Why Denmark Can’t “Block” Dark Tankers

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A dangerous proposal is on the table as sanctioning authorities grasp for answers on how to improve enforcement of the Russian oil price cap. The coalition-driven cap aims to accomplish two apparently paradoxical purposes: limit Russia’s ability to generate oil-based revenue used to fund its war effort and maintain the global supply of energy. Rather than banning the facilitation of Russian oil exports altogether, the G7, the EU, Norway, and Australia, adopted a scheme to set Russian-origin oil moved in maritime transport at an artificially low price. The coalition attempts to execute this price cap by placing a compliance burden on “maritime service providers” including commodity traders, charterers, shipowners, and insurers. In effect, this requires private actors in the commercial chain to either painstakingly track the price of each underlying Russia-connected oil trade or exchange pro forma “attestations” of compliance with their direct business associates.

As the spot rate for Russian oil has climbed up and over the cap, it has become clear that these experimental regulatory efforts have so far failed to achieve their policy aims. Instead, the price cap is a paperwork headache causing legitimate industry actors in remote proximity to the actual pricing information to either trust the compliance warranties embedded in the attestations, or otherwise withdraw from Russia-connected oil trades altogether. Marine insurers appear to have largely opted with the latter. Simultaneously filling this commercial void, a parallel “dark fleet” has emerged to skirt the sanctions using older tankers with manipulated tracking transmissions, concealed ownership structures, and alternative insurance arrangements, if any at all.

A worrying knock-on effect is that dark tankers with questionable insurance are loading oil at Russia’s Baltic ports and then making their way to global markets through the international straits separating mainland Denmark with Sweden. Ominously, some of them seem to linger at anchorage off Skagen Harbor at Denmark’s Northern edge. In response, the coalition have reportedly contemplated tabbing Denmark with an audacious role of enforcing the price cap by inspecting Russia-connected tankers as they move through the Danish Straits. This brief essay addresses the controversy by discussing the commercial maritime context alongside the corresponding treaty-based framework governing the proposed Danish intervention. It argues that while the prospect of a price cap enforcement overhaul is a worthwhile conversation, the present enforcement proposal is conceptually flawed.

The Insurance Context

A central premise driving the price cap is that the maritime service providers under the jurisdiction of coalition nations are “best in class,” making them a useful channel to self-police the sanctions through compliance measures. One truth reflected in that characterization is the status of the marine insurance provided by the world’s leading protection and indemnity (P&I) clubs. The International Group of P&I Clubs is an umbrella organization linking the twelve most well-regarded shipowner mutual indemnity associations, with each of its members based in coalition nations. Collectively, they provide cover for more than 90% of tankers worldwide. Seven clubs are operated out of the UK (Britannia, London P&I, NorthStandard, Shipowners’ Mutual, Steamship Mutual, UK P&I, and West of England), two clubs in Norway (Gard and Skuld), and one club each in the EU (Swedish Club), the US (American Club) and Japan (Japan Club). Explicitly referencing the P&I clubs as “Tier 3” actors subject to price cap attestation obligations, these insurance restrictions have created two practical consequences. First, International Group P&I clubs are unlikely to intentionally insure vessels carrying Russian petroleum above the price cap. This is the basis behind the widespread media reporting that “non-Western” insurance can be used as a proxy for price cap evasion. Second, even if an International Group-member P&I club unwittingly covers a vessel participating in a non-compliant trade, the attestations, the P&I club rules, and broader legal doctrines of illegality may complicate the recovery of claims in the event that the vessel ends up in a casualty.

The prospect that oil tankers without adequate insurance could be regularly moving across Europe’s coastlines is deeply concerning. But the commercial realities are more complex than popular perception. P&I clubs provide cover for a wide range of risks, including personal injury, salvage, wreck removal, and—yes—environmental pollution. In fact, the International Group P&I clubs are fundamentally linked to the compulsory insurance flowing from the international conventions on ship-source marine pollution, including the Civil Liability Convention (CLC) of 1969 and 1992, among others. Evidencing that a strictly liable shipowner carries insurance satisfying the CLC, P&I clubs provide a “Blue Card” to a State authority (such as the flag state) indicating cover is in place for an enrolled vessel. Then, relying on the Blue Card, the state authority issues a certificate of insurance, which is carried on board the vessel to allow it to access maritime infrastructure (ports and canals) around the world. In theory, this framework allows for States to ascertain whether a vessel carries adequate insurance to cover oil pollution liabilities affecting third parties before it engages in international voyages. Under the CLC, if another contracting State questions whether the insurer named in the certificate is capable of meeting the obligations of the convention, it may request a remedial consultation with the certifying State. 

