For decades, hundreds of vessels have been transiting the Strait of Hormuz on a weekly basis, typically navigating Omani territorial waters. As is well-known, Iran and, more recently, the United States have announced transit restrictions pertaining to the Strait of Hormuz, raising questions under international law. Iran has indicated that certain vessels could be allowed passage upon payment of a fee reportedly in the range of USD 2 million and allegedly payable in cryptocurrency. Vessels transiting without payment may face significant security risks, including the risk of attacks in the Strait.[1]
The Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and constitutes a strait used for international navigation. It therefore falls within the scope of the transit passage regime under the United Nations Convention on the Law of the Sea (“UNCLOS”), including Article 17 and the provisions on transit passage.
Under UNCLOS, Article 38(2), transit passage includes freedom of navigation and overflight, subject to certain conditions. [2]Importantly, transit passage may not be suspended by the relevant coastal state(s) or any other third-party state.[3]
Although neither Iran nor the United States are formally parties to UNCLOS, the regime governing transit passage is widely considered to reflect customary international law and is therefore generally regarded as binding. It has also (at least in the past) been recognised as such by the United States[4].
Source: marineregions.org.
In the picture the green areas represents the internationally recognised territorial waters of Iran and Oman, not considering disputed islands controlled by Iran, while the light blue indicates the international waters (and exclusive economic zones).
The concept of maritime passage rights can be traced back several centuries, with Denmark playing a central role. The Danish straits were historically under the control of the Danish King, and from the early 15th century, vessels passing through Øresund were required to pay a toll (the ‘Sound Toll’). Vessels that failed to declare the value of their cargo risked confiscation. A similar right was invoked by the Ottoman Empire in respect of the Bosporus Strait, based on the Ottoman control of the straits since at least 1453.
The legal framework has sometimes been associated with the so-called “Cannonball Rule”, i.e. the principle that a coastal state may extent coastal jurisdiction based on the range of its shore-based artillery.
In 1857, Denmark signed the Copenhagen Convention of 1857, abolishing the Sound Toll. In return for a one-time compensation payment, Denmark allowed free passage for foreign commercial vessels through the straits. This marked an important step towards the modern principle of freedom of navigation.[5] Similar convention frameworks are in place in respect of the Bosporus (the Montreux Convention of 1936) which guarantees “complete freedom of transit” for civilian vessels and war ships in peace time[6].
The European Union has adopted a number of sanctions against Iran.
Iran’s nuclear programme was publicly exposed in 2002, prompting sanctions from the EU, UN, and the United States. EU sanctions were significantly expanded in 2012, targeting the oil and financial sectors.[7]
Following the Joint Comprehensive Plan of Action in 2015 (originally adopted between EU, UK, Russia, China, France, Germany, USA and Iran), certain sanctions were lifted. Eventually, however, in September 2025, the EU agreed to reimpose the suspended sanctions on Iran including restrictions on trade, finance, transport and listings of individuals and entities (the Iran Sanctions Regulation “ISR”).[8]
All European nationals as well as individuals and entities domiciled in the EU fall within the scope of the ISR and its prohibitions.[9] Importantly, under Article 23(3), it is for instance prohibited to make funds or economic resources available, directly or indirectly, to or for the benefit of listed persons, entities or bodies, including key Iranian state institutions such as the Central Bank of Iran and relevant ministries.[10]
This prohibition entails that EU-based shipowners and charterers must exercise due diligence in relation to payments that may, directly or indirectly, benefit such entities.[11] Assuming that the transit fee will ultimately be remitted to the Iranian state, such payment will most likely constitute a violation under Article 23(3). It is further prohibited to participate in activities that seek to circumvent these restrictions.[12]
Violations of this prohibition is subject to heavy fines and potential prison sentence in each EU member state[13].
The current situation gives – in addition to the primary concerns for the crew safety – rise to a large number of contractual issues for both owners and charterers under charterparties as well as other vessel related contracts. Focusing just on charter parties, varying and related issues may arise:
Standard sanctions clauses for time and voyage charterers, such as those developed by BIMCO, do not necessarily resolve these issues. In particular, the clauses are light on the rights offered to charterers in respect of sanctioned activities. As is indicated above, parties may be placed in a position where they must choose between either (i) breaching applicable sanctions or (ii) breaching the charterparty.
Stakeholders are thus advised to carefully consider the potential implications of paying transit fees or otherwise breaching sanctions based on the existing contracts and – going forward – to draft the sanctions clauses in their charter parties and other contracts to ensure they are appropriately protected.
Gorrissen Federspiel specialises in assisting shipowners, charterers and other stakeholders in navigating the complexities of sanctions regulations and the contractual implications in a volatile geopolitical environment and closely monitor the developments.
If you have any questions, please feel free to contact a member of our team.
This newsletter is for information purposes only and should not be relied upon as legal advice in respect of sanctions regulations from the European Union, the United States or any other jurisdiction.
[1] AP News, Iran’s proposal to collect tolls in the Strait of Hormuz violates trade norms, 8 April 2026, https://apnews.com/article/strait-of-hormuz-iran-tolls-oil-3ef5dcd907122922db714d318c35317e
[2] See UNCLOS, Art. 39(1)(a).
[3] See UNCLOS, Art. 45(2).
[4] Carol Elizabeth Remy (1992), Fordham International Law Journal. 16 (4), p. 1218
[5] See our Newsletter of 2 April 2024 – https://gorrissenfederspiel.com/en/passing-through-russian-vessels-in-the-danish-straits/
[6] Art. 2 (1) of the Montreux Convention of 20 July 1936.
[7] Council Regulation (EU) No 267/2012.
[8] Regulation (EU) 2025/1975 amending the ISR. See our Newsletter of 3 October 2025 here.
[9] See ISR, Art. 49.
[10] Central Bank of Iran, the Ministry of Petroleum and the Ministry of Energy of Iran (nos. 104, 110 and 111 in Annex IX).
[11] See ISR, Art. 42(2).
[12] See ISR, Art. 41.
[13] For instance, violations are subject to fines and prison sentences of up to eight years under the Danish Criminal Code, section 110c(3).