On 18 October 2015, 90 days after the United Nations passed a resolution endorsing the Joint Comprehensive Plan of Action (JCPOA) between Iran, the United States, the EU and other negotiating partners relating to Iran’s nuclear activities, both the United States and the EU issued measures preparing for implementation of the agreement. Following this formal adoption (which is referred to as “Adoption Day” in the JCPOA), Iran now must implement the commitments it made in the JCPOA, such as dismantling proliferation-sensitive components of its nuclear facilities and reducing its uranium stockpiles. For more details of the JCPOA and what it means for business, please see our previous briefing.
The United States and EU have initiated the preparatory steps and legal acts described below providing for the lifting of US and EU nuclear-related economic and financial sanctions as specified in the JCPOA. These legal acts will only take effect when the International Atomic Energy Agency (IAEA) verifies the implementation by Iran of agreed nuclear-related measures (Implementation Day). It is estimated that Implementation Day will occur approximately six months from Adoption Day, in early- to mid-2016. No sanctions relief will occur until then, other than the limited relief currently in effect under the original Joint Plan of Action agreed in November 2013.
Issuance of US contingent waivers and guidance
The United States took a formal step toward implementation of the JCPOA on 18 October 2015 by issuing contingent waivers that aim to suspend all US nuclear-related sanctions described in the JCPOA upon Implementation Day. These sanctions consist primarily of US extraterritorial, or ‘secondary’, sanctions. Along with the waivers, US President Barack Obama issued a memorandum to the US Secretaries of State, Treasury, Commerce and Energy directing them to take the necessary steps to fulfil US commitments under the JCPOA.
The Office of Foreign Assets Control (OFAC) of the US Treasury Department issued a new set of Frequently Asked Questions relating to Adoption Day. The primary purpose of this guidance is to explain the differences between Adoption Day and Implementation Day, and to clarify that no sanctions will be suspended prior to Implementation Day.
OFAC states in the Adoption Day FAQs that it will ‘vigorously enforce’ the current sanctions that remain in effect until Implementation Day. OFAC has expressed the view that Iran is not yet ‘open for business’, and that entering into contracts involving Iran or its government before Implementation Day that are conditioned on the implementation of sanctions relief under the JCPOA may be sanctionable. This means that even non-US companies could be penalized under US secondary sanctions if they enter into contracts that would currently be caught under such sanctions. US persons cannot enter into contracts (contingent or otherwise) involving Iran or its government, or individuals and entities on the US sanctions list, and will continue to be prohibited from engaging in most dealings and transactions with Iran even after Implementation Day, unless authorized by OFAC.
OFAC noted that it will release detailed guidance closer to Implementation Day on how the sanctions suspensions will be implemented.
Adoption of EU legislation
On 18 October 2015, the EU issued Council Regulation (EU) 2015/1861 (amending Regulation (EU) 267/2012), Council Decision (CFSP) 2015/1863, and Council Implementing Regulation (EU) 2015/1862 in order to lift nuclear-related economic and financial EU sanctions targeting Iran. The annexes to these provisions also list individuals and entities to be delisted on Implementation Day.
- Delisting: Regulation (EU) 2015/1862 lists all individuals and entities that will be delisted from EU sanctions lists.
- Listing of individuals / asset freeze: New criteria for travel bans and asset freezes have been added, and new Annexes XIII and XIV (of Regulation 267/2012) have been created as placeholders for future lists of individuals and entities that may be designated under such criteria. All funds and economic resources of any individuals or entities that may be designated by the UN Security Council or the EU as having engaged in Iran’s proliferation-sensitive nuclear activities undertaken contrary to Iran’s commitments in the JCPOA shall be frozen.
- Financial messaging services: While it will be possible to provide specialised financial messaging services to individuals and entities delisted from Annexes VIII and IX (of Regulation 267/2012), it shall be prohibited to provide such financial messaging services to individuals and entities remaining on these EU sanctions lists or added to the new lists in Annexes XIII and XIV.
- Set-up of Joint Commission: A Joint Commission – consisting of representatives from Iran, China, France, Germany, Russia, the UK, the United States and the High Representative of the EU – will be established to monitor the implementation of the JCPOA. National authorities in EU Member States must seek approval from the Joint Commission for the authorisation of specific transactions with or for the benefit of Iran involving certain items, materials, equipment, goods and technology (e.g. nuclear material, equipment for nuclear reactors and non-nuclear materials for reactors), except for such transactions related to the implementation of Iran’s commitments under the JCPOA, which will only require prior notification to the Joint Commission and the UN Security Council.
- Dual-use goods: Instead of a complete prohibition related to transactions with dual-use goods and technology involving Iran, it will be possible for transactions involving certain dual-use goods and technologies (listed in Annex I of Regulation 2015/1861) and related financial services to be conducted subject to prior authorisation by the relevant EU national authority (after having informed the other EU Member States, the European Commission, the High Representative of the Union for Foreign Affairs and Security Policy, the UN Security Council and the IAEA). Certain such transactions must also be approved on a case-by-case basis by the UN Security Council or the Joint Commission, as discussed below.
- Nuclear enrichment activities: On a case-by-case basis it will be possible to obtain authorisation from EU national authorities for transactions involving goods and technologies that could contribute to reprocessing- or enrichment-related or heavy water-related or other activities inconsistent with the JCPOA (listed in Annex II of Regulation 2015/1861) if such transactions are consistent with the JCPOA. Also, the ban on certain goods and technologies from the Nuclear Suppliers Group list, the UN armament industry / ballistic missiles list and dual-use goods will be lifted for certain light water reactors.
- Nuclear Suppliers Group list: Case-by-case assessment will be required by the UN Security Council of the sale, supply or export to Iran or any Iranian person of goods and technologies contained in the Nuclear Suppliers Group list (found in Annex I of Regulation 2015/1861). The provision of related services (including financing or financial investments) will also be subject to authorisation by the UN Security Council. Also, the sale of other goods and technologies (not contained in the Nuclear Suppliers Group list) that could contribute to reprocessing- or enrichment-related or heavy water-related activities need to be assessed on a case-by-case basis by EU national authorities (prior to approval). In addition, authorisation of transactions involving the purchase, import or transport from Iran of goods and technologies contained in the Nuclear Suppliers Group list will require prior approval of the Joint Commission.
- Software and metals: Instead of a complete prohibition of transactions or services related to software listed in Annex VIIA (of Regulation 2015/1861) and metals listed in Annex VIIB (of Regulation 2015/1861) it will be possible to obtain authorisation by EU national authorities (after having informed the other EU Member States and the European Commission).
- Missile technology: Annex III (of Regulation 2015/1861) specifies the goods and technologies contained in the Missile Technology Control Regime list, for which the export to Iran or Iranian persons remains prohibited. The ban also includes the provision of related services, such as financing, technical assistance or education and training.
All adopted legal acts entered into force on 18 October 2015, but they will only apply from Implementation Day.