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In Trailer Bridge, Inc. v. Louisiana Int’l Marine, L.L.C., No. 25-30331 (5th Cir. 2026), the Fifth Circuit Court of Appeals confirmed that the supplier of tugs to the charterer of a barge established a maritime lien despite the inclusion of a no-lien clause in the barge charter party. In August 2020, Trailer Bridge, Inc., a freight service company, chartered two flat deck barges to Work Cat Trans Gulf. The Barge Charter contained a “no-lien” clause that required Work Cat to indemnify Trailer Bridge against any lien arising upon the barges during the contract period.

In November 2020, Work Cat finalized a six month charter agreement for Louisiana International Marine to provide two tugboats to tow the barges. Work Cat was required to pay a daily rate to use the Tugs, including the cost of fuel and lubricants. Work Cat settled only one quarter of its invoices with LIM before it filed for bankruptcy in May, 2021. LIM filed a proof of claim in bankruptcy seeking to recover its unpaid invoices.

Trailer Bridge sold both Barges by November 2022. Subsequently, LIM sent a Notice of Lien and Demand for Payment to one of the purchasers. Trailer Bridge intervened to defend the lawsuit, arguing that the Barges were exempt from a maritime lien pursuant to the Barge Charter’s no-lien clause. After a two day bench trial, the Eastern District Court of Louisiana determined that LIM had a lien against both Barges. Trailer Bridge appealed the verdict.

The Fifth Circuit Appeals Court first considered whether LIM established a maritime lien under the Commercial Instruments and Maritime Liens Act. Under CIMLA, a party may obtain a maritime lien if it provides necessaries to a vessel on the order of the owner, or a person authorized by the owner. The Fifth Circuit reasoned that the towing services provided to the Barges constituted necessaries that Work Cat was authorized by the owner to obtain, thereby creating a maritime lien.

The Appellate Court noted that the Barge Charter’s no-lien clause did not prevent a maritime lien from arising unless the entity providing necessaries had actual knowledge of the clause before agreement. LIM gained actual knowledge of the clause by December 20, 2020, but the Tug Charter was executed on November 12, 2020. As such, LIM lacked actual knowledge of the no-lien provision at the relevant time. Trailer Bridge then argued that LIM had an independent duty to investigate whether any no-lien provision applied to the Barges. The Appellate Court similarly rejected this argument, noting that CIMLA is silent on whether a diligence standard applies to no-lien clauses in maritime contracts.

The Fifth Circuit rejected LIM’s attempt to include the costs of fuel and lubricant used while the Tugs serviced the Barges in its maritime lien. The justices noted that the value of a maritime lien is strictly limited to the value of necessaries provided to a vessel. The Court concluded that fuel and lubricant costs were ancillary to this purpose and did not impact the value of the maritime lien.

The Fifth Circuit affirmed the judgment of the District Court in full.

Trailer Bridge, Inc. v. Louisiana Int’l Marine, L.L.C., confirms the application of maritime liens despite the inclusion of a no-lien clause in maritime contracts and the absence of a diligence requirement for providers of necessaries to discover the clause. Additionally, the Fifth Circuit’s opinion clarifies that maritime liens are constrained to value of necessaries provided to a vessel.

For more information on CIMLA or the decision in Trailer Bridge v. Louisiana Int’l Marine, L.L.C., please contact us at info@chaloslaw.com

Last month, the Ninth Circuit Court of Appeals awarded attorneys’ fees to a petitioner seeking recognition and enforcement of a foreign arbitration award who had been forced to defend against a frivolous appeal based on “hyperformalistic objections” by the respondent, against whom the arbitration tribunal issued its award. After opining on the flimsy merits of the appeal in March, the Ninth Circuit issued an order to show cause. In it, the Court observed, “Winebow knew or should have known that its claims were frivolous, and it should bear the cost of this self-indulgent appeal.” Franz Haas GmbH SRL v. Winebow Inc., No. 25-4105 (9th Cir. Mar. 26, 2026).

