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The 9th Circuit Court of Appeals recently decided that the discretionary function exception bars wrongful death suits against the U.S Coast Guard under the Suits in Admiralty Act (SIAA) when the agency’s conduct involves policy-based regulatory judgments.  The decision, Fiedler v. United States, affirmed the dismissal of claims arising from the 2019 D/V CONCEPTION fire that killed thirty-four (34) passengers and crew members. The CONCEPTION was a U.S. Coast Guard certificated passenger vessel with overnight accommodations operating as dive boat off California’s coast. All thirty-four (34) people sleeping below deck perished. Plaintiffs sued the U.S. Coast Guard, alleging negligent inspections allowed the vessel to operate with fire hazards including faulty electrical wiring, plastic trash cans, and plastic chairs.

On appeal, the 9th Circuit was asked whether the Federal Tort Claims Act’s discretionary function exception applies in actions under the SIAA.  The Court applied the discretionary function exception’s two-part test, to find that Coast Guard inspections involve discretionary judgments. It held that no statute or regulation mandated that inspectors identify the specific hazards alleged. While inspections are required, the regulations governing how to conduct them leave inspectors substantial discretion regarding what constitutes “unsafe practices” or “hazardous situations.”

Next, the Court concluded that U.S. Coast Guard inspections involve economic and political policy considerations intended to be shielded from judicial scrutiny by the exception. The decision noted that federal law instructs inspectors to interpret regulations “to avoid disruption and undue expense to industry.” The 9th Circuit emphasized that requiring inspectors to balance safety, economics, and vessel-specific needs implicates the type of policy judgments Congress sought to protect from judicial review.

The decision reinforces the 9th Circuit’s prior ruling in Earles v. United States, 935 F.2d 1028 (9th Cir. 1991), and is consistent every other federal circuit in applying the discretionary function exception to SIAA claims, despite the SIAA statute’s lack of an express textual exception. Judge Bumatay discussed the absence of an express exception in lengthy dissent, arguing that the U.S. Supreme Court’s 2019 decision in Thacker v. Tennessee Valley Authority effectively overruled Earles by mandating strict adherence to statutory text in sovereign immunity waivers. The dissenting opinion demonstrates the limited willingness of Circuit Courts to embrace significant recent decisions by the Supreme Court.

For more information on the 9^th Circuit’s ruling in the CONCEPTION matter, the Suits in Admiralty Act and/or the Federal Tor Claims Act, please feel free to contact us at: info@chaloslaw.com

On January 6, 2026, the Federal Maritime Commission (FMC) assessed the Mediterranean Shipping Company (MSC) $22.67 million in civil penalties for violations of The Shipping Act (46 U.S.C. § 40101 et seq.).  MSC Assessed Civil Penalties Totaling $22.67 Million – Federal Maritime Commission.  The enforcement action—resulting in one of FMC’s largest penalties in recent memory—found several widespread MSC billing practices affecting customs brokers and cargo owners that violated the Shipping Act.

Of the total penalty amount, $65,000 related to MSC’s billing of customs agents as “notify parties” for demurrage and detention charges (late fees) through the “merchant clause” in its bills of lading, even though such parties were not involved in moving the cargo, in violation of 46 U.S.C. § 41102(c).

MSC’s failure to include its non-operational reefer (NOR) -related fees in its published tariffs from 2021 to 2023, required by 46 U.S.C. § 40501, resulted in a further $9,460,000 in civil penalties, an amount the Commission modified upward from the Administrative Law Judge’s penalty based on a finding that MSC’s violations were willful and knowing.  The largest share of penalties, however, were imposed by the Commission after reversing the Administrative Law Judge’s determination that MSC had not overcharged demurrage and detention (D&D) fees as connected to NORs.  The FMC investigation found the practice was in place for all of 2021, leading the Commission to conclude it was an “unreasonable practice” as opposed to a mistake in the billing system and justified $13,145,000 in penalties under 46 U.S.C. § 41102(c).

There has been a significant increase in the number and complexity of cases filed with the FMC, with many involving disputes emanating from the pandemic-era supply chain disruption.  The civil penalty of $22.67M issued on January 6, 2026, shows FMC’s heightened scrutiny of demurrage and detention billing practices, as well as tightening oversight of carrier billing and contracting practices and is willing to go.  The Commission’s willingness to part ways with the Administrative Law Judge’s findings to impose heavier penalties merits particular attention.

