Sanctions

On the Legality and Policy Ramifications of High Seas Seizures of Foreign Merchant Vessels for Violating U.S. Sanctions

By Brian Zupruk
Wednesday, June 23, 2021, 11:12 AM

Despite robust U.S. sanctions, Tehran and Caracas are undertaking a significant shipping operation to provide desperately needed cash to Iran and weapons and fuel to Venezuela. The Iranian frigate IRIS Sahand and converted oil tanker IRINS Makran, the latter freshly commissioned as a military vessel, are currently transiting the Atlantic en route to Venezuela. If these ships reach Venezuela, it will be a milestone in Iran’s evolving efforts to circumvent U.S. sanctions and will mark a renaissance for the Cold War-era tactic of converting commercial vessels into warships to gain treaty-protected grants of sovereign immunity, guaranteeing safe passage for illicit cargo onboard. 

The United States views the Iranian government as an illegitimate, anti-democratic regime whose nuclear aspirations and dreams of regional hegemony are destabilizing the Middle East. In its efforts to undermine the regime and Iran’s nuclear program, the United States has sanctioned individuals, entities and organs of the Iranian state; frozen billions in assets; conducted targeted military strikes; and tacitly supported assassinations. Regarding Caracas, the United States is committed to punitively sanctioning the Maduro regime after it invalidated the 2019 election of Juan Guaidó, with Venezuelan losses estimated at $30 billion and climbing. The U.S. Department of Justice has estimated that in the spring of 2019 alone, the Islamic Revolutionary Guard Corps (IRGC), a branch of the Iranian military, coordinated the “clandestine transfer” of approximately 10 million barrels of crude oil and millions more in condensate and gasoline, including to Maduro’s beleaguered regime in Caracas, netting Iran hundreds of millions of desperately needed dollars.  

With Iran atop a fiscal cliff, the U.S. has redoubled its sanctions enforcement efforts to include seizures of Iranian fuel and weapon exports that the U.S. contends either support international terrorism, are funding Iranian state terrorism, or both. While high-profile shipping seizures are not without precedent, U.S. sanctions enforcement is straining traditionally accepted state behavior in the maritime to such an extent that the United States is very likely operating at the limit of its sovereign authority. 

Issues of International Law

Iran’s use of warships to deliver fuel and arms to Venezuela, a move designed to deter U.S. intervention in the transfer, represents a major escalation in the United States’s conflicts with both states. Thus far, the United States’s aggressive sanctions enforcement against Iran has not violated international law of the sea, but this escalation could be disastrous in the long term. Understanding where that line is requires a brief primer on the law of the sea. Factors that affect the legality of interdictions include the ship’s claimed identity, the location of the seizure, the domestic and international authorities under which the interdiction occurs and, especially important given facts at hand, whether the vessel is a warship. 

Ships transiting the high seas are subject exclusively to the jurisdiction of the state under whose flag they are sailing, a paradigm drawn from both customary international law and modern treaty law. Customary international law is an amalgamation of norms, practices and judgments that enjoy broad international acceptance. As for treaties, the two central multilateral pacts regulating state interference with foreign shipping are the 1958 Convention on the Law of the High Seas (1958 Convention), which the United States has ratified and the 1982 United Nations Conventions on the Law of the Sea (UNCLOS). The United States has not ratified UNCLOS, but it has accepted large portions as accurately reflecting customary international law of the sea.

Both treaty and customary international law proscribe state interference with foreign-flagged vessels outside exceptional circumstances (primarily the slave trade, illegal broadcasting and piracy). In all other cases, Article 3 of the 1958 Convention and Article 94 of UNCLOS prohibit high-seas interdictions of foreign vessels without pre-authorization from that vessel’s state. Additional rules prescribe strict limits on the search and seizure of boarded vessels. Taken holistically, the calculus suggests breaching customary law or either treaty will produce only negative long-term outcomes for the violating state by degrading international legal norms that provide immense economic benefits to abiding states, frittering away diplomatic capital, and creating rhetorical or pretextual cover for the misdeeds of less scrupulous state actors. 

Factors affecting foreign-flagged ship and cargo seizures include the domestic and/or international legal justification for the seizure, the identities of the ship or cargo and of the state conducting the seizure, the nature of the cargo, and the location of the seizure. Treaty and customary law restrict seizures of foreign merchant ships to ships transiting a state’s territorial waters, with an essentially blanket ban against seizures on the high seas. Critically, both the 1958 Convention and UNCLOS afford warships sovereign immunity on the high seas. Barring a warship unlawfully using force or otherwise breaching international law, warships effectively have complete freedom of movement and action.

