In Conversation: Prof. Richard L. Kilpatrick Jr, Academic Fellow, Centre for Maritime Law, NUS Law

Introduction

The intersection of maritime activity with international financial sanctions, trade restrictions and regulatory enforcement has become one of the most complex domains of modern oceans governance. Increasingly sophisticated evasion strategies ranging from AIS manipulation to “dark fleet” operations, layered corporate structures, and deceptive cargo transshipment challenge the capacity of legal regimes to impose accountability on actors exploiting maritime opacity. These dynamics raise difficult questions about the balance between commercial freedoms, regulatory burdens, extraterritoriality, and the rapidly evolving architecture of global financial compliance.

To explore these themes, SPIL Mumbai engages in a conversation with Prof. Richard L. Kilpatrick Jr, author of the forthcoming book Geopolitical Disruption in Shipping (Hart Publishing 2026), whose broader work includes examining sanctions risk and compliance, illicit shipping practices, and their impacts on commercial contracts. Drawing on his deep experience analyzing the challenges financial institutions, shipowners, charterers, and insurers must confront when engaging in sanctions compliance, the following questions examine the legal, regulatory and commercial challenges defining contemporary maritime sanctions governance.

The Q&A is curated by Lavanya Hajare for the SPIL Blog.

1. To begin, Sanctions evasion in maritime shipping increasingly relies on sophisticated dark-fleet tactics such as AIS spoofing, false flagging, complex ownership layering and mid-ocean ship-to-ship transfers. How should regulators balance strict liability expectations with the operational difficulty of detecting such concealed practices, particularly when shipowners lack full visibility over sub-charterers or intermediate cargo interests?

As regulators seek to crack down on the so-called “dark fleet” by leveraging commercial actors through compliance mandates, it is important for them to maintain an awareness of the practical burdens that this creates. For instance, when sanctioning authorities require shipowners or insurers to monitor counterparty and customer activities in real time, this is pushing commercial actors to engage in practices that are well beyond their traditional operational expertise. The short-term solution has been for businesses subject to these compliance burdens to outsource investigation processes to third party vendors specializing in sanctions compliance. These vendors have proliferated in the modern era due in part to market demand, but their use comes with real costs. These burdens may be readily absorbed by larger companies but they can be cost prohibitive for the smaller operators. It would be wise for sanctioning authorities to remain conscious of these procedural and economic burdens as they engage in statecraft techniques through private sector regulation, particularly if compliance is measured by a standard of strict liability.

2. OFAC’s expanding use of secondary sanctions effectively forces global shipping actors to align with U.S. regulatory preferences, even when operations occur outside U.S. jurisdiction. How should international maritime law conceptualise the boundary between legitimate extraterritorial enforcement and overreach that distorts navigational freedoms and international commerce?

Sanctions that appear to regulate extraterritorially are naturally controversial. This is not only due to sovereignty concerns but also because the geopolitical value judgments driving sanctions may not be totally aligned even among traditional allies. This is particularly true in the current geopolitical landscape as multilateralism is being challenged by attitudes predominantly prioritizing national interests. For strategic reasons, it is understandable that regulators would want to opportunistically leverage chokepoints in the international commercial and financial infrastructure to create real and enforceable incentives for compliance. This may result in external perceptions of overreach—including criticisms that these measures violate free trade principles—but sanctioning authorities appear willing to accept those consequences for the tradeoff of making headway in promoting their policy agendas beyond national borders. Whether this approach is consistent with international legal norms and expectations is a fair question of public law, but the reality of enforcement risk appears the more pressing concern among the commercial actors effectuating maritime trade.

3. Compliance expectations are shifting toward proactive due-diligence systems incorporating automated risk scoring, behavioural analytics and data-driven ship-tracking. How should legal standards define “reasonable diligence” when compliance programmes increasingly rely on probabilistic algorithms whose outputs may not be transparent or auditable?

Vessel tracking and sanctions compliance tools are constantly improving. These will no doubt be bolstered by recent developments in artificial intelligence. But realistically, even the most cutting-edge compliance products are bound to produce some false positives and false negatives that may disrupt prudent business decision making. These realities should be taken into account as regulators determine potential penalties in sanctions enforcement actions. It would seem that a standard that measures compliance under a reasonableness framework as opposed to strict liability would offer the more appropriate flexibility.