The case arose from a petition in the Central District of California to confirm an Italian Arbitration Award under the New York Convention. Pursuant to Article IV of the Convention, on November 25, 2024, Petitioner Haas moved to confirm an award in its favor against Respondent Winebow. Because Petitioner’s initial filing omitted some of the documents necessary to proceed with its motion, Petitioner moved for leave to amend its submission on February 20, 2025. Respondent opposed the motion for leave, arguing all necessary documents must be produced at the time of filing, and that Petitioner’s translations of the award were inaccurate. The District Court rejected these arguments and ultimately confirmed the award.

Respondent then appealed the confirmation to the Ninth Circuit, which issued its opinion on April 9, 2026. In its appeal, Respondent repeated the unsuccessful arguments it made at the District Court level. Echoing the District Court, the Ninth Circuit determined that none of the arguments raised by Respondent seriously objected to the substance of Petitioner’s motion to confirm the award. Rather, Respondent focused on trivialities that did not impress the Court. Notably, Respondent repeated its claim that the translations of the Italian Arbitration Award were inadequate to meet the standard of Article IV. However, Respondent identified only one (1) incorrect word in the translation. Amusingly, Respondent derided the translation for using “foreign language”; in fact, the only non-English phrase used in the translation was “pactum renovandi,” a Latin term of art that the award accurately defined in English.

The Ninth Circuit concluded that Respondent’s appeal was “frivolous,” as it failed to raise a substantive argument on which the District Court’s decision could be overturned. It specifically pointed to Respondent’s focus on insignificant and minute faults in Petitioner’s submissions as evidence that its arguments were non-substantive and therefore frivolous. After the parties had presented their positions in response to the Court’s order to show cause, the Ninth Circuit ordered that Respondent and its firm, jointly and severally, were liable for all attorneys’ fees and costs associated with the appeal of the District Court’s confirmation of the Italian Arbitration Award. The Court noted that Respondent’s frivolous legal arguments were “selected and introduced” by its counsel, which justified the joint and several liability between Respondent and its legal counsel.

The Ninth Circuit’s decision in Winebow will likely deter frivolous appellate litigation of foreign arbitration awards. Specifically, by imposing costs and fees directly onto Respondent’s counsel, Winebow stands as a potent warning that attorneys may be “on the hook” for losses incurred through meritless appellate litigation arising from foreign arbitration. The decision also strengthens the expectation that district courts will efficiently expedite arbitration confirmations under the New York Convention.

For more information on the Ninth Circuit’s ruling in Franz Haas GmbH SRL v. Winebow Inc., please contact us at info@chaloslaw.com

In Jules v. Andre Balazs Props., 2026 U.S. LEXIS 2035 (2026), the U.S. Supreme Court (“SCOTUS”) confirmed that a federal court with original jurisdiction over a claim stayed pending arbitration retains jurisdiction to confirm the resulting arbitral award. The dispute in Jules arose in March 2020 when Adrian Jules, a former hotel employee in California, sued his former employer in the U.S. District Court for the Southern District of New York, alleging unlawful discrimination in violation of federal and state law. The employer, citing the parties’ arbitration agreement, moved to stay proceedings pending arbitration under § 3 of the Federal Arbitration Act (“FAA”). After the U.S. District Court granted the motion, Jules commenced arbitration and received a $34,500 award. When the employer moved to confirm the award under §§ 9 and 10 of the FAA, Jules cross-moved to vacate the award on the basis that the District Court lacked jurisdiction to confirm the award. The District Court disagreed with Jules’ argument and confirmed the award. On appeal, the Second Circuit Court of Appeals affirmed the District Court’s ruling. The U.S. Supreme Court granted certiorari to review the Second Circuit’s decision.

Jules argued to the U.S. Supreme Court that the District Court lacked jurisdiction to confirm the arbitral award because of a lack subject matter jurisdiction. In support of the argument, Jules cited two (2) prior SCOTUS decisions—Vaden v. Discover Bank, 556 U.S. 49 (2009), and Badgerow v. Walters, 596 U.S. 1 (2022), whereinthe SCOTUS permitted federal courts to “look through” a motion to confirm a freestanding arbitral award to determine if the substantive dispute invoked federal subject matter jurisdiction and previously held that a federal court cannot confirm a freestanding arbitral award if the substantive dispute in an award did not give rise to subject matter jurisdiction. Jules argued that, when applied to his case, this “look through” provision would compel a finding that the District Court lacked jurisdiction to confirm the arbitral award because the substantive dispute in the arbitration concerned state claims and lacked diversity jurisdiction.