Globally, UNCLOS has subsumed the 1958 Convention as the international law of the sea, though it is unratified by the United States. In law of the sea disputes, the Supreme Court and multiple circuits hold that U.S. law incorporates UNCLOS only to the extent that it reflects customary international law. This leaves the 1958 Convention as controlling in U.S. courts. However, despite the U.S’s ratification of the 1958 Convention, courts considering it must still confront whether the relevant treaty provisions are “self-executing.” This distinction, which has perennially fuzzy edges, is instrumental to determining whether courts have jurisdiction to hear treaty law claims. Self-executing treaty provisions are those that can operate without implementing legislation. U.S. courts generally regard such provisions as equivalent to federal statutes when the treaty clearly authorizes executive action in “pursuance of its provisions” and where existing legislation is adequate to enforce the treaty provision. Provisions that are not self-executing may create international commitments but are not binding federal law absent associated implementing legislation. The vast majority of treaty provisions are non-self-executing. 

U.S. courts maintain that their jurisdictional bounds are exclusively constitutional or statutory and that customary international law is insufficient to restrict their authority on the high seas absent Congress explicitly abdicating jurisdiction. The U.S. Court of Appeals for the Fifth Circuit tackled self-execution of 1958 Convention Article 6—curtailing jurisdiction over foreign vessels in international waters—in United States v. Postal, which involved a drug-runner seized in the southern Caribbean. The Postal court found Article 6 not to be self-executing and therefore that it could not restrict the jurisdiction of U.S. courts. More broadly, international law defenses to U.S. jurisdiction generally fail unless the court holds the treaty provision to be truly self-executing or the claimant can prove the court is statutorily precluded from exercising jurisdiction in their specific scenario. While courts tend to uphold the principle of restricting the extraterritorial application of U.S. law, they are willing to distinguish applications of the protective principle, granting U.S. courts high seas jurisdiction over offenses committed in violation of United States criminal law. That Postal and its progeny give the U.S. government remarkable latitude to justify extraterritorial jurisdiction on the high seas creates enormous friction with both the 1958 Convention and UNCLOS. 

Authority to Seize Ships Violating U.S. Law on the High Seas

As long as the United States does not (1) unilaterally seize ships or cargoes in another state’s territorial waters or (2) seize foreign vessels on the high seas, it has a clear domestic statutory basis for the seizures that appears consistent with domestic precedent and international legal principles as construed in U.S. courts. However, the U.S. must tread carefully in the absence of parallel multilateral sanctions against the Iranian regime. 

U.S. sanctions alone provide a variety of authorities through which the U.S. may seize Iranian property. Those upon which the United States relies to seize Iranian shipping include, but are not limited to: the Iranian Transactions and Sanctions Regulations (ITSR); statutory authority to seize assets of designated foreign terrorist organizations including the Iran Revolutionary Guard Corps; and the Iran and Libya Sanctions Act of 1996, as incorporated into the International Emergency Economic Powers Act. In 2010 Congress amended the 1996 sanctions act to specifically ratchet sanctions on Iran’s petroleum industry. As for Venezuela, U.S. sanctions against the Maduro regime largely target Venezuela’s financial sector, state-owned oil company Petroleos de Venezuela, S.A. and entities related to terrorism and drug trafficking.

Beyond sanctions, Congress has empowered U.S. law enforcement and courts to effect seizure and forfeiture of IRGC-associated assets pursuant to statutes regarding civil forfeiture, including of maritime shipping vessels and cargoes and regarding federal crimes of terrorism. The latter, 18 U.S.C. § 2332b, specifically grants extraterritorial and special maritime jurisdiction and is the section most frequently cited justifying seizures of Iran-related shipping. 

Presuming the U.S. has jurisdiction, 14 U.S.C.A § 522 authorizes “inspections, searches, seizures, and arrests upon the high seas” for violations of U.S. law. Under 28 U.S.C. § 1333, the U.S. government must assert a claim in rem under admiralty jurisdiction to seize a ship or cargo. Obtaining a warrant to do so requires satisfying two conditions: relevant location and a nexus with maritime activity. The location test asks only whether the tort or injury occurred on navigable water or a vessel thereupon. The nexus test requires that the court assess both (1) whether the incident was disruptive of marine commerce and (2) whether the incident bears a “substantial relationship to traditional marine activity.” In cases involving a marine tanker allegedly smuggling contraband fuel while transiting the open ocean, fulfilling the nexus and location tests is straightforward so long as the U.S. has other statutory bases for the seizure. 

There is a question as to whether the U.S. government could secure jurisdiction to seize vessels on the high seas through the Foreign Sovereign Immunity Act (FSIA). There are exceptions to FSIA immunity that could be implicated, including those regarding the United States Victims of State Sponsored Terrorism Fund (USVSSTF). The USVSSTF is funded partly through sales of seized Iranian property pursuant to either the Trading with the Enemy Act or “any related civil or criminal conspiracy, scheme, or other federal offense related to doing business or acting on behalf of a state sponsor of terrorism.” Sovereign immunity under the FSIA does not extend to government vessels being used for commercial purposes, but it does apply to warships, as it has since the 1812 Schooner Exchange decision, which cemented U.S. adherence to maritime sovereign immunity. 