4. The emergence of “shadow fleets” often operating outside P&I coverage, class society oversight, or transparent ownership creates systemic safety and environmental risks. Should international maritime law develop minimum due-diligence obligations for counterparties engaging with opaque fleets, and how could such obligations be enforced without imposing disproportionate burdens on legitimate operators?

The safety concerns linked to “dark fleet” activities are serious. In particular, as regulators use insurance prohibitions as a means of geopolitical leverage, this puts substantial pressure on P&I clubs and other insurers to maintain compliance and also protect their reputations by cutting ties with customers that may cause them to be exposed to blacklisting, fines, and negative publicity. One problem with this regulatory approach is that nefarious actors may continue to trade even after being cut off from insurance markets. They may even be motivated to engage in riskier activities such as engaging in unauthorized ship-to-ship transfers at sea that can increase the risk of marine pollution. This has become a major concern, particularly among vulnerable coastal states in navigationally significant regions where uninsured vessels may be moving off their shores, potentially exposing the public and the marine environment without the safeguard of legitimate insurance cover. Increasing or harmonizing due diligence obligations among legitimate commercial actions will not solve this part of the problem. Unfortunately, other solutions have been elusive, but recently there has been some broad multilateral recognition of the problem in the International Maritime Organization and other diplomatic contexts, which is an encouraging sign of momentum for reform.

5. Sanctions often require an interpretive assessment of beneficial ownership and control, yet corporate structures in shipping are deliberately fluid. What legal or regulatory changes are necessary to harmonise ownership-disclosure requirements across jurisdictions, and how can inconsistencies among registries be managed without impairing commercial flexibility?

The shipping industry seems to appreciate the ability to limit liability exposure through layered ownership structures. Any attempt to curtail this flexibility through a harmonized reforms is likely to lead to push back. At the same time, as technologies continue to improve, efforts to track regulatory compliance, not only for sanctions purposes but also know-your-customer investigations to address money laundering and terrorism financing concerns, may lead to more efficient due diligence inquiries and increased visibility of beneficial owners.  With the right resources, it may be easier to objectively ascertain beneficial ownership of vessels when accountability is necessary.

6. Financial institutions increasingly refuse to finance or insure vessels associated with high-risk jurisdictions, creating de facto commercial blockades. To what extent should regulators consider the systemic economic consequences of derisking on global shipping, especially where overcompliance results in more severe impacts than sanctions themselves?

Provocative descriptions like “commercial blockades” seem to be misnomers because sanctions and other statecraft tools are designed in part to be alternatives to wartime techniques. But it is true that even narrow and nuanced sanctions tactics may be broadly interpreted through over-compliance that has the effect of increasing their scope and coercive force. Whether intentional or not, when sanctions mandates are not expressed in clear terms, private actors may naturally hedge against the risk of enforcement exposure by insulating themselves through due diligence methods and procedural safeguards that go well beyond the letter of the law. The effect of this phenomenon can be more coercive than the bare terms of the sanctions mandates suggest, but sanctioning authorities seem to recognize the strategic value of this approach and appear to take these commercial responses into account when developing sanctions rules.

7. Sanctions-related claims are rising in maritime arbitration, particularly involving charterparty termination, repudiation, deviation, and force majeure. Do current arbitration frameworks adequately address the interpretive complexities of sanctions clauses, or should sanctions-specific procedural or evidentiary rules be developed?

There have been many cases in recent years addressing the charterparty consequences of sanctions. Some of these cases have involved force majeure clauses and some have involved arguments hinging on clauses designed to directly address sanctions exposure. Due to the private and confidential nature of most charterparty arbitration, the true scope of these interpretive challenges is largely unknown to the public. Any attempts to formalize frameworks for analyzing sanctions clauses would be based on the relatively small proportion of charterparty cases that make their way into the public domain. Nevertheless, as varied factual scenarios and resolution methodologies utilized in charterparty dispute resolution trickle out either through judicial appeals or through publicly distributed arbitration awards, these provide some level of guidance that may be helpful in resolving future cases.

8. False or misleading bills of lading, forged certificates of origin and deceptive cargo documentation remain central to sanctions evasion. How should due-diligence rules evolve for carriers who cannot realistically verify every documentary representation in complex multimodal supply chains?

