On 14 July 2015, the E3/EU +3 (China, France, Germany, the Russian Federation, the United Kingdom and the United States, with the High Representative of the European Union for Foreign Affairs and Security Policy) and the Islamic Republic of Iran signed a Joint Comprehensive Plan of Action (“JCPOA”), which they have announced will “ensure that Iran’s nuclear programme will be exclusively peaceful, and mark a fundamental shift in their approach to this issue.”

The JCPOA is accompanied by five annexes dealing with nuclear-related measures (Annex I), sanctions-related commitments (Annex II), civil nuclear cooperation (Annex III), a Joint Commisison (Annex IV), and the Implementation Plan (Anfnex V).

The JCPOA provides for Iran to implement a number of nuclear-related measures that will be monitored by the International Atomic Energy Agency (“IAEA”) (as detailed in Annex I to the JCPOA) and there will be civil nuclear cooperation between the E3/EU + 3 and Iran (as set out in Annex III to the JCPOA).

As a consequence of the measures to be implemented by Iran, the JCPOA states that it “will produce the comprehensive lifting of all UN Security Council sanctions as well as multilateral and national sanctions related to Iran’s nuclear programme”.

Timetable

The lifting of the sanctions will not be immediate and until a series of steps have been taken  the various sanctions regimes will remain unchanged. There is no definite timeline for these steps, but in broad terms they are as follows:

  • First, a draft resolution providing for endorsement of the JCPOA will be submitted “promptly” to the UN Security Council for adoption “without delay”. A unanimous vote took place at the UN Security Council on 20 July;
  • Second, “Adoption Day” will occur 90 days after adoption of the draft resolution by the Security Council (or at any earlier date that may be agreed by mutual consent of all JCPOA participants), whereupon the JCPOA will enter into force.

At that point, Iran must start implementing its commitments under the JCPOA. It is only once the IAEA has been able to verify the implementation of a number of defined commitments, which include making technical modifications to Iran’s nuclear infrastructure, that sanctions will be lifted, amended or suspended, on a date referred to as “Implementation Day”.

It is not clear how long this process will take, and Iran, in order to obtain the lifting of sanctions as soon as possible, may take steps in this regard before the JCPOA has entered into force. It is noteworthy, however, that U.S. Secretary of State John Kerry has expressed the view that Implementation Day is likely to occur in around six months, i.e. in early 2016.

Relaxation of sanctions  

On Implementation Day the sanctions that will be affected comprise not only the UN Security Council resolutions on the Iranian nuclear issue (all of which will be lifted) but also:

  • The majority of the provisions of EU Council Regulation No. 267/2012, as subsequently amended, and any national implementing legislation. The provisions that will be lifted are in particular those that had placed prohibitions or restrictions on doing business in the financial, banking, insurance, petroleum and shipping sectors. A few provisions (relating notably to nuclear proliferation, metals, software and arms) will either remain in place or will be amended. In addition, the asset freeze affecting numerous Iranian individuals and entities will be lifted, although it will remain in place for others;
  • United States secondary sanctions, insofar as they provide for sanctions to be imposed upon non-U.S. individuals or entities for engaging in certain Iran-related transactions. For the time being, these sanctions are only being suspended, and it is important to note that the prohibitions and restrictions on U.S. persons and entities – including U.S.-controlled foreign subsidiaries - entering into Iran-related transactions will remain in force. However, the United States has committed to allow certain transactions relating to commercial passenger aircraft; to license non-U.S. entities that are owned or controlled by a U.S. person to engage in activities with Iran that are consistent with the JCPOA; and to license the import into the United States of certain Iranian-origin products. In addition, a number of individuals and entities will be removed from the list of “specially designated nationals” whose assets are blocked by the United States.

The JCPOA further provides for the remaining EU sanctions to be lifted, and for the United States to take measures for the termination of its previously suspended sanctions, but this will not be done until “Transition Day”, which will occur 8 years from “Adoption Day” at the latest.

Conclusion

The JCPOA is the culmination of many years of significant investment in diplomacy and relationship building.  However, this in reality will be the start of a new process, one which has many potential hurdles for international businesses. Understanding the changes to the sanctions regimes and how they are implemented across the globe will be critical for those businesses operating across multiple jurisdictions and, in particular for those with any US nexus. The legal and political landscape relating to Iran will remain unclear for the foreseeable future and as such understanding and complying with the complex sanctions regimes in place will remain a key challenge.