In the modern era, Congress authorizes seizures of vessels and cargoes on the high seas for violations of U.S law, and courts have repeatedly authorized the sale of extraterritorially seized Iranian property to fund the USVSSTF. Essentially, the FSIA strips immunity where a suit is brought in admiralty to enforce maritime liens against a foreign state’s vessel or cargo, and the U.S. government is bringing suits to enforce maritime liens to fund awards in U.S. court judgments to victims of Iran-backed terrorism 

Though high seas seizures clearly conflict with international law, an aggressive U.S. administration might find this legal avenue tempting. However, domestic authorities only work domestically; the United States would need to couch its actions so that the international community cannot fairly view them as unprovoked, illegal attacks on foreign merchant shipping. This is a tall order. Interdicting foreign shipping without a solid legal international basis would seem to be precisely the kind of coercive behavior that U.N. Charter Article 2(4) bars because of its corrosive potential. 

Slowly Spiraling Escalation

Two recent seizure cases—those of the Grace 1 and the Bella—demonstrate that the United States understands where the line between treaty-compliant sanctions enforcement and illicit seizures of foreign shipping is. Briefly, when the United States wants to seize a foreign vessel without flag state consent, its options under international law are limited. They include co-opting flag state action against a vessel, use of third-party state enforcement as the ship in question transits their territorial waters (as in Grace 1), the voluntary surrender of the ship or cargo to avoid financial or legal penalties in U.S. court for aiding the IRGC (as in Bella) or incentives through State Department counter-organized crime incentive programs.

That said, reciprocal seizures by Iran are significantly ratcheting tensions among maritime shippers transiting the Persian Gulf. Given Iranian willingness to react to U.S. efforts to unravel sanctions-evasion through norm-smashing escalation, a high-seas seizure could provoke an even more dramatic response.

The Grace 1 and Stena Imperio provide one cautionary tale. On July 4, 2019, the British Royal Navy, operating alongside Gibraltar authorities and at the behest of the United States, seized the Panamanian-flagged supertanker M/T Grace 1 as it transited Gibraltar territorial waters. Grace 1 was carrying Iranian crude oil bound for Syria in violation of U.S. sanctions. Panama had revoked Grace 1’s registration just weeks pre-seizure, leaving the ship stateless and vulnerable, but Iran quickly claimed the ship in an attempt to shield it from forfeiture to the United States.

Gibraltar authorities initially invoked EU sanctions against the Syrian regime to keep Grace 1 impounded. However, as the courts churned, Iran retaliated by seizing the British tanker Stena Imperio in the Strait of Hormuz, ratcheting up pressure to release Grace 1. It worked. Gibraltar released the supertanker on an Iranian promise that it was no longer Syria-bound. Iran then released the Stena Imperio. In the midst of this, Grace 1 vanished, though the United Kingdom reported that the oil ultimately arrived in Syria following a ship-to-ship transfer. The Grace 1 debacle illustrated that sanctions-evading shippers straying into U.S.-allied territorial waters is a fatal error but also that EU states continue to prefer renewing an Iran deal over the United States’s proclivity for extraterritorial sanctions enforcement. 

In July 2020, after failing to seize the Grace 1, the United States took bolder action to enforce its sanctions. Pursuant to a U.S. federal court order, the United States seized the fuel cargoes aboard four tankers bound from Iran to Venezuela as they exited the Persian Gulf—the supposedly Greek-owned, Liberian-flagged Bella, Bering, Pandi and Luna (which I’ll refer to simply as Bella.) Soon thereafter, the Justice Department announced that the U.S. had seized more than 1.1 million barrels of Iranian-origin fuel from the four ships suspected of belonging to the IRGC. The ships’ various owners, whose assets were seized by the Justice Department, asserted no such Iranian nexus existed and that they were bound not for Caracas but Trinidad. There is ample reason for suspicion: among the most glaring is that the flotilla disabled their tracking transponders after reaching Iran—a classic maneuver to avoid route scrutiny.  

The Bella seizure reflects typical U.S. practice of upholding extraterritorial jurisdiction in forfeiture actions against foreign terrorist organizations and their boosters. But it is unique in that as bold as the seizure was, the United States did not directly use force. Instead, the Bella flotilla surrendered its cargoes voluntarily to “foreign partners” of the United States, rather than to American warships, allowing the United States to effectuate the seizure without running afoul of the letter of international law. This was likely accomplished through the threat of sanctions enforcement against the ships’ owners, insurers, and captains if they failed to comply. 