In a unanimous decision, the U.S. Supreme Court disagreed with Jules’ arguments. Justice Sotomayor distinguished Vaden and Badgerow from Jules and wrote, the disputes in Vaden and Badgerow involved freestanding arbitration, where no federal court had original jurisdiction over the claims prior to arbitration. A federal court which did not possess original jurisdiction is obliged to conduct a separate jurisdictional analysis to confirm an arbitral award. By contrast, in Jules, the federal court sitting in New York possessed original jurisdiction over Jules’ claims prior to granting a stay pending arbitration. Therefore, the District Court retained original jurisdiction to confirm the arbitral award and warned that § 3 of the FAA aims to avoid the cost of additional litigation by allowing federal courts to stay proceedings during arbitration. Jules’ argument, the U.S. Supreme Court reasoned, would give rise to an independent jurisdictional analysis for every motion to confirm an award, creating additional litigation that would defeat the purpose of § 3.

By confirming that federal courts retain original jurisdiction to confirm arbitral awards under § 3 of the FAA, Jules reduces the risk of costly post-arbitration litigation and confirms that the “look through” provision, introduced in Badgerow, only applies to freestanding arbitral awards and not § 3 arbitrations.

For more information on the Federal Arbitration Act or the U.S. Supreme Court’s decision in Jules v. Andre Balazs Props., please contact us at info@chaloslaw.com

OFAC has announced a settlement of alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR) with Adani Enterprises Limited (AEL) of India.  The enforcement originated in AEL’s purchase of cargoes of liquefied petroleum gas (LPG) from a Dubai-based trader purporting to supply Omani and Iraqi gas. In these transactions, AEL was the consignee for LPG cargoes bound for India. It had contracted with a Dubai supplier as shipper and vessel charterer and took title to each cargo at Mundra Port. The Dubai supplier controlled all shipping arrangements — chartering the vessels, loading the Iranian-origin LPG, and issuing the falsified certificates of origin that misrepresented the cargo as Omani or Iraqi. AEL, as the receiving terminal operator with no direct relationship with the shipowners, relied on those documents for its knowledge of cargo origin.

At the time of the dealings, AEL followed its affiliates’ 2020 OFAC sanctions compliance program, which prohibited Iranian and/or sanctioned vessels and Iranian-origin cargo from entering AEL-affiliated ports. AEL conducted its standard Know Your Customer (“KYC”) process on the Dubai Supplier and its affiliates, which identified no matches with OFAC’s List of Specially Designated Nationals (SDN) and Blocked Persons (the “SDN List”).  None of the parties involved in AEL’s LPG imports were sanctioned at the time of the LPG shipments, and none of the documentation provided to AEL contained any information explicitly pointing to Iranian origin of the LPG. Yet unbeknownst to AEL, an affiliate of the Dubai Supplier had been designated by OFAC in March 2023 pursuant to E.O. 13846 for purchasing LPG from Iran-based SDN Persian Gulf Petrochemical Industries for resale. AEL sanctions compliance program, and its affiliates’, did not include other measures to account for risks arising from its dealings.

OFAC determined that during the dealings in 2023-2025, AEL learned of concerns that cargoes supplied by the Dubai Supplier may have originated in Iran. OFAC found that for the period in which the apparent violations occurred, vessels carrying the Dubai supplier’s cargoes routinely engaged in suspicious behavior, including (1) Automatic Identification System (AIS) manipulation, including spoofing and prolonged unexplained AIS dark periods; (2) uneconomic or illogical vessel movements or port calls; and (3) frequent name, ownership, and/or Flag State changes.  OFAC further found fault with the documentation provided by the Dubai Supplier, which was indicative of falsification, including: (1) illogical and nonsequential numbering of certificates of origin, (2) repeated unexplained delays in post-shipment issuance of documents, and (3) use of outdated document templates.

