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News: US passes additional legislation targeting the Nord Stream 2 and TurkStream 2 pipeline projects

14 January 2021

In December 2019 ​the US enacted Protecting Europe’s Energy Security Act (PEESA) as part of the National Defense Authorization Act (NDAA), which mandates the imposition of sanctions against foreign vessels engaged in the Russian Nord Stream 2 (NS2) and TurkStream 2 (TS2) pipeline construction projects. When completed, those projects will transport natural gas from Russia to Europe.

In 2020 the Protecting Europe’s Energy Security Clarification Act (PEESCA) was introduced to expand the proposed sanctions under PEESA to include vessels engaged in 'pipe-laying activities' in respect of the construction of NS2 or TS2 which includes site preparation, trenching, surveying and rock dumping. It also proposed that sanctions should be imposed on foreign persons who are determined to have knowingly provided underwriting, insurance or reinsurance services necessary for the completion of these projects. In September 2020 the club issued a circular (linked in the attachment box) which advised members that P&I cover may be excluded if vessels are involved in any activities related to the NS2 or TS2 projects which are unlawful and/or placed the club at risk of breaching sanctions.

In January 2021 PEESCA entered into force in the US (under section 1242 of the NDAA 2021) following a vote by Congress to overrule President Trump’s veto of the legislation. It includes a government consultation requirement which means that before imposing sanctions under PEESCA, the US State Department shall consult with the governments of Norway, Switzerland, the UK and EU member states with respect to the imposition of such sanctions. Further details are provided in the client alert provided by Freehills Hogan & Mahar LLP which is available here

Members are strongly urged to assess and mitigate the risks of entering into contracts on the NS2 or TS2 construction projects and exercise the fullest possible due diligence to avoid exposure to sanctions and enforcement actions. If members have any queries, they should contact their usual club contact for guidance.