As always, we advise and assist our clients in practicing a proactive approach to compliance and early identification of possible issues.  For more information concerning the FMC and Shipping Act, please contact us at: info@chaloslaw.com

Chalos & Co, attorney, Ben Robinson, authored an article on the changes in U.S. maritime regulatory policy in 2025 and what lies ahead for 2026, which was published in The Marine Insurer January 2026 edition.

To read a copy of the article, click here. If you have any questions concerning US law and sanctions, please contact us at: info@chaloslaw.com

This week’s developments in Venezuela underscore the significance of the Second Circuit’s recent decision in CITGO Petro. Corp. v. Ascot Underwriting Ltd.  The Court’s October 28, 2025, decision addressed an insurance claim involving the Maduro Regime in Venezuela. The decision arose from an insurance dispute between ship operators and reinsurers over whether the Maduro faction in Venezuela should be considered “insurrectionists” for the purposes of insurance coverage under a war risks clause.

The dispute began while a CITGO chartered ship was transporting a large quantity of oil.  Venezuelan authorities loyal to Maduro seized the cargo. CITGO determined that they were incapable of completing the payment for the oil, since the producing company was a sanctioned entity, and as a result, CITGO could not safely conduct business with it. The Venezuelan authorities were unrelenting and eventually sent a naval patrol to escort the vessel back to the Port of Jose to return the oil. CITGO was then denied coverage by Ascot Underwriting for their claim under the insurance contract’s insurrection clause.

CITGO filed suit in the United States District Court for the Southern District of New York, alleging that an insurrection caused the loss of the cargo, while Ascot argued that the Maduro regime’s actions were not part of an insurrection. After cross-summary judgment motions, the trial court determined that an insurrection occurred in Venezuela after January 2019, when the Maduro government refused to cede power to the newly elected Guaidó. The primary reasoning for this decision was that insurrection was left undefined in the contract, and many definitions of the word can result in different outcomes in cases such as this one. The court applied the doctrine of contra proferentem, which requires ambiguity to be determined against the insurer if they drafted the contract. The case went before a jury, which ultimately determined that the loss of the crude “arose from” the Maduro regime and its actions. In other words, the Maduro regime was one of the major reasons why the loss occurred, but not necessarily the only one. Plaintiff won a judgment of $54,235,187.24.

Defendants then appealed the judgment to the Second Circuit, arguing that the trial court abused its discretion in considering the Maduro regime an insurrectionist movement, accepting information from Plaintiff as judicial notice, and applying a “but for” standard of causation. The Second Circuit then considered whether the Maduro regime was an insurrection and determined that the trial court did not abuse its discretion, as the term “insurrection” was highly ambiguous in the contract. The Second Circuit also determined that the judicially noticed facts were not improper to admit, due to the fact the fact they were from sources traditionally considered highly reliable, and that the use of the “but for” causation test, which can recognize multiple causes, was not only appropriate, but also more in line with the contract, and waived for having not been preserved for appeal. As such, the judgment was affirmed in its entirety.

For more information on the District Court or Second Circuit decisions in CITGO Petro. Corp. v. Ascot Underwriting Ltd., or more on the evolving landscape of Venezuela sanctions, please do not hesitate to contact us at: info@chaloslaw.com

On December 10, 2025, U.S. Coast Guard and FBI personnel boarded and seized the oil tanker MT SKIPPER in waters off the coast of Venezuela, marking one of the most significant maritime enforcement actions against “shadow fleet” vessels in recent years. The vessel was originally designated by OFAC under the name ADISA in November 2022, and is alleged to be part of an evasive oil trade that funneled revenue to the Islamic Revolutionary Guard Corps-Qods Force and Hezbollah. At the time of seizure, SKIPPER had loaded approximately 1.8 million barrels of Venezuelan heavy crude and was digitally manipulating its tracking signals to falsely indicate it was sailing off the coast of Guyana while also falsely flying the Guyana flag. The seizure raises fundamental questions about the scope of U.S. maritime authority and the legal basis for seizing vessels and cargo on the high seas.

Can the U.S. Board a Non-U.S. Vessel Outside of Its Territorial Seas?