Finally, OFAC considered the prices offered by the Dubai supplier, which it concluded were sufficiently below the predominant market rate and should have prompted greater due diligence by AEL. According to the Enforcement Release, AEL did not demonstrate that it took sufficient steps to investigate the red flags beyond reviewing shipping documentation and obtaining assurance from the Dubai Supplier that it was not selling Iranian-origin LPG.

Based on OFAC’s investigation, with which AEL cooperated, thirty-two (32) apparent violations of § 560.203(a) of the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. part 560 were identified exposing AEL to a maximum penalty of $384,208,088.  The violations were pursued on a causation theory: OFAC characterized AEL’s violations as having “caused U.S. financial institutions to process 32 U.S. dollar (USD) denominated payments totaling approximately $192,104,044 for the shipments.”  After weighing the applicable aggravating and mitigating factors in OFAC’s Enforcement Guidelines, the office agreed to settle the enforcement action for $275,000,000.

OFAC’s imposition of liability on a non-US commodity buyer based on “red flags” associated with the loading of the cargo and vessel operations is significant.  OFAC’s view that “Red flags should have put AEL on notice that the LPG actually originated from Iran” demonstrates the serious compliance risk exposure to non-US cargo interests, particularly in the oil and gas trade and underscores the importance of its recent Guidance on Sham Transactions and Sanctions Evasion issued March 31, 2026.

This update is provided for general information and is not legal advice.  To further discuss the above or how this enforcement may affect your interests, please contact us at info@chaloslaw.com.

The U.S. Supreme Court issued an important unanimous decision yesterday with significant implications for the transportation and logistics industry. That decision, Montgomery v. Caribe Transport II, LLC, No. 24-1238 (May 14, 2026), holds that negligent-hiring claims against transportation brokers are not preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA).

The case arose from a collision between two trucks on an Illinois highway, one of which was stopped on the side of the road. The motor carrier that struck the parked truck held a “conditional” FMCSA safety rating reflecting deficiencies in driver qualifications, vehicle maintenance, and crash rate. Notwithstanding these, the broker engaged the motor carrier for the shipment at issue and, based on this, the plaintiff sued the broker for negligent hiring.

THE HOLDING

The issue before the Supreme Court originated in a statutory federal preemption provision covering laws “related to a price, route, or service” of brokers and carriers. The provision, however, contains a safety exception preserving state authority “with respect to motor vehicles.” The Court held that a negligent-hiring claim based on a carrier’s poor safety record plainly falls within that exception and is not preempted.

Four federal Courts of Appeals had addressed the question and divided evenly. Two circuits held that the safety exception required a “direct link” to motor vehicles and, consequently, did not apply to transportation brokers. Two others had reached the opposite conclusion. The Supreme Court resolved this split, rejecting the “direct link” requirement in favor of the ordinary meaning of the statutory phrase “with respect to motor vehicles.”  The Court interpreted this to require that the claim just “concerned” motor vehicles, a looser standard that allows negligent hiring claims in collision cases like the one at issue. In doing so, the Court was careful to note the exception’s limits: it “saves only a subset of preempted claims: those involving regulations concerning motor vehicle safety.” State laws governing prices, routes, or services with no relationship to safety remain fully preempted.

ANTICIPATED IMPACTS

The decision opens the door to pursuing brokers as defendants in jurisdictions where those claims were previously dismissed on preemption grounds. In the wake of this decision, brokers should review their carrier vetting procedures and how that vetting is documented. Brokers who conduct reasonable due diligence should be well-positioned to defend against negligent-hiring claims.

While the decision resolves the circuit split on broker liability for negligent hiring, the boundary between preempted claims involving “rates, routes, and services” and viable “safety” claims will continue to be tested in the lower courts. We expect active litigation clarifying the scope of the “safety” exception to preemption, particularly regarding the decision’s impacts on negligent-hiring claims in adjacent areas like cargo damage and non-broker parties such as 3PLs, freight forwarders, and digital freight platforms.

