Red Sea Legal Letter * Issue 1

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This is the law-and-regulatory portion of the Red Sea Brief, a weekly roundup of the most relevant trends and events affecting the Red Sea and its littoral states.

This week the United States blacklisted Iran’s Persian Gulf Strait Authority — the Iranian body that collects the Hormuz toll. The move turns every dealing with that body into a banned transaction for any shipowner, charterer, insurer, or bank exposed to the Red Sea. At the same time, a maritime court set a record payout for the wrongful seizure of a ship, an English court reinforced a liability protection that an Australian court had just weakened, and the Gulf gas force-majeure question kept developing without a ruling.

Acronyms used in this section: OFAC (Office of Foreign Assets Control, the US Treasury sanctions arm); SDN (Specially Designated National, the blacklist OFAC maintains); IRGC (Islamic Revolutionary Guard Corps); P&I (Protection and Indemnity, the mutual insurance system that covers shipowners’ liabilities); UNCLOS (UN Convention on the Law of the Sea); ITLOS (International Tribunal for the Law of the Sea, the court that applies UNCLOS); LLMC (Convention on the Limitation of Liability for Maritime Claims, which lets shipowners cap what they owe); ICC, SIAC, LMAA (three arbitration bodies — the International Chamber of Commerce, the Singapore International Arbitration Centre, and the London Maritime Arbitrators Association).

The US blacklists the Hormuz toll authority

On 27 May, OFAC added Iran’s Persian Gulf Strait Authority — the IRGC body set up to issue Hormuz transit permits and collect a toll — to its sanctions blacklist under Executive Order 13224.

Treasury Secretary Scott Bessent called the move “proof” the regime was running short of cash, and warned that the same exposure extends to anyone paying the fees. A day later he turned to Oman, the strait’s other coastal state, warning that Treasury “will aggressively target any actors involved, directly or indirectly, in facilitating tolls.” He added that Oman’s ambassador had assured him Muscat has no plans to charge tolls of its own.

This is a step-change. Until 27 May, paying a Hormuz toll was a sanctions risk under guidance a party might dispute. Now, any owner, charterer, insurer, or bank that applies for a permit, pays the toll, or follows the Authority’s routing is dealing directly with a blacklisted party. For US persons that means strict primary liability; for everyone else it means exposure to secondary sanctions. It also kills the old fallback of “we only paid a transit fee” — the payment itself is now the violation.

Will a measure meant to pressure Iran into reopening the strait instead become permanent? Dr. Samuel Helfont of the Naval Postgraduate School argues it need not repeat the trap that followed the 1991 Iraq sanctions. That trap, he notes, “was about regime change,” with no concrete demand Iraq could ever meet. Reopening the strait, by contrast, is a clear and achievable condition. The Iraq sanctions, in his account, “became semi-permanent when US officials indicated that Iraq had no way to comply.” The equivalent danger here would be any US signal that the measures stay in force even if Iran opens the strait and meets the stated demands.

Greek shipowner Evangelos Marinakis was the first to defy the sanction in public. Speaking for a fleet of more than 150 vessels, he told a Posidonia forum on 2 June he would pay a toll of $100,000 to $200,000 rather than reroute.

The harder enforcement question is what happens off the books — whether owners quietly pay the now-sanctioned toll through channels built to hide who is on the other end. Captain Roy Facey notes that “absent a negotiated solution within roughly sixty days,” a “significant increase in the number of ships in transit” would itself signal that owners are paying. As for how the payments would be disguised, Facey points to the template already used for Chinese purchases of Iranian oil, which run through shadow-banking arrangements settled in Chinese yuan or UAE dirhams. Similar channels could be opened up for shipowners.

Every charter touching Hormuz now requires a clause allocating the cost of a refused transit or a vessel detained for non-payment of the sanctioned fee. Existing charters should be reviewed for sanctions, compliance-with-law, and indemnity provisions before the next fixture.

A maritime court sets a record payout for wrongful seizure of a ship — with implications for Hormuz and Bab al-Mandeb

On 27 May, a Special Chamber of the International Tribunal for the Law of the Sea (ITLOS) ruled in The M/T “Heroic Idun” (No. 2) (Marshall Islands v. Equatorial Guinea). It awarded the Marshall Islands more than $14 million — including over $4 million for mistreatment of the crew — and found that Equatorial Guinea broke the Law of the Sea and the right of free navigation when it intercepted the supertanker in 2022 and held it and its crew for 92 days before handing them to Nigeria. It is the largest award ITLOS has ever issued. The flag state’s administrator and the ship’s insurer, the P&I club Gard, both welcomed it as a landmark on unlawful interception.

The timing is significant, as Iran’s Hormuz regime and repeated detentions in the Red Sea and Bab al-Mandeb have made wrongful seizure a real operational risk, and this ruling hands counsel a worked methodology for valuing such a claim — breaking the loss into recoverable heads (detention of the vessel, lost hire — the income the owner forgoes while the ship sits idle — and crew mistreatment) that the flag state can claim under the Law of the Sea. That method applies to any coastal-state detention of a tanker in transit, including a detention by Iran’s Strait Authority for non-payment. Flag states and their P&I clubs facing a Red Sea or Gulf detention now have a recent basis for quantifying a UNCLOS claim.

English court upholds the 1976 liability cap, splitting from Australia

The UK Admiralty Court has landed on the opposite side of the liability-cap question from Australia’s highest court, sharpening a divide that matters for every wreck-removal and casualty claim in Red Sea waters governed by English law.