It was legally essential that the boarding of SKIPPER was led by a U.S. Coast Guard Maritime Security Response Team (MSRT).  The Coast Guard’s boarding authority statute, 14 U.S.C. § 522,  is unique in U.S. law.  It authorizes the Coast Guard to “make inquiries, examinations, inspections, searches, seizures, and arrests upon the high seas and waters over which the United States has jurisdiction, for the prevention, detection, and suppression of violations of laws of the United States.”  As a result of the high-seas language, the authority extends well beyond the twelve-nautical-mile territorial sea, reaching into international waters.

The statute grants Coast Guard boarding officers the power to board any vessel “subject to the jurisdiction, or to the operation of any law, of the United States” and to use “all necessary force to compel compliance.”  Unlike land-based law enforcement officers who generally require a warrant, Coast Guard personnel can board and inspect vessels without warrant or suspicion.

The scope of this authority is not unlimited, however. Under international law, particularly the UN Convention on the Law of the Sea (UNCLOS), vessels on the high seas are generally subject to the exclusive jurisdiction of their flag state—the country where they are registered. As a result states generally cannot unilaterally board and enforce domestic law against foreign-flagged vessel outside their own coastal waters unless UNCLOS provides an exception for doing so.

Stateless Vessels

The key to the legal framework for the SKIPPER boarding lies in the vessel’s registration status. According to maritime intelligence reports and international ship registries, the SKIPPER was falsely flying the Guyana flag and was therefore a stateless vessel. Guyana had notified the International Maritime Organization that it de-listed the ship following advocacy group listings and American sanctions. This designation as “stateless” proved crucial to the legal justification for the seizure.

Under UNCLOS and customary international law, vessels “without nationality” are treated as stateless vessels and, therefore, outside the protection of any country. When a vessel falsely claims registry under a flag it does not legitimately hold, or refuses to show any flag at all, states have the “right of visit,” allowing their officials to stop and inspect the ship on the high seas. This right of visit permits warships to verify a vessel’s nationality, and if doubts remain after checking its documents, engage in a more extensive boarding.

Multiple sources confirmed that this was the international law rationale supporting the boarding.  A senior Trump administration official described it as a “judicial enforcement action on a stateless vessel.”  The deliberate misrepresentation of flag state—something believed to be a common tactic among “shadow fleet” operators to evade sanctions—effectively stripped the SKIPPER of the legal protections normally afforded to vessels on the high seas.

What Authority Does the U.S. Have to Seize a Ship and Its Cargo?

While boarding authority establishes one element of lawfulness, the ability to seize a vessel and its cargo requires further authority.  The seizure of SKIPPER was authorized in a warrant issued pursuant to 18 U.S.C. §§ 981, 982, 2332b(g)(5), and 2339B(a)(1), which authorize the seizure of “all assets, foreign or domestic, of any individual, entity, or organization engaged in planning or perpetrating any Federal crime of terrorism against the United States, citizens or residents of the United States, or their property.”

These statutes, found in U.S. counterterrorism laws, provide the government with powerful tools to act against terrorist financing networks. The warrant specifically cited the vessel’s identification by the Treasury Department’s Office of Foreign Assets Control as being used in an oil shipping network supporting Hizballah and the Islamic Revolutionary Guard Corps-Qods Force, both State Department-designated foreign terrorist organizations. According to the Justice Department, the IRGC uses proceeds from petroleum distribution to fund its terrorist networks.

The warrant was issued by a federal magistrate judge in the District of Columbia on November 26, 2025—more than two weeks before the actual seizure.  The U.S. Attorney’s Office for the District of Columbia obtained an order unsealing the seizure warrant, and the Coast Guard executed the warrant after boarding the vessel as it traveled on the high seas after departing Venezuela.

The statutory authorities cited in the warrant represent a convergence of asset forfeiture laws and counterterrorism statutes. Section 2339B prohibits providing material support to designated foreign terrorist organizations, while sections 981 and 982 authorize civil and criminal forfeiture of property involved in illegal activities. By framing the vessel and its cargo as assets supporting terrorism, the government established a legal basis for forfeiture under federal law.

Can the U.S. Seize Any Sanctioned Vessel? 

Following the SKIPPER seizure maritime operators are prone to ask, does every vessel on OFAC’s sanctions list face potential boarding and confiscation?  The answer comes from the underlying legal authority for nearly all sanctions enforcement, particularly the International Emergency Economic Powers Act (IEEPA). While IEEPA does authorize blocking transactions, freezing bank accounts, and prohibiting U.S. persons from dealing with sanctioned entities, it does not contain a generally applicable seizure and forfeiture  provision like those under which the SKIPPER warrant was issued.  While these are impactful measures, they do not transfer title in property.