For more information on this decision contact us at info@chaloslaw.com.

 

The U.S.  Court of Appeals for the District of Columbia Circuit recently issued a decision affirming the civil forfeiture of over 700,000 barrels of Iranian crude oil seized from two (2) tankers in the Mediterranean on a novel terrorism forfeiture theory. United States v. All Petroleum-Product Cargo Onboard the M/T Arina, No. 24-5218 (D.C. Cir. April 21, 2026).  The crude at issue was seized following a November 2020 ship-to-ship transfer from the sanctioned M/T Stark I to the M/T Arina in the Persian Gulf. The U.S. directed both vessels to discharge ports and filed civil forfeiture complaints against their cargos. Following seizure, the crude was sold in a court-authorized interlocutory sale.  The forfeiture complaints alleged that the National Iranian Oil Company (NIOC) provides material support to the Islamic Revolutionary Guard Corps (IRGC), a U.S. federal crime for which forfeiture may be pursued under 18 U.S.C. § 981(a)(1)(G)(i). As such it provides the legal foundation that prior Iranian oil forfeiture cases, which resolved through agreed forfeitures or guilty pleas, never produced.

The decision rests on three (3) significant holdings. First, the DC Circuit overcame the legal obstacle posed by the fact that at the time of the seizure the oil was no longer property of NIOC, by applying the relation-backed doctrine. Under this theory, the Court concluded that forfeiture title vests in the United States when the predicate offense is committed, not at the time of seizure. Because NIOC’s alleged support of the IRGC is an ongoing offense going back to at least 2012, any subsequent purchaser of NIOC-origin oil, including the defendant Turkish claimant Aspan Petrokimya, acquired an interest already subject to forfeiture. The implication of this holding, although expressly stated, is that the United States holds inchoate title to all NIOC-origin oil produced during the offense period, that can be perfected by subsequent seizure and forfeiture.

The next significant aspect of the decision was the broad application of the U.S. Constitution’s Foreign Commerce Clause to reach purely foreign transactions that affect U.S. commerce through generalized impact on global commodity market prices. Building off United States v. Park, 938 F.3d 354 (D.C. Cir. 2019), the Court applied the Interstate Commerce “substantial affects” analysis to the Foreign Commerce Clause, and held that even if none of the seized oil was headed to the United States, and even if the specific transactions had no direct U.S. connection, the Foreign Commerce Clause is satisfied because NIOC’s overall oil trading affects global markets that affect U.S. energy prices. The D.C. Circuit’s approach would seem to extend congressional regulatory authority over foreign commerce to all internationally traded commodities.

Third, the Court construed the terrorism statute’s “calculated to influence” element as an intent requirement satisfiable at the pleading stage by inference from the alleged organizational integration of NIOC and the IRGC.

Notably, the decision was rendered in response to a motion to dismiss.  As such all of the government’s factual allegations were accepted as true. The claimant then admitted all factual allegations and consented to judgment to provide a clean record for the appellate decision. The DC Circuit’s holdings are, therefore, purely legal: they establish allegations that satisfy requirements for forfeiture under the statutes, but they do not provide precedent that NIOC is in fact a terrorism perpetrator since that fact was admitted. A future claimant who contests the factual allegations would require the government to prove each element, a daunting task that would likely require classified intelligence evidence and test the limits of OFAC designations as proof of terrorist support.

The forfeiture is also notable for succeeding without relying on IEEPA, OFAC enforcement authority, or the U.S. financial system nexus that ordinarily anchors sanctions enforcement. OFAC’s 2020 counterterrorism designation of NIOC was a very limited factor in the decision, serving only as support for the intent allegation. The appellate decision remains subject to petition for rehearing through June 5, 2026, and to petition for certiorari at the U.S. Supreme Court through July 2026.

For more information on the US Court of Appeals for the District of Columbia and/or U.S. sanctions generally, please contact us at: info@chaloslaw.com.