Nevertheless, even prior to the implementation of the price cap, the International Maritime Organization (IMO) issued Guidance highlighting that Russia-related sanctions could complicate recovery in the event of a major oil spill due to cancelled coverage or complications in the payment of claims. As a recommendation, the Guidance suggests States should cancel certification if they receive notification that the P&I club has terminated the underlying insurance, and that States should implement verification measures to ascertain whether any Russian insurers can provide adequate cover. A recent Advisory issued jointly by the price cap coalition nations echoes similar concerns, warning that dark fleet vessels involved in Russia-connected oil trades may fabricate their certificates or use “unknown, untested, sporadic, or fraudulent insurance” that might lead to the inability to pay oil spill claims. If indeed Russia or other states are falsifying certificates regarding the adequacy of P&I cover, this flagrant breach of the convention-based framework is among the central concerns. But is it a concern that can be remedied by inspecting, blocking, or even seizing vessels?

The Legality of Intervention

The unconfirmed coalition proposal involves Danish authorities physically engaging Russia-connected tankers in or near the Danish Straits on the basis that it is necessary to inspect the  CLC certificates of certain Russia-connected vessels. The concern is that dark fleet vessels may have inadequate P&I insurance that is either insufficient to meet the requirements of the CLC convention, or is otherwise subject to a sanctions exclusion clause or illegality defense in the event the vessel is moving oil above the price cap. This intervention approach is legally problematic in several ways.

Although the Danish Straits are narrow, under the Copenhagen Treaty of 1857, they are “international straits” providing for the freedom of navigation for any vessel. Fast-forwarding to the present-day legal position, this means that the regime of transit passage applies in the straits. Under the regime, bordering States, such as Denmark, have very limited legislative and enforcement powers.

Denmark’s only legislative powers in the straits are specified in UNCLOS Article 42. In relation to marine pollution, the provision allows bordering states to require that the international convention-based rules on prevention and control of ship-source pollution are complied with. Since this is already an obligation on vessels wishing to use the right to transit passage, it leaves no real independent legislative powers with States bordering international straits, and certainly rules out any requirements that go beyond accepted international maritime treaties, such as requiring vessels to produce a certificate of insurance backed by Blue Cards issued by coalition-based P&I clubs.  

Regarding enforcement powers, as long as a vessel is engaged in “continuous and expeditious transit” through the Danish Straits, Denmark cannot “hamper” or otherwise interfere with its progress. Vessels remaining at anchorage for an extended period would go beyond the scope of these free movement protections, and Denmark would arguably be allowed to inspect vessels lying at anchorage withing territorial waters in Skagen, as reported. Setting aside these situations, Denmark’s enforcement powers are outlined by UNCLOS Article 233, which indicates that if pollution control regulations are not adhered to and this threatens to cause major damage to the marine environment of the Danish Straits, then Denmark could take “appropriate enforcement measures.” But this is a high standard for Denmark to establish. It requires more than a vague sense of dread that a vessel might be carrying a fraudulent certificate of insurance as it passes through the Danish Straits. It is also not enough for Denmark to worry that a vessel is moving oil above the price cap and therefore potentially establishing legal grounds for the P&I club to resist paying claims due to exclusionary clauses or illegality-based arguments. Instead, Denmark is restrained from intervention unless there is concrete and actionable proof that a vessel is a major threat to damaging the marine environment.

Distinguishable from the reported environmentally-based intervention of dark ships entering port facilities in other parts of the world, freedom of navigation remains the starting point for transit through the Danish Straits including tankers with cargoes of Russian oil.

The Proposal: A Red Herring Released to Influence the Market?

Viewed in total, the proposal for Denmark to enforce the Russian oil price cap is likely unlawful mainly because the Danish Straits have special status in international law, and whereas Denmark may require vessels to hold a legitimate CLC certificate, Denmark has limited proscriptive and enforcement powers to intervene when vessels are navigating in transit passage to physically verify this. Instead, it must rely on the state-to-state consultation framework already outlined in the oil pollution conventions.

