-flagged 5,100-ceu car carrier (built 2002) is understood to be seeking a payout based on constructive total loss after a year in Houthi hands.
The US has also imposed sanctions on the Houthi group but the owner is confident there will be no problems over the claim.
Fundamentally flawed
The two insurers for the Niovi also claim the owner and operator ignored the advice of their Iranian lawyers and did not attend a court hearing in April this year in Iran where they could have tried to recover the ship.
The failure to attend meant they were not obliged to pay out as the owners had failed to act to avert or minimise loss, they said.
The owner and operator say they told the Iranian lawyer that they were skipping the hearing because the prosecution was “fundamentally flawed”.
The vessel was seized after it left Dubai on a ballast leg to Fujairah, United Arab Emirates, for stores and supplies after a period in dry dock.
The seizure of the Niovi came six days after another ship, the 159,000-dwt suezmax Advantage Sweet (built 2012), was also taken by Iranian forces.
Other attempts were made to seize tankers but were unsuccessful, owing to the US Navy, according to the papers.
Satellite footage in April showed the Niovi moored near three other ships, including the Advantage Sweet, that had been seized by Iran.
The others were Empire Navigation’s 159,000-dwt suezmax St Nikolas (built 2011) and the MSC Mediterranean Shipping Company-chartered and operated container ship MSC Aries.
Iranian state media said at the time of the seizure that the Niovi was impounded following a complaint by a plaintiff in a civil suit.
The court papers say the owners learned from representatives that the complaint was made by a company with links to the IRGC over a crude cargo dispute in China in 2020. The owners said that the allegation of illegal possession of an Iranian oil consignment was untrue.
- The 49,700-dwt Stena Impero was held for 71 days in July 2019 in apparent retaliation for the seizure by British commandos of an Iranian VLCC in connection with the EU’s Syrian sanctions regime.
- The 159,000-dwt suezmax tanker Advantage Sweet (built 2012) was boarded in April 2023, six days before the Niovi. It was seen as a response to the US ordering the seizure of another suezmax, the Suez Rajan, hauling Iranian oil. The Advantage Sweet was released in July 2024.
- The 157,400-dwt Delta Poseidon (built 2011) and 150,000-dwt Prudent Warrior (built 2017) were seized in May 2023 but released after six months in exchange for an Iranian-flagged aframax held in Greece at the request of US authorities.
- The 158,600-dwt St Nikolas (built 2011) was taken in January. The ship was renamed from the Suez Rajan after its Iranian oil cargo was removed in the US. The ship returned to the Middle East region where it was boarded and moved to Iran.
- The 15,000-teu MSC Aries (built 2020) was hijacked in April in apparent retaliation for Israel’s bombing of Iran’s embassy complex in Syria. Iran claimed it was held over a “technical issue” before releasing the crew.
The Niovi is one of eight crude and product tankers managed by Smart Tankers. Grand Financing Co is the registered owner of just the Niovi.
Lawyers for the two sides and Smart Tankers have been contacted for comment.
Malin Hogberg, a sanctions expert and specialist counsel at Swedish law firm WERKS, said if the sanctions defence succeeded it would mean other non-US insurers with a high-ranking US person within their claims process could point to a similar clause and refuse to pay.
“Careful consideration should go into the wording of any sanctions clause or structuring of a sanctions defence as the devil is in the detail, in each case,” she said.
Read more
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- ‘Compensation for sanctions’: Iran stashes seized container ship near ‘hijacked’ tankers
- Iran confirms tit-for-tat seizure of Greek-owned suezmax tanker
- Iranian navy reported to have fired shots at laden Chevron VLCC off Oman
- Owner of seized crude tanker Niovi insists it had ‘no links to Iran whatsoever’