Regulators have attempted to address this problem by requiring shipping industry actors to provide attestation of sanctions compliance along with the conventional documentation used in shipping transactions. The problem with this approach, of course, is that these attestations can also be fabricated, which simply adds another layer of documentation amenable to potential circumvention. Nevertheless, for legitimate shipping actors, an attestation document presented by a trusted counterparty may give some peace of mind and potentially provide evidence of good faith in an era in which even inadvertent sanctions violations can generate serious enforcement and reputational consequences.

9. The environmental and safety risks posed by ageing, uninsured or improperly maintained shadow-fleet vessels raise questions about responsibility for transboundary harm. Should sanctions policy incorporate environmental safeguards, and if so, how could this be reconciled with the primary geopolitical objectives of sanctions regimes?

Sanctioning authorities should absolutely take environmental protection into account, particularly when the regulatory targets are large oil-carrying tankers. As sanctioning authorities leverage marine insurance markets to promote geopolitical aims, insurers may be forced to cancel cover with existing customers or refuse to provide cover to those actors who do not pass compliance scrutiny. This raises the prospect of maritime casualties involving oil-carrying vessels that ultimately maintain uncertain insurance cover. This is one reason why vulnerable coastal states have been attempting to formulated methods to “check” vessels for adequate insurance even as they sail through their waters in transit passage. One relatively straight forward solution sanctioning authorities could employ to better guard against environmental harm would be to ensure that any insurance prohibitions implemented for sanctions purposes are paired with explicit licensing authorizing insurance cover for ship source oil pollution liabilities, particularly those that are already subject to compulsory insurance mandates under maritime treaties. This, however, would require buy in from the very sanctioning authorities who are aiming to deploy marine insurance regulation into a statecraft tool.

10. With sanctions emerging as long-term instruments rather than temporary political tools, do you foresee the development of a specialised body of “maritime sanctions law,” or will the field continue to evolve through overlapping regulatory guidance, case-by-case enforcement actions and arbitration jurisprudence?

As a commercial lawyer, I am not best positioned to evaluate whether maritime sanctions trends are crystalizing into a specialized body of public law. But there is a rapidly compounding body of commercial jurisprudence spanning across leading maritime law jurisdictions that is examining the contractual consequences of sanctions and statecraft. Dozens of cases have appeared in recent years addressing the impact of economic coercion techniques on charterparties, marine insurance, letters of credit, transnational lending agreements, and many other scenarios. Collectively, this caselaw is indeed establishing rules, analytical frameworks, and illustrative guideposts that may be useful in resolving—or at least predicting—future commercial disputes impacted by geopolitical disruption.

11. In your forthcoming book Geopolitical Disruption in Shipping, you aim to analyze economic disruptions produced by sanctions and trade-war statecraft. These measures can destabilise shipping activity just as severely as physical conflict. Should maritime law begin treating such “economic coercion” as a distinct category of disruptive event, separate from ordinary commercial risk, given that regulatory shifts, secondary sanctions, and retaliatory trade measures can render contractual performance legally or commercially impossible despite the absence of physical force?

A recurring theme raised in the book is that the forms of economic disruption caused by sanctions, tariffs, export controls, and other trade barriers are in some ways analogous to the physical disruption that has impacted shipping in wars and periods of hostilities throughout maritime history. The first part of the book examines various commercial disputes flowing out of war, unrest, and piracy. The second part of the book then focusses specifically on the economic tools of sanctions and statecraft that have produced similar types of commercial disputes. By compiling cases that analyze the way industry actors, courts, and arbitrators react to these challenges, the book examines trends such as the use of standard and bespoke contract clauses, including force majeure wordings, alongside doctrinal principles such as frustration and impossibility. Some of these solutions indeed have origins in ordinary commercial cases, but they also take on a unique character when applied in the context of geopolitical controversies, particularly when the contract wordings at issue, such as war risk clauses and sanctions clauses, have been developed with precise purposes in mind. In separating these scenarios into chapters, the book is not aiming to draw a bright line distinction between forms of physical and economic coercion. Rather, the aim is to illustrate that these are all forms of geopolitical risk that may lead to similar types of contractual disputes. As a consequence, parties aiming to resolve commercial disputes flowing out of these varied forms of disruption may find value in borrowing analytical frameworks applicable to a spectrum of factual scenarios impacted by geopolitical controversies. For this reason, it may be more helpful to recognize the similarities among the sources of the disruption instead of teasing out their differences.