Sunday, October 18, 2015 marked the official “Adoption Day” of the July 14, 2015 Joint Comprehensive Plan of Action (JCPOA), the day on which, to quote President Obama, “the JCPOA comes into effect and all JCPOA participants, including the United States, are to make the necessary arrangements and preparations for implementation of their respective JCPOA commitments.”

The US Government announcements came in three flavors:

  1. Presidential memorandum for the Secretaries of State, Treasury, Commerce, and Energy to direct them to take “all appropriate additional measures to ensure the prompt and effective implementation of the US commitments set forth in the JCPOA, in accordance with US law. In particular, subject to the requirements of applicable US law.” The President directs the Secretaries, “subject to the requirements of applicable US law” …  “to take all necessary steps to give effect to the US commitments with respect to sanctions described in section 17 of Annex V of the JCPOA, including preparation for the termination of Executive Orders as specified in section 17.4 and the licensing of activities as set forth in section 17.5, to take effect upon confirmation by the Secretary of State that Iran has implemented the nuclear-related measures specified in sections 15.1-15.11 of Annex V of the JCPOA, as verified by the IAEA.” This licensing of activities includes the licensing of non-US entities that are owned or controlled by a US person to engage in activities with Iran that are consistent with the JCPOA.  
  2. Contingent waivers of certain statutory sanctions on non-US companies issued by the Department of State. These waivers do not take effect until “Implementation Day” (the date when the Secretary of State confirms that the International Atomic Energy Agency has verified that Iran has implemented its key nuclear-related measures described in the JCPOA). They contain waivers of the secondary sanctions set forth in section 17 of Annex V of the JCPOA. These warrant a closer review, but of immediate interest is footnote 2, which states that “transactions by non-US persons” include transactions by non-US entities that are owned or controlled by US persons (i.e., US owned or controlled foreign entities) provided that the transaction is authorized by the Office of Foreign Assets Control (OFAC) of the Department of Treasury. This footnote effectively ensures that no secondary sanctions will be applied to any transaction undertaken by US controlled, non-US subsidiaries that are licensed by OFAC.  
  3. New FAQs issued by OFAC regarding the effect of Adoption Day. The FAQs contain very little new information, but officially confirm reports that OFAC intends to issue guidance between Adoption Day and Implementation Day, as seen in the below excerpt:

“OFAC intends to publish on its website prior to Implementation Day detailed guidance and information on the implementation of US commitments with respect to sanctions under the JCPOA. OFAC will also update its website on Implementation Day to notify the public that the easing of US sanctions pursuant to the JCPOA is in effect.

Even after Implementation Day, US persons will continue to be broadly prohibited from engaging in transactions or dealings involving Iran, including the Government of Iran, with the exception of a few additional categories of transactions that the Treasury Department’s Office of Foreign Assets Control (OFAC) will license pursuant to the JCPOA.”

Notably, OFAC’S guidance confirms that it could be sanctionable for non-US persons to enter into contracts with Iran or its Government, even if those contracts are made contingent on the lifting of sanctions. OFAC’s guidance also confirms that US persons are prohibited from entering into contracts, contingent or otherwise, with Iran or its Government unless authorized by OFAC.