 

Introduction

On April 12, 2026, President Trump announced via Truth Social that the United States Navy would begin “BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz.”  The social media announcement was followed within hours by a formal CENTCOM press release confirming that the blockade would take effect on April 13 at 10 a.m. ET “in accordance with the President’s proclamation.” Exactly one week later, the blockade produced its first vessel seizure: on April 19, the U.S. Navy intercepted, disabled, and boarded the Iranian-flagged container ship M/V TOUSKA in the north Arabian Sea as it attempted to enter the Persian Gulf in violation of the blockade. The TOUSKA remains in U.S. custody. The seizure brings to the fore aspects of the law of naval warfare that have remained largely dormant since the Second World War and brings into effect a legal regime distinct from the maritime law enforcement regime that generally prevails under the law of the sea.

The Law of Naval Blockades

Naval blockades are a recognized instrument of belligerent warfare under customary international law, codified most authoritatively in the 1994 San Remo Manual on International Law Applicable to Armed Conflicts at Sea. Under Articles 93–108 of the Manual, a legally valid blockade must satisfy several requirements: it must be formally declared and notified to all belligerents and neutral states; it must be effective, meaning it genuinely prevents ingress and egress from the enemy’s coast; it must be applied impartially to vessels of all nations; and it must not bar access to neutral ports or coasts, nor cut off the supply of essential humanitarian goods to the civilian population. The blockaded area must be clearly defined, and sufficient warning must be given to neutral shipping so that vessels may alter course. Although novel, the declaration by presidential social media post alone could satisfy the Manual’s declaration requirement.  If it was insufficient alone, the subsequent official CENTCOM press release and Notice to Mariners broadcast likely provides the requisite formality. Under the Manual, any vessel that breaches, or attempts to breach, a lawfully declared blockade becomes subject to capture, along with its cargo.

M/V TOUSKA

This legal framework was invoked in practice on April 19, 2026. According to the CENTCOM press release, guided-missile destroyer USS SPRUANCE (DDG 111) intercepted M/V TOUSKA as it transited the north Arabian Sea toward the Straits of Hormuz bound for Bandar Abbas, Iran. U.S. forces issued multiple warnings, informing the Iranian-flagged vessel it was in violation of the U.S. blockade. After TOUSKA’s crew failed to comply with repeated warnings over a six-hour period, USS SPRUANCE directed the vessel to evacuate its engine room, then disabled the ship’s propulsion by firing several rounds from the destroyer’s 5-inch MK 45 Gun into the engine room. U.S. Marines from the 31st Marine Expeditionary Unit subsequently boarded the non-compliant vessel, which remains in U.S. custody.  Since the blockade was declared, U.S. forces had directed 25 commercial vessels to turn around or return to Iranian ports. This action was thus the first actual capture under the blockade.

Legal Authorities: Blockade, OFAC Sanctions, and the Law of Prize

Three distinct legal frameworks converge on the TOUSKA boarding. First, and most significantly, the capture was executed under the law of armed conflict rather than domestic law enforcement authority. San Remo Manual Articles 118–124 establish the general right of belligerent warships to visit and search merchant vessels outside neutral waters — but that regime applies to neutral vessels only where there are reasonable grounds for suspicion of contraband or blockade-running. That is not the operative framework here. The TOUSKA is an Iranian-flagged vessel, and therefore an enemy merchant ship subject to San Remo Article 135. It states directly: “Enemy vessels, whether merchant or otherwise, and goods on board such vessels may be captured outside neutral waters. Prior exercise of visit and search is not required.” The vessel falls within none of Article 136’s enumerated exemptions — it is not a hospital ship, a cartel vessel, a humanitarian transport, nor any other protected category.

At this point, the Law of Prize applies.  Under San Remo, Article 138 governs the procedure: “Capture of a merchant vessel is exercised by taking such vessel as prize for adjudication.” Diversion from the vessel’s declared destination is an available alternative. The Law of Prize is implemented by statute at 10 U.S.C. Chapter 883 (§§ 8851–8880), titled simply “Prize,” which details the U.S. legal requirements for capture, custody, and adjudication of enemy vessels and their cargo by U.S. naval forces.