The background: the 1976 LLMC lets a shipowner cap the total it can be forced to pay after a casualty, no matter how many claimants line up. In a judgment handed down on 22 May in the Solong / Stena Immaculate case — arising from the 10 March 2025 allision (a moving ship striking a stationary object) off the Humber — Justice Andrew Baker refused to let the tanker interests break that cap. He ruled the container ship’s owners entitled to limit their liability, capping it at roughly $20 million across all claimants.

Baker read the cap broadly. He treated the relevant “loss” as the general type of loss rather than tied to the specific vessel struck, and he held that allegations the company’s senior managers knowingly let the ship sail in an unsafe state still fell short of the very high bar needed to break the cap. By contrast, in CSL Australia v Tasmanian Ports [2026] the Australian court let a claim in an excluded category escape the cap entirely. The English court described the protection as “virtually unbreakable.”

Why it matters for the Red Sea: an insurer’s liability on a Red Sea casualty can swing by an order of magnitude depending on where the cap question is fought — in an English-tradition court, where the cap holds, or an Australian-tradition one, where it can collapse. Watch whether a Singapore court — or another LLMC state — lines up with Baker or with the Australian reasoning.

Gulf LNG force majeure stays unresolved as the foreseeability fight develops

The Gulf gas questions: Can sellers suspend contracted deliveries because of Hormuz disruption, and can buyers defeat that excuse by arguing the disruption was foreseeable? This turns on QatarEnergy’s force-majeure declaration and its extensions through mid-June, with the same Hormuz crisis testing force majeure, the legality of the sanctions, and enforcement across the ICC, SIAC, and LMAA. No new ruling on a Hormuz-linked LNG dispute surfaced between May 26 and June 7. The OFAC blacklisting adds a fresh foreseeability data point that cuts against contracts signed more recently: a party resisting a force-majeure notice can now argue that, as of 27 May, the impossibility of a lawful, toll-paid transit wasn’t merely foreseeable but had been formally established by the US government itself. Most Gulf LNG contracts run under English or New York law, where force majeure is purely a creature of the contract — and relief depends on the qualifying event being the effective cause of non-performance and on the invoking party having mitigated.

Sudan–Ethiopia drone dispute continues without a forum

The cross-border arms dispute between Sudan and Ethiopia continued, with no formal legal proceeding initiated. Sudan recalled its ambassador from Addis Ababa on 5 May after the Sudanese Armed Forces presented serial-number evidence it says proves UAE manufacture and an Ethiopian launch point for drones hitting Sudanese positions. Ethiopia rejects the accusation and counters that Sudan funds Tigrayan forces; the UAE also denies the claim, which comes from the Sudanese government. French-language reporting this week confirms the dispute is still at the stage of diplomatic accusation, with the next step being Ethiopia’s formal response to the African Union and no complaint lodged at the UN Security Council as of late May.

Michael Brill, a historian of how sanctioned states procure weapons who has reconstructed Iraqi supply chains from captured records, identifies the most likely weak point as the use of “third-country suppliers for most of the weapons, given plausible deniability.” Reporting that arms reaching the theater pass through southern European go-betweens such as Serbia and Bulgaria, or through China, echoes patterns going back to the Iran–Iraq War. A supply trail running through those go-betweens, rather than straight to any alleged sponsor, is what would most likely sink an arms-embargo or aggression case.

Brill adds a caution that bears on where such a case should be brought: anything traced to Chinese manufacture is, in his words, “dead on arrival at the UNSC,” where a veto is certain. Serial numbers, launch-point geolocation, and recruitment-and-transit records drive these cases, but their value depends on whether the chain can be tied to a state and whether the chosen forum can actually act.

Watch for a Sudanese filing or a referral to a UN Panel of Experts — while bearing in mind that a third-country or Chinese-origin trail may make the African Union, not the Security Council, the only forum where a complaint can move forward.

Three things to watch over the next 1-2 weeks

First, whether OFAC brings an enforcement action against a named Hormuz toll-payer, or instead issues a license carving out a negotiated reopening — either would reveal whether the Strait Authority blacklisting is a hard line or a bargaining chip. Marinakis’s public defiance makes a test more likely. Second, whether the first ICC, SIAC, or LMAA ruling on a Hormuz-linked LNG force-majeure dispute is published. Third, whether a Singapore court — or another LLMC state — lines up with the English liability cap or the Australian all-or-nothing approach.

Contributors

This issue integrates insight from members of the Red Sea Futures expert pool.

Dr. Birol Baskan — political scientist (Ph.D., Northwestern), Gulf and Turkish political economy (Section 1).

Mr. Michael Brill — Ph.D. candidate, Near Eastern Studies, Princeton University; historian of sanctioned-state procurement (Section 3).

Dr. Ethan Chorin — Red Sea Futures CEO; politics and political economy of the Red Sea states (Section 1)

Captain Roy Facey — master mariner; four decades advising local and multinnational bodies on Red Sea and Gulf port operations (Sections 2 and 3).

Dr. Samuel Helfont — Naval Postgraduate School (Sections 1 and 3).

Mr. Danial Kaysi — Gulf and Iraq analyst (Section 1).

Ms. Jessica Olney — Executive Director, Institute of International Studies, UC Berkeley; community-based research specialist on conflict-affected aid environments (Sections 1 and 2).

Prof. Robert Springborg — Political economy of Egypt and MENA; Former Director of SOAS-LMEI, Italian Institute of International Affairs (Section 2).

This brief is produced by Red Sea Futures, as part of a three-part weekly series on Red Sea politics, fragility, and law and governance. Subscribe to The Red Sea Brief here. Future editions of this report are paywalled. Visit us on www.redseafutures.com