The Iranians have shown no such restraint. Immediately following the Bella seizure, Iran dramatically interdicted the Liberian tanker M/T Wila (the Bella was also Liberian flagged) to either reclaim the fuel or retaliate as it did with the Stena Imperio in 2019. More recently, in January 2021, Iran retaliated again by seizing the South Korean M/T Hankuk Chemi, spuriously asserting that it seized the vessel for violating Iranian environmental rules. Ultimately, the United States has thus far remained within the bounds of customary international law while the crescendoing Iranian response violates the 1958 Convention, UNCLOS and customary international law. 

But the gap between present U.S. action and plainly treaty-violative conduct is narrower than it might appear.

Seizures Clearly Violating International Law

With Bella and Grace 1 as a baseline, only a few variables need to change for U.S. action to violate international law, potentially jeopardizing the legality of the arrests in U.S. courts in addition to damaging international norms. 

Consider the following hypothetical scenario: Sometime in 2021, the United States obtains a warrant for the seizure of an Iranian tanker and its cargo on the grounds that this tanker is clandestinely transporting IRGC-owned fuel for sale in Venezuela in violation of U.S. sanctions against both countries. The tanker is flying the Iranian flag and bears markings indicating it is an Iranian warship. The United States identifies the tanker in international waters just before it passes into the South Atlantic. Fearing that it will deactivate its transponder and slip away, the U.S. Navy interdicts and seizes. Mirroring Bella, the U.S. Navy tows the ship to a U.S. port with the intent to sell the fuel to benefit the USVSSTF. 

This scenario alters three variables from recent seizure activity: (1) location on the high seas (distinguishing from Grace 1); (2) direct U.S. enforcement (distinguishing from Bella); (3) the tanker’s status as a warship (distinguishing from all recent priors). 

Regardless of the domestic authority to do so, this scenario would violate both customary international law and the relevant provisions of at least the 1958 Convention and UNCLOS, potentially along with U.N. Charter Article 2(4). Boarding and seizing foreign-flagged vessels on the high seas without flag state consent is prohibited incontrovertibly under international law except as related to specific jus cogens violations such as piracy or the slave trade. 

If the tanker were a state-owned military vessel instead of a privately operated merchant ship, a U.S. seizure would be an even more egregious treaty violation. However, as Iran is aware, a U.S. seizure of a foreign warship on the high seas is exceedingly unlikely. This is because the United States has for decades led opposition to the demilitarization of international waters, establishing a position that freedom of navigation and operation was essential to U.S. naval power projection and because such actions fall within the UNCLOS article 88 requirement that states only use the high seas for “peaceful purposes.” Absent open conflict with Iran, it would beggar belief for the United States to move that aggressively. 

Warship caveat aside, the United States might creatively assert that because Iran did not ratify the 1958 Convention, it could not avail itself of Article 6 protections against interference with Iranian shipping. There is precedent for this: In United States v. Gonzalez, the U.S. Court of Appeals for the Eleventh Circuit denied a Honduran-flagged ship Article 6 protections because Honduras had not ratified the treaty. Further, some might argue that Article II, § 2 of the U.S. Constitution (granting the president sweeping powers as commander in chief and in the realm of treatymaking), provides ample authority for high seas interdictions of suspected Iranian fuel and weapons shipments if the president believes doing so would protect U.S. national security interests. In short, without treaty ratification by both the United States and Iran, U.S. courts would likely dispatch any international law jurisdictional claim opposing a U.S. government seizure.

To date, the United States has been cautious not to directly contravene either customary international law or the 1958 Convention in its maritime sanctions enforcement. However, the use of proxies to induce the “voluntary” forfeiture of ships and cargoes, as in the Bella case, lies just inside the law’s bounds. Pushing farther could produce dire normative consequences. 

Conclusion

Freedom of maritime commerce and the United States’s unmatched naval strength have produced a geopolitical asymmetry that is supremely beneficial to American political, economic and security interests. The international commitment to collective security on the world’s oceans has proven incredibly fruitful for international peace and prosperity as merchant ships can trust in essentially unfettered access to global shipping routes. That collective security is endangered when states on a near-war footing engage in tit-for-tat shipping seizures, especially when one side, Iran, is paying lip service to international law at best.

The United States no longer alone maintains the gravitas or naval muscle to enforce domestic judgments on the high seas, with China, in particular, growing increasingly assertive. Eroding flag-state sovereignty on the high seas would be of immense value to less scrupulous state actors or those seeking to radically reshape the world order. If the United States were to push the boundaries any farther, it will struggle to legally oppose, for example, Beijing seizing vessels belonging to Indonesia or Taiwan for violating Chinese law in the South China Sea, or Russian naval action in the Sea of Azov. The dangerous second-order effects of abridging traditional freedoms on the high seas must outweigh short-term foreign policy benefits. 

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