On 14 July 2015, Iran and the EU/E3+3 (China, France, Germany, the Russian Federation, the United Kingdom, the United States, and the European Union) announced that they had agreed on a Joint Comprehensive Plan of Action (“JCPOA” or “Agreement”) regarding the lifting of sanctions currently imposed against Iran. If fully implemented, the JCPOA will ultimately see the comprehensive lifting of all UN Security Council (“UNSC”) sanctions targeting Iran, as well as multilateral and national sanctions related to Iran’s nuclear programme, including increasing access in areas of trade, technology, finance, and energy. In return, Iran will curb its nuclear programme and provide access to the International Atomic Energy Agency (“IAEA”) for verification purposes. There will also be a 65-day snapback mechanism by which sanctions can be reinstated for non-compliance, subject to a dispute resolution process.

TIME FRAME

According to unofficial copies of the Agreement published in the media, a UN resolution shall be promptly put forward to the UNSC to endorse the JCPOA. Ninety days after the UNSC adopts a resolution endorsing the JCPOA (or sooner if agreed by mutual consent), the JCPOA shall come into effect (“Adoption Day”). In practical terms, this will mean that the JCPOA participants will begin to make the necessary arrangements to implement their respective commitments under the JCPOA. However, UN, U.S. and EU sanctions will only begin to be relaxed once the IAEA has verified that Iran has implemented its nuclear-related commitments under the JCPOA (“Implementation Day”). On this basis, sanctions may not be actually lifted or relaxed until early 2016.

The EU has announced that it will prolong until 14 January 2016 the suspension of EU restrictive measures agreed in the Joint Plan of Action (“JPOA”) with Iran dated 24 November 2013. The U.S. Government has also announced its intention to extend the JPOA sanctions relief and is likely to adopt an approach similar to the EU. See our prior blog post about the JPOA. All other sanctions targeting Iran will remain in place until the sanctions relief described in the JCPOA is implemented.

EU SANCTIONS

The EU and EU Member States commit to terminate all provisions of Council Regulation (EU) No 267/2012 (as amended) Council Decision 2010/413/CFSP (as amended), and to terminate or amend national implementing legislation as required. Implementation Day will see the removal of restrictions on:

  • Certain listed persons, entities and bodies in the Iranian oil and gas, financial, and shipping sectors;
  • Financial, banking and insurance measures;
  • Oil, gas and petrochemical sectors;
  • Shipping, shipbuilding and transport sectors; and
  • Gold, other precious metals, banknotes and coinage.

Specific arms restrictions/missile proliferation sanctions will remain in place for up to eight years until the JCPOA’s “Transition Day” – the earlier of (i) the date eight years after Adoption Day or (ii) the date on which the IAEA reports that it has reached conclusion that all nuclear material in Iran remains in peaceful activities. Human rights related sanctions and those targeting terrorist financing are, however, expected to remain in place.

U.S. SANCTIONS

The principal impact of U.S. sanctions relief will be on non-U.S. persons not generally subject to U.S. jurisdiction. The U.S. sanctions applicable to U.S. persons, non-U.S. persons acting or causing an act to occur in the United States, and non-U.S. subsidiaries of U.S. companies will remain in effect, subject to certain favorable licensing policies, as noted below.

More specifically, the Agreement provides for phased relief of certain U.S. sanctions against Iran starting on Implementation Day. U.S. sanctions relief would be provided through suspension and eventual termination of secondary U.S. sanctions against Iran, which target specific activities of non-U.S. persons that are not otherwise subject to U.S. jurisdiction. The JCPOA provides for relief from certain U.S. secondary sanctions in the following areas:

  • Financial and banking measures
  • Insurance measures
  • Iranian energy and petrochemical sectors
  • Iranian shipping, shipbuilding and port sectors
  • Gold and other precious metals
  • Supply to Iran of software and metals
  • Iranian automotive sector
  • Delisting of Iranian parties as Specially Designated Nationals and other sanctions listings
  • Nuclear proliferation measures

The sanctions relief does not apply to U.S. sanctions that have been imposed to address human rights or terrorism issues relating to Iran. It also does not apply to U.S. sanctions imposed under the Iranian Transactions and Sanctions Regulations (“ITSR”) by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), which continue to prohibit most Iran-related transactions by U.S. persons and non-U.S. entities owned or controlled by U.S. persons. According to the unofficial copy of the JCPOA, however:

· The U.S. Government has agreed to license non-U.S. entities owned or controlled by U.S. persons to engage in activities consistent with the Agreement. It is not known whether those licenses will be general or specific or whether they will permit some level of U.S. person involvement, e.g., U.S. parent company facilitation of transactions undertaken by their foreign subsidiaries. As a result, foreign subsidiaries of U.S. companies may be able to engage in the Iran-related transactions described above, pursuant to general licenses issued under the ITSR or specific licenses obtained from OFAC.

· In addition, the U.S. Government has apparently agreed to: (a) allow for the sale of commercial passenger aircraft and related parts and services to Iran, through licensing of exports and provision of associated services, and (b) license the importation into the United States of Iranian-origin carpets and foodstuffs.

OFAC has not yet implemented any of these authorizations and has announced that it will issue guidance on JCPOA relief prior to Implementation Day.

As noted above, the U.S. Government has announced that it will further extend temporary U.S. sanctions relief under the JPOA in the interim. As part of this U.S. extension, all specific licenses with an expiration date on or before 14 July 2015 that were issued pursuant to OFAC’s Second Amended Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry will remain in effect through Implementation Day. Prior to implementation, the JCPOA must also meet the requirements of the Iran Nuclear Agreement Review Act of 2015, which imposes a 60-day congressional review period on the JCPOA during which the President may not waive, suspend, reduce, provide relief from, or otherwise limit certain sanctions against Iran. The President has announced that he will “veto any legislation that prevents the successful implementation of this deal.”