More importantly, assuming Denmark discovers that a particular vessel is found to have a fraudulent or otherwise inadequate certificate of insurance as it moves in the Danish Straits, what would be the next move? It would be highly provocative for a NATO member to illegally inspect, detain, block, or arrest a Russia-connected commercial vessel carrying extremely valuable cargo. Tit-for-tat merchant vessel seizures are already occurring in relation to other geopolitical conflicts around the world. Initiating a new wave on Scandinavia’s doorstep is not a viable solution to price cap woes.

Still, the mere threat that oil tankers might be inspected and detained if they carry a dubious certificate of insurance could arguably result in a market shift back towards the “Western” Internatinoal Group P&I clubs that are bound to comply with the price cap. In the end, therefore, the strategically, legally, and practically naïve proposal might just work—presuming, of course, that it is never actually carried out.

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Andrew Serdy says

December 14, 2023

Dear Kristina and Richard
Many thanks for this fascinating post. One particularly intriguing aspect is the relationship between the 1857 Copenhagen Treaty and Part III of UNCLOS. Are you saying (or is it Denmark's position) that UNCLOS supersedes the 1857 Treaty, as opposed to subordinating itself to it pursuant to Art 35(c)?
Perhaps you could also expand on what if anything the 1857 Treaty says about its application in wartime. In line with other posts on this blog that have occasionally raised the matter, as far as I am aware no NATO member States have claimed to be neutral in the Russia-Ukraine conflict, and many of the actions taken by them since 2022 are not open to neutrals, though all seem reluctant to make the obvious concomitant admission that they are thereby participating in the armed conflict on Ukraine's side, even if not directly taking part in the fighting. Abandoning that fiction would open the way to enforce the price cap at sea, but until/unless that happens I am inclined to agree with your conclusions.

Kristina Siig says

December 14, 2023

Hi Andrew,

On the reading of the 1857 Treaty it is arguably more far-reaching in its protection of the right to transit than UNCLOS. Whereas Denmark has entered it as a special regime under 35(c) I would presume that Denmark would interpret them together and claim to still have the (limited) enforcement powers given to States bordering international straits given there.

I very much agree on the strained neutrality issue. So far we have however explored this under UNCLOS and not under the laws of naval warfare. We may return on that issue.

Best / Kristina

Alexander Lott says

December 14, 2023

Thank you for this important and topical contribution. I agree that it might be difficult to implement this plan in and around the Danish Straits. But I would argue that this is not because of the applicability of the right of transit passage (as repeatedly suggested in the post).

Principally, only the United States has argued in favor of the existence of the right of transit passage (which would grant almost the equivalent of the freedom of navigation and overflight) in the Danish Straits. Other states are clearly of the view that a special passage regime applies, providing an exception from the applicability of the right of transit passage in the Danish Straits proper under the 1857 Copenhagen Convention in combination with UNCLOS Article 35(c). Denmark and Sweden made this position clear when signing and ratifying the UNCLOS.

Furthermore, in the Kattegat, Denmark and Sweden have established a long EEZ corridor by voluntarily limiting the outer extent of their territorial sea (the same method has been used in the Bornholmsgat and Fehmarnbelt). Importantly, according to the 1857 Copenhagen Treaty, no ship transiting the Great Belt, Little Belt, or Øresund shall be subjected to 'any detention' or 'hindrance' 'under any pretext whatsoever'(Art I(1). This does not preclude Denmark exercising prescriptive jurisdiction, but means that enforcement against the tankers might(?) be possible only in the Danish EEZ and not in the Danish Straits proper. Yet it seems to be unclear if section 6 of Part XII of UNCLOS could provide the legal basis for the proposed enforcement measures.

Richard Kilpatrick says

December 16, 2023

Dear Andrew,

Thanks very much for these helpful comments.

As to the issue of wartime neutrality, there are certainly other "hybrid" and "gray zone" activities going on in the maritime domain between Russia and NATO members, but so far all seem to fall within the restraint necessary to maintain the fiction you referenced. The fear is that inspecting, detaining, and seizing commercial vessels on tactical sanctions enforcement grounds could escalate quickly, generate inevitable retaliation, and ultimately cause more harm than good.

Dear Alexander,

Thank you as well. It seems that to get a full picture of the LOS dimensions of this controversy we need to study the maps in detail and pinpoint precisely where the vessels are moving.