The absence of a seizure and forfeiture provision actually distinguishes IEEPA from its predecessor, the Trading with the Enemy Act (TWEA), which did include “vesting” authority for permanent seizure during wartime.  Congress deliberately omitted these powers from IEEPA when enacting it in 1977 because IEEPA was designed for peacetime emergencies.  With no seizure or “vesting” authority, sanctioned vessels are not subject to the type of seizure carried out on SKIPPER.

However, IEEPA operates through blocking and freezing mechanisms, not seizure authority. The statute does not contain a provision authorizing the government to physically seize and confiscate property. Blocking freezes property in place and prohibits transactions, while seizure involves taking physical custody and control. This distinction is crucial: violations of IEEPA sanctions programs alone cannot give rise to seizure like that of the SKIPPER. A vessel that violates sanctions by carrying prohibited cargo or conducting transactions with sanctioned entities may be subject to penalties, fines, and blocking designations, but IEEPA itself provides no mechanism for the government to board and seize the vessel on the high seas.

The seizure of MT SKIPPER underscores how our understanding of what the law allows can be shaped by ordinary practice rather than the law itself.  It is a  compelling reminder that legal authorities exercised day in and day out by maritime states can be applied more creatively to accomplish what at first blush appears to be outside law’s reach. The U.S. leveraged three key legal elements: the Coast Guard’s broad boarding authority under 14 U.S.C. § 522, the vessel’s stateless status under international maritime law, and terrorism-related asset forfeiture statutes that reach beyond typical IEEPA sanctions enforcement and act against the threat perceived in the “shadow fleet.”

While the operation demonstrates sophisticated use of existing legal authorities, it also highlights unresolved tensions in international maritime law. The step from establishing statelessness and boarding rights to full seizure and confiscation occurs in what scholars describe as a “jurisdictional grey zone”—an area where domestic law claims authority but international law principles remain unsettled. The precedent set by the SKIPPER seizure suggests that shadow fleet vessels operating with falsified registrations face not merely financial penalties but physical interdiction and asset forfeiture, fundamentally altering the risk calculus for sanctions evasion. Yet this enforcement model depends critically on the combination of statelessness, terrorism connections, and domestic judicial process—a formula that may not apply uniformly to all sanctioned vessels.

For more information concerning the U.S. authority to board and/or seize vessels, please contact us at: info@chaloslaw.com

 

In mid-September, the Department of Homeland Security Office of Inspector General issued a report evaluating the U.S. Coast Guard’s ability to effectively oversee merchant mariner credentialing in response to Congressional inquiry.   The report identified significant numbers of drug and alcohol allegations that received little or no follow-through, inaccurate records for mariners whose credentials were suspended or revoked, but not documented as such in the Coast Guard’s databases, and a policy gap in documenting reports on which the Coast Guard took no action.  Many of the shortcomings involved three (3) databases used by the Coast Guard to manage credentials—the Marine Information for Safety and Law Enforcement (MISLE 5.0) system, MISLE Adjudication, and the Merchant Mariner Licensing and Documentation (MMLD) database.  Current database architecture can hamper communication, and cause cases of Mariner misconduct to fall through cracks. This was further exasperated by the fact that these databases were not always up to date, or could provide ambiguous information, such as registering any abnormal entry as “void”, whether it was due to a credential revocation or a printing error.

The OIG recommended that the Coast Guard (1) establish a comprehensive case management system to track cases and (2) provide training for it, (3) create a policy to ensure that MMLD is up to date, (4) create a policy governing how Investigating Officers will decline to pursue a preliminary case, (5) ensure that Suspension and Revocation staff can search for impaired credentials, and (6) ensure that ALJ staff notify IO and Maritime Center staff on each decision. The report is DHS Report No. OIG-25-41.

Soon, mariners can expect to see a standardized policy used by the Coast Guard, including the use of a more modern and powerful system, the MISLE Enforcement and Adjudication Modernization (MEAM) system to enter and maintain data on mariner qualifications and discipline. Coast Guard created this system just after the initial investigations of the report were completed, and so it was not ready for the report. However, the Coast Guard intends that, by the end of the year, all data entry will be managed using this system.  Further, compliance with recommendations for greater documentation, the new system will require any investigation that does not result in a preliminary enforcement case to have a documented justification for no-action. The OIG was satisfied with the Coast Guard’s plans to redress their concerns, and MEAM will be the conclusive tool for this purpose.