CENTCOM’s announcement on the TOUSKA, however, did not describe the action as capture and it remains to be seen whether TOUSKA will be subject to legal proceedings as a prize.  An alternative legal regime is available under U.S. sanctions law: TOUSKA has been sanctioned by the U.S. Office of Foreign Assets Control (OFAC) since 2020 for its links to Islamic Republic of Iran Shipping Lines. Its owner, Mosakhar Darya Shipping Co., is also subject to U.S. Treasury sanctions. As a result, two legal avenues are available under U.S. law. TOUSKA could be adjudicated as prize and become property of the U.S. government.  Alternatively, the vessel could be adjudicated under forfeiture statutes similar to those relied on for the December seizure of MT SKIPPER.  Only time will tell.

Conclusion

The TOUSKA seizure marks a historically significant legal departure from the earlier pattern of U.S. maritime interdictions. Prior actions like the MT Skipper and the MT Marinera (a/k/a Bella 1) arose in the context of the Coast Guard-led Venezuela sanctions campaign under a maritime law enforcement framework applying US federal criminal law. The TOUSKA, by contrast, was by all indications captured as an enemy merchant vessel under San Remo Manual Article 135.  The U.S. blockade of Iranian ports has activated the long-dormant law of prize requiring merchant shipowners and marine insurers to become familiar with a legal regime they may have thought was consigned to the dustbin of history.  For more information contact us at info@chaloslaw.com.

 

Yesterday, March 31, 2026, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) released a Sanctions Advisory titled “Guidance on Sham Transactions and Sanctions Evasion.” The Advisory is aimed at clarifying the sanctions risks posed by transfers of property that are designed to conceal, rather than genuinely terminate, their continuing interest in that property. These “sham” transactions often occur through proxies, straw owners, front businesses, or opaque legal structures such as trusts . OFAC makes it clear that it applies functional definitions of “interest” and “property interest” that look through legal formalities to underlying economic realities and sham transactions, therefore, do not extinguish a blocked person’s interest in property. The Advisory builds directly on existing OFAC guidance, including FAQ 402 (addressing the 50 Percent Rule), and supplements that prior framework by identifying concrete factors market participants should consider when evaluating whether a purported transfer or divestiture was genuine.

The Advisory identifies several red flags that may indicate a blocked person continues to hold an interest in property that has ostensibly been transferred. These include: (1) commercially unreasonable transactions — transfers lacking adequate consideration or not reflective of arm’s-length dealings; (2) transfers to family members or close associates who may be serving as proxies, facilitators, or agents for the blocked person; (3) transfers with no apparent business purpose, or to individuals with little relevant expertise in the transferred asset; (4) unduly complex corporate structures — such as multi-layered LLCs, partnerships, or trusts — domiciled in higher-risk or opaque jurisdictions with little connection to the underlying property; (5) continued involvement by the blocked person in the use, management, or disposition of property, whether directly or through intermediaries; (6) transfers completed close in time to a designation; and (7) evasive or vague responses from counterparties or intermediaries when queried about a blocked person’s involvement. OFAC emphasizes that no single factor is determinative and that a totality-of-the-circumstances analysis applies.

The guidance crystallizes OFAC’s expectations for heightened due diligence when a blocked person has previously held an interest in property, making it clear that market participants must look beyond legal title and assess the economic and functional realities of any purported transfer. In the wake of this guidance, commercial actors must scrutinize transactions with greater care. The consequences of failing to do so are severe. Participants who engage, even unknowingly, in transactions involving property that remains functionally blocked face significant enforcement exposure. In additional to civil monetary penalties, those who knowingly serve as proxies, nominees, or facilitators for blocked persons face the risk of designation themselves. We recommend that clients review their existing due diligence frameworks in light of this Advisory and assess whether current procedures adequately account for the red flags OFAC has now identified.

