A dormant legal framework could reshape maritime risk
A maritime legal mechanism that has remained unused in the United States since the 1950s could soon return to the forefront, with potentially far-reaching consequences for international shipping. The US District Court for the Southern District of Texas is considering new procedures that would govern the seizure of vessels and cargo during armed conflicts under the country’s long-dormant prize law.
The court has invited the public to submit comments by 23 October on its proposed Prize Rules and Standing Interrogatories for Prize Proceedings. The 30-page document, if adopted, could significantly affect shipowners, charterers, vessel operators, cargo interests and marine insurers.
Currently, maritime boardings, detentions and seizures carried out to enforce US sanctions, export controls and anti-smuggling restrictions generally fall under civil forfeiture procedures established by federal law. Prize law operates under a different legal framework, rooted in the US Constitution and last invoked in the period immediately following the Second World War.
As explained in a legal alert published earlier this month by Holland & Knight, prize proceedings determine whether a vessel or its cargo was lawfully captured under the laws of armed conflict. This can include enemy property, contraband, goods involved in blockade-running or other assets legally subject to capture.
The proposed rules would establish modern procedures for applying this framework, covering evidence collected at or near the time of capture, verified ownership claims, restricted discovery, summary judgment, interim sales of seized property and appeals.
Holland & Knight warns that the implications could extend beyond vessels directly targeted by US sanctions. Under the Prize Act, ships and cargo belonging to third parties could also face capture and eventual forfeiture if they become involved in blockades targeting sanctioned countries.
A different legal and commercial exposure for shipping companies
The potential return of prize law would introduce a substantially different set of risks for maritime businesses. Allison Luzwick, an associate at Holland & Knight who specialises in maritime casualties, told Seatrade Maritime News that companies should not treat the proposed framework as a simple extension of existing civil forfeiture rules.
Instead, she said, operators need to assess the implications for insurance coverage, voyage planning and maritime security, while taking account of the broader geopolitical environment.
One of the most significant distinctions concerns ownership of seized assets. Under civil forfeiture procedures, shipowners, lienholders, cargo owners and other interested parties can submit claims concerning a vessel or its contents.
Prize law, by contrast, provides for ownership to transfer immediately to the capturing nation. The government can then appropriate the property for public use or sell it, with the proceeds deposited into the US Treasury, Luzwick explained.
For shipping stakeholders, understanding how the proposed procedures would operate before they take effect is therefore essential. Early assessment could help companies make better-informed decisions about routes, counterparties, insurance arrangements and exposure to conflict-related enforcement actions.
Why the United States is considering the move now
The escalation of military operations in the Middle East may help explain why a federal court is considering the revival of wartime seizure procedures. The Southern District of Texas is particularly relevant because its jurisdiction includes the Port of Houston, a major hub for energy transportation.
The prospect of seizing neutral vessels suspected of violating a blockade could also strengthen the effectiveness of such restrictions. According to Luzwick, the possibility of capture may give blockades greater weight by increasing the consequences for ships that breach them.
Charlie Brown, senior adviser at United Against a Nuclear Iran (UANI), believes the return of prize law could fundamentally alter the risk calculations for shipping businesses connected to Iran.
The exposure, he warned, might no longer be confined to sanctioned tankers or financial penalties. Under applicable wartime rules, third-party vessels and cargoes could also be captured if they violate a lawful blockade or carry contraband that is subject to seizure.
Iran’s maritime trade under growing pressure
The potential use of prize law comes as the war involving Iran continues. Restricting the country’s ability to sell and transport its products is becoming an increasingly important element of the broader strategic picture.
Michael Frevola, a partner at Holland & Knight who also specialises in maritime casualties, said limiting Iran’s access to shipping capacity could influence the country’s calculations over whether to seek an end to the conflict. The more effectively the United States can restrict the movement of Iranian products, whether on Iranian vessels or third-party ships, the less pressure Iran may feel to resolve the war, he argued.
The consequences could extend well beyond the Middle East, particularly into Southeast Asia, where the movement of Iranian crude oil has raised concerns over opaque shipping practices.
Brown, who is based in Singapore, highlighted Malaysia’s Eastern Outer Ports Limit (EOPL) anchorage as a key location for ship-to-ship transfers involving Iranian crude destined for China. Such operations can make it more difficult to establish the origin, ownership and final destination of cargoes.
The risks are not limited to oil tankers. Cargo ships transporting other goods could also face greater scrutiny where ownership structures are unclear, shipping practices are deceptive or cargo movements involve indirect routes that obscure the underlying trade.
Brown called on regional authorities to strengthen maritime surveillance, improve information-sharing and reinforce enforcement measures. These steps, he said, are necessary to prevent ports and strategic sea lanes from becoming weak points for sanctions evasion or the circumvention of blockades, as well as potential flashpoints in an expanding conflict.
Implementation, oversight questions remain
Even if there is fall-out, the practical effect of resurrecting prize proceedings is unclear. Frevola said it was too early to know how the proposed system would work in practice.
He said clear procedures could provide a clear framework for applying the law. But there is a danger that the powers could be used too widely, and a backlash could develop against the use of these powers.
Maritime operators have a good reason to review existing risk-management arrangements: uncertainty. Companies may have to reconsider how they evaluate their exposure to conflict zones, the legal status of their cargoes, trading relationships and the potential for vessels to get caught up in a blockade even when not directly sanctioned.
The key question is: will the proposed rules make an old legal power a practical tool for modern day maritime enforcement? If adopted they could broaden the range of vessels and cargoes subject to wartime seizure, with consequences for ownership, insurance and commercial operations.
Holland & Knight’s more general warning is that the age of the legislation should not be confused with lack of relevance. Prize law may be the product of an earlier age, but it may once again be a factor in international shipping. That’s why assessing that exposure before the rules come into force is becoming ever more important for shipowners, operators, charterers and insurers.