Consistent with the report, the Coast Guard implemented a case tracking portal that will allow mariners facing potential cases to stay up to date on their case and be able to provide any representation with the same information quickly and easily. Mariners and counsel will also have the ability to file any documents needed for proceedings directly through the MISLE data systems, once registered, to help expedite all proceedings that may impact a mariner’s credentials. Links to these portals can be found in MSIB 04-25 and MSIB 05-25.

The Western District of Washington recently issued a pair of summary judgment decisions opening the way for liability in a $14.3 million oil spill clean-up cost recovery action.  The case arose from the 2021 grounding of the American Challenger, a 90-foot decommissioned fishing vessel, near Bodega Bay, in Marin County, California. The vessel was being towed from Puget Sound, Washington, to a scrapyard in Mexico when the towing vessel fouled its propeller and lost propulsion. The towline broke, and the American Challenger drifted aground on rocky shoreline. The subsequent oil spill response recovered somewhere between 400 and 760 gallons of contaminated water, 50 gallons of hydraulic fluid, and 14 cubic yards of oiled debris.  The federal government brought an OPA 90 cost recovery action against the corporate owner and its individual owner as well as the estate of the now-deceased tug captain.

The first summary judgment decision addressed whether the tug captain was the “operator” of the former fishing vessel under tow.  Relying heavily on CERCLA authorities the Court applied a very broad construction and held the tug captain was the “operator” of the former fishing vessel as one “who directs or controls the movement of a vessel.”   Equally noteworthy, the Court rejected the contention that a party who was not an “operator” for purposes of the Certificate of Financial Responsibility requirement would likewise not be an operator for liability purposes in a cost recovery action.

In the second decision, the court granted a summary judgment motion brought by the United States imposing strict liability for the spill on the tug captain’s estate.

For more information on OPA ’90 or the above referenced decisions, please contact: info@chaloslaw.com

The Second Circuit Court of Appeals issued an opinion on July 2, 2025, which strengthens the recognition and enforceability of foreign arbitration awards by curtailing collateral attacks. The case arose from an arbitration held in Geneva that resulted in an award for damages resulting from breach of a joint venture agreement together with declaratory relief, plus costs and attorneys’ fees.  Inverting the usually posture of a case brought under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the losing party petitioned the U.S. federal court to vacate the award under U.S. law on the grounds of fraud, alleged arbitrator partiality, refusal to hear new evidence, and the awards’ disregard for New York law, which was governing under the contract.  Petitioners further asserted that the Federal Arbitration Act’s vacatur provision applied equally to foreign awards.

The Second Circuit rejected the position and held that under the Federal Arbitration Act and New York Convention, a court may only decline to enforce a foreign arbitration agreement when one of the five (5) grounds in Article V of the Convention are satisfied.  The opinion explained, “The Convention was not intended to provide a vehicle for the second-guessing and invalidation by one jurisdiction of arbitral awards generated in another; it was designed to enhance the portability of awards by streamlining the process by which they could be recognized and enforced abroad.  Molecular Dynamics, Ltd., et al. v. Spectrum Dynamics Med. Ltd., et al., 24-2209-cv, slip op. at 33 (2^nd Cir 2025).

The Court’s full decision is available here.

For more information about the recognition and enforcement of arbitration awards in the U.S., please contact: info@chaloslaw.com

On June 20, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela General License 5S, authorizing certain transactions related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond.  Under this general license, transactions related to the Petróleos Bond that were generally prohibited by Executive Order 13835 in May 2018 by will be allowed. The May 2018 Executive order addresses transactions involving entities in which the Government of Venezuela has a 50% or greater ownership interest.  The first Trump administration specifically named Petróleos as agency or instrumentality of the Venezuelan Government for sanctions purposes in Executive Order 13857 of January 25, 2019.  General License 5S replaces General License 5R and will extend the timeframe for transactions related to the Bond from July 3, 2025 to December 20, 2025.

The license is available on OFAC’s website and can be found here: General License 5S

To learn more about US Sanctions and/or the US Treasurys Office of Foreign Asset Control, please contact us at: info@chaloslaw.com