MALTA Law and Practice Contributed by: Ann Fenech, Adrian Attard, Lara Saguna Axiaq and Martina Farrugia, Fenech & Fenech Advocates
tions. The National Interest (Enabling Powers) Act also outlines the punishments applicable for sanction breaches, which could include hefty penalties and criminal charges. Under EU sanctions law, there are generally two types of permissible exceptions: • exemptions – where particular activities or goods are expressly carved out from an applicable sanction(s); or • derogations – where specific authorisations would be required from the competent authority in a member state. The Sanction Monitoring Board would also be the competent authority to give guidance on exemptions as well as the authority in Malta empowered to grant any authorisation for any derogations envisaged under the EU sanctions framework. From a shipping perspective, it is also worth mention - ing that the Authority for Transport in Malta issued a Merchant Shipping Notice (No 175) in October 2021 to inform that the use of Maltese ships in violation of any applicable sanctions “...may be considered as being against the interest of Malta and of Maltese shipping and may lead, inter alia, to closure of registry”. It is known that there are Maltese persons, both natu - ral and legal, presently subject to OFAC sanctions. However, as previously stated, these sanctions are not directly enforceable in Malta and no legal proceed - ings are known to have been commenced in Maltese jurisdiction in this regard. That said, there are certainly known ongoing local criminal proceedings that have been instituted against Maltese economic operators for alleged breaches of UN and/or EU sanctions. 9.4 International Conflict International conflicts such as the war in Ukraine and the more recent attacks of merchant vessels travers - ing towards the Red Sea inevitably tend to have a ripple effect on shipping and bring with them a myriad of legal and commercial consequences. For instance, given Malta’s geographical position in the heart of the Mediterranean Sea, any conflict adversely affecting the passage of shipping through the Mediterranean
region inevitably has commercial implications such as the soaring of shipping costs and a dip in the volume of ship calls. From a legal perspective, it is admittedly unusual to find Maltese case law touching upon these matters. The principal reason for this is because it is uncom - mon to find contracts of carriage or charterparties subject to Maltese jurisdiction and governed by Mal - tese law. However, the statutory definition of force majeure under Maltese law, and the judicial interpre - tation thereof, is wide enough to allow a party to rely on this defence whenever it becomes impossible to perform any contractual obligations due to any “irre - sistible force” which could not have been avoided, which was unforeseen, and which could not have been avoided by the exercise of reasonable due dili - gence. That said, this may only be availed of when performance is made impossible and not simply made more onerous or more costly. Moreover, Article 1134 of the Civil Code dictates that no liability ensues for non-performance of obligations due to an irresistible force or a fortuitous event. As a direct ramification of the war in Ukraine, the EU has imposed 16 sanction packages against Russia, all of which are applicable in Malta. Consequently, these restrictions have also meant that several parties found themselves unable to perform pre-existing obligations as these would have otherwise fallen foul of the Rus - sian sanctions. While arguably the non-performance of obligations due to such sanctions could also fall within the ambits of Maltese statutory provisions of force majeure – as Maltese law also provides that no liability ensues when a party is forbidden from per - forming an obligation due to an “irresistible force” – the matter has yet to be tested. However, in the recent decision in North by Northwest Gmbh v Vessel MSC Bilboa (Rik 2038/2023), the court hinted that a party cannot use sanctions as an excuse to avoid performance of their obligations when that party could resort to obtaining a derogation in terms of the relevant EU sanctions regulations, in order to comply. This would suggest that, where a derogation could be applied for, it should be pursued before a court would consider the performance of that obliga - tion as being impossible.
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