Yesterday, the Department of Justice (DOJ) released its first-ever Department-wide Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP).  The CEP is applicable to all corporate criminal matters except antitrust violations. DOJ announced the policy as a significant step toward uniformity and predictability in federal corporate criminal enforcement. The most prominent feature of the CEP is the Part I declination policy, which states that DOJ “will decline to prosecute a company for criminal conduct” when four specific factors are satisfied. Under Part I, a declination is warranted when: (1) the company voluntarily self-disclosed the misconduct to the appropriate DOJ criminal component; (2) the company fully cooperated with the Department’s investigation; (3) the company timely and appropriately remediated the misconduct; and (4) no aggravating circumstances related to the nature or seriousness of the offense are present.  If aggravating circumstances exist, prosecutors still retain discretion to nevertheless recommend a declination by weighing those circumstances against the company’s self-disclosure, cooperation, and remediation efforts. Companies receiving a Part I declination will still be required to pay all applicable disgorgement, forfeiture, restitution, and victim compensation amounts, and all declinations will be made public.

For situations that fall short of a full declination, CEP Part II creates a structured two-tier alternative. Under Part II, companies that fully cooperated and remediated are entitled to a Non-Prosecution Agreement (NPA) if they either (a) made a good-faith self-report that did not technically qualify as a “voluntary self-disclosure” as defined in Appendix B of the policy, or (b) had aggravating factors warranting a criminal resolution.  In the absence of particularly egregious or multiple aggravating circumstance, the Part II NPA will have a term of fewer than three years, no requirement for an independent compliance monitor, and a fine reduction of between 50% and 75% below the low end of the U.S. Sentencing Guidelines (U.S.S.G.) range. Companies that do not qualify for Part I or Part II will receive the least favorable treatment under Part III, where prosecutors retain broad discretion over resolution form, term length, compliance obligations, and monetary penalties. Even in Part III cases, however, the Policy establishes a floor: the Department will not recommend a fine reduction of more than 50% off the applicable range. Part III applies a presumption that any reduction will be measured from the low end of the guidelines range for companies that fully cooperate and remediate; for those that do not prosecutors will use other points within the range based on the circumstances—including recidivism.

DOJ’s new CEP does not exist in isolation.  Rather, it joins stands alongside well-established agency-level voluntary disclosure programs that companies must navigate in parallel. Both the Environmental Protection Agency (EPA) and U.S. Coast Guard have established Voluntary Disclosure Policy, which offer penalty mitigation and, in appropriate cases, declination of criminal referrals to DOJ for companies that self-disclose environmental violations discovered through compliance auditing. Similarly, the Treasury’s Office of Foreign Assets Control (OFAC) maintains a Voluntary Self-Disclosure (VSD) program under which companies that self-disclose apparent sanctions violations receive a 50% reduction in the base civil monetary penalty, and where OFAC expressly considers voluntary disclosure as a significant mitigating factor in determining whether to refer a matter to DOJ for criminal action. While each of these frameworks operates independently and retains its own procedural and substantive requirements, the new DOJ CEP now provides yet another layer: a company that has made disclosure to a sector-specific agency such as EPA, the Coast Guard, or OFAC should carefully evaluate whether—and how promptly—that disclosure must also be made to the appropriate DOJ criminal component to preserve eligibility for a Part I declination, since the CEP generally requires disclosure to DOJ directly and treats agency-only disclosures as qualifying only in limited circumstances at prosecutorial discretion. The full text of the DOJ press release and the CEP policy document are available online at the Department of Justice website.

The CEP offers very strong incentives for voluntary disclosures of potentially criminal conduct if a company acts consistently with the Policy.  Companies should engage legal counsel promptly to preserve the opportunity to take the best advantage of the CEP’s benefits. If you have any questions concerning the CEP, please contact us at info@chaloslaw.com.

Benjamin Robinson, of Chalos & Co, authored an article in the February issue of Maritime Risk International exploring the impacts of the Second Circuit’s decision on war risks claims in the wake of the arrest and extraction of Nicolas Maduro.  The article highlights the broader implications of the decision on judicial treatment of sanctions decisions by the executive and the causation standard applied to them by courts.

To read a copy of the article, click here.  If you have any questions concerning the decision or its impact on war risks clause insurance claims, please contact us at info@chaloslaw.com.