Client Alert 25 Mar. 2024

Balancing Safety and Sanctions: Understanding the Houthi’s New Vessel Permit Requirement

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Balancing Safety and Sanctions: Understanding the Houthi’s New Vessel Permit Requirement

I. Introduction

Amid escalating tensions across the Middle East, the Houthis have expanded their operational scope, with recent attacks on vessels in the Red Sea and Gulf of Aden. Against this backdrop, commercial vessels and maritime operators find themselves in a precarious position in which they must decide between the risk of sanctions violations or ensuring safe passage.

This situation underscores the complex and evolving challenges faced by maritime operators in the region, highlighting the need for a nuanced understanding of both geopolitical dynamics and U.S. sanctions laws to ensure compliance and security.

This Client Alert helps to identify legal issues for those in the maritime industry who may be affected by these recent events.

II. Background

  • A. History of the Houthi Movement

Ansarallah, also known as the Houthi movement, is an Islamist political and military organization. Emerging in the 1990s, the Houthis took control of the capital of Yemen, Sanaa, in 2014. Today, the Houthis control most of northern Yemen and other large population centers, while the internationally recognized government is based in Aden. The conflict has resulted in “the world’s worst humanitarian crisis,” according to the United Nations, with 14 percent of the population currently displaced and 21.6 million people in dire need of humanitarian assistance.

In recent months, the Houthis have targeted commercial and military ships potentially linked to Israel. In response, the United States, along with the United Kingdom and supported by Australia, Bahrain, Canada, Denmark, the Netherlands, and New Zealand, have initiated strikes against Houthi targets.

On March 4, 2024, Reuters reported that Houthi Telecommunications Minister Misfer Al-Numair announced a new requirement for ships navigating Yemeni waters to obtain a permit from the Houthi-controlled Maritime Affairs Authority. Reuters attributed the statement to Al Masirah TV, the main television news outlet run by the Houthi movement. A statement made by Al-Numair on the social media platform X (formerly Twitter) provided only that cable-laying vessels, rather than all vessels, must obtain permits to navigate Yemeni waters.

The Maritime Affairs Authority is responsible for issuing permits for ships operating in Yemeni territorial waters, exclusive economic zone, and continental shelf. At the time of publication, the Maritime Affairs Authority’s website provided the procedure for licensing cable-laying vessels but did not provide information on licensing for other types of vessels.

In light of the Houthi announcement of the new permit requirement and the re-imposition of U.S. sanctions against the group, one crucial question emerges: How can U.S. and non-U.S. persons safely navigate Yemen’s territorial waters by acquiring a permit from the Maritime Affairs Authority without violating U.S. sanctions? Alternatively, are they confronted with the dilemma of prioritizing either safety or compliance?

This Client Alert identifies and discusses the interplay of some of the key U.S. sanctions issues involved.

  • B. U.S. Sanctions and the Houthi Movement

Following recent tensions in the Red Sea and Gulf of Aden, the Houthi movement was designated as a Specially Designated Global Terrorist (“SDGT”) on January 17, 2024. This designation took effect 30 days later, on February 16, 2024.

This was the second designation of the movement by U.S. authorities. The Houthis were initially designated as an SDGT and a Foreign Terrorist Organization (“FTO”) on January 10, 2021. The State Department quickly revoked both designations on February 16, 2021, due to concerns about the dire humanitarian situation in Yemen. This decision came after warnings from the United Nations, humanitarian groups and bipartisan members of Congress, among others, highlighting the potential devastating impact of the designations on the Yemeni people’s access to basic commodities such as food and fuel.

During the 30-day implementation delay in January-February 2024, the U.S. government engaged in robust outreach to stakeholders, aid providers, and partners crucial for facilitating humanitarian assistance and the commercial import of critical commodities in Yemen. Notably, the Houthi movement was redesignated only as an SDGT and not as an FTO.

III. Implications of the Houthi Designation

The designation of the Houthis as an SDGT carries significant legal implications for both U.S. and non-U.S. persons.

  • A. Primary Sanctions

U.S. persons are generally prohibited from engaging in transactions with individuals or entities blocked pursuant to the Global Terrorism Sanctions Regulations (“GTSR”), which includes the Houthis as of February 16, 2024. All property and interests in property of the Houthis that are in the United States or in the possession or control of U.S. persons must be blocked and reported to the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”).

Non-U.S. persons risk violating U.S. primary sanctions and being designated if they engage in a transaction involving a sanctioned person or jurisdiction that has any nexus to the United States. U.S.-nexus transactions include (1) transactions involving U.S. persons, and (2) transactions causing or involving activity in U.S. territory (including transactions in U.S. dollars). Therefore, non-U.S. persons engaging in transactions with the Houthis that have a U.S. nexus may violate U.S. primary sanctions.

Additionally, non-U.S. persons who conduct business with SDGTs risk being designated for providing material support to SDGTs such as the Houthis.

  • B. Secondary Sanctions

Secondary sanctions affect non-U.S. persons and organizations engaging in transactions with designated persons that have no U.S. nexus. A non-U.S. person who deals in assets linked to an SDGT risks being sanctioned.

E.O. 13224, as amended by E.O. 13886, authorizes the imposition of secondary sanctions on foreign financial institutions that knowingly conduct or facilitate any significant transaction on behalf of an SDGT. As such, foreign financial institutions risk violating U.S. sanctions if they knowingly conduct or facilitate any significant transaction on behalf of the Houthis.

IV. Obtaining a License from the Maritime Affairs Authority

As described above, the designation of the Houthis as an SDGT carries significant legal implications for both U.S. and non-U.S. persons. Understanding these implications is essential when navigating transactions with the Maritime Affairs Authority, particularly concerning obtaining permits to safely navigate Yemen’s territorial waters.

  • A. Government of Yemen

The designation of the Houthis as an SDGT does not subject Yemen as a country or any specific geographic regions within Yemen to embargoes or comprehensive sanctions programs. Additionally, administrative agencies and government bodies in Yemen controlled by Houthi members are not considered blocked solely as a result of a Houthi member’s leadership role at that entity.

Given ongoing uncertainty surrounding the scope of authorized transactions with Yemeni government bodies controlled by the Houthis, it is advisable to seek legal advice and proceed with caution as certain transactions by both U.S. and non-U.S. persons may risk violating U.S. sanctions laws, despite these bodies not being blocked.

  • B. General Licenses

OFAC issued six general licenses simultaneously with the designation of the Houthis. The most relevant is General License No. 26 (GL 26), which authorizes the purchase or receipt of permits from Houthi-controlled government bodies such as the Maritime Affairs Authority. However, GL 26 may not extend to obtaining a passage permit from the Maritime Affairs Authority. This license authorizes transactions with Houthi-controlled government bodies regarding permits for passage through ports and airports in Yemen, not its territorial waters. Furthermore, GL 26 was specifically issued to facilitate the flow of humanitarian assistance and critical commodities to Yemen, and obtaining a passage permit may not match the purpose of the general license.

V. Conclusion

Conflicting signals from OFAC contribute to uncertainty surrounding transactions with the Houthis, especially since OFAC issued six general licenses simultaneously with the designation of the Houthis, authorizing a specific set of transactions with government bodies controlled by the Houthis but aimed exclusively at facilitating humanitarian aid and critical commodity flow to Yemen.

This unclarity complicates assessing whether engaging with the Maritime Affairs Authority risks violating the GTSR and E.O. 13224, potentially exposing both U.S. and non-U.S. persons to primary and secondary sanctions risks. Therefore, seeking legal advice in order to conduct legal analysis on a case-by-case basis is imperative to navigate these complexities and ensure compliance.


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