Introduction

On July 14 2015 the Joint Comprehensive Plan of Action (JCPOA) was welcomed by China, France, Germany, Russia, the United Kingdom and the United States, with the high representative of the European Union for foreign affairs and security policy, and Iran.

Under the JCPOA, the European Union and the United Kingdom agreed to terminate or relax nuclear-related economic and financial sanctions, including related designations. Inconsistent with this, the BVI regime preserves, to an extent, the UK sanctions and restrictive measures regime on Iran instituted from 2009 to 2011 in the form of the BVI 2011 direction. The BVI 2011 direction is still on the books and, unlike the United Kindom's position, has not been revoked by the Financial Investigation Agency (FIA).

BVI position in 2009

On December 18 2009 the FIA in the British Virgin Islands gave a direction under Section 3 of the Proliferation Financing (Prohibition) Act 2009. In accordance with Section 5(1)(b)(iii) of the act, the FIA reasonably believed that there was a risk that money-laundering activities were being carried out by persons resident or incorporated in Iran as part of their attempt to aid or facilitate the development or production of nuclear weapons, and that these activities posed a significant risk to the interests of the British Virgin Islands or the United Kingdom.

The BVI 2009 direction was directed at all persons operating in the financial services sector of the British Virgin Islands as prescribed under Section 4 of the act. The BVI 2009 direction is set out below:

"Designated person

This direction is given in relation to transactions or business relationships with the following persons (referred to in the Act [the PFPA] as 'designated person')

(a) Bank Mellat, whose head office is located at No. 327 Talegani Avenue, Tehran 15817 Iran;

(b) Islamic Republic of Iran Shipping Lines ('IRISL'), whose address is No. 37, Aseman Tower, Sayyade Shirazee Square, Pasdaran Avenue, Tehran, Iran;

(c) a branch of Bank Mellat or IRISL.

Direction to cease business

The Agency [i.e. the FIA] directs that, from the effective date of this direction, a relevant person must not:

(a) enter into, or

(b) continue to participate in any transaction or business relationship with a designated person."

The BVI 2009 direction was replaced in 2010 by equivalent measures. The BVI 2009 direction replicated similar (now repealed) UK legislation issued in the form of the UK Financial Restriction (Iran) Order 2009. In contrast, as a matter of BVI law, the BVI 2009 direction was still in force until August 11 2016, even though its counterpart direction (the UK 2009 order) had ceased to have effect.

On August 11 2016 the direction given by the FIA (Revocation) Order 2016 was passed into law. The revocation order revoked the BVI 2009 direction and aligned the British Virgin Islands' position with that of the United Kingdom.

BVI position in 2011

The FIA issued a further direction on December 2 2011 under the act. The BVI 2011 direction was issued by the FIA for the same reason as the BVI 2009 direction, as highlighted above.

The BVI 2011 direction applies to all persons operating in the financial sector in the British Virgin Islands, as prescribed under Section 4 of the act. The BVI 2011 direction is set out below:

"Designated person

This direction is given in relation to transactions or business relationships with the following persons (referred to in the Act [the PFPA] as 'designated person')

(a) a credit institution incorporated in Iran;

(b) the Central Bank of Iran, also known as Bank Markazi Jomhouri Islami Iran;

(c) a branch, wherever located, of a person falling within sub-paragraph (a);

(d) a subsidiary, wherever located, of a person falling within sub-paragraph (a).

Direction to cease business

The Agency directs that, from the effective date of this direction, a relevant person must not–

(a) enter into, or

(b) continue to participate in, any transaction or business relationship with a designated person."

The BVI 2011 direction replicates similar directions made in the United Kingdom: the Financial Restrictions (Iran) Order 2011 and the Financial Restrictions (Iran) Order 2012. As a matter of BVI law, the BVI 2011 direction is still in force, even though its counterpart directions (the UK 2011 and 2012 orders) have been revoked. The UK 2011 order seems to have inspired the drafting for the BVI 2011 direction.

The Financial Restrictions (Iran) (Revocation) Order 2013 was made on January 29 2013, laid before Parliament on January 30 2013 and brought into force on January 31 2013. The explanatory note is particularly instructive as it comments that EU Regulation 1263/2012, which amended EU Regulation 267/2012 concerning restrictive measures against Iran, contained effectively the same prohibition as the UK 2012 order. The UK 2012 order was revoked by the UK 2013 revocation effective January 31 2013.

In other words, the older UK sanctions and restrictive measures regime instituted from 2009 to 2011 should be superseded by the revised regime formulated by the European Union, in particular under EU Regulation 267/2012.

Based on recent discussion with the FIA, it is understood that the BVI 2011 direction is due to be repealed and the various legislative processes have commenced to give effect to this. A copy of the order revoking the BVI 2011 direction will be published in the BVI Gazette. Once the BVI 2011 direction is repealed, the British Virgin Islands' position will be further aligned with that of the United Kingdom and be in keeping with the relaxation of the Iran restrictions discussed below.

Joint Comprehensive Plan of Action

With the implementation of EU Regulation 267/2012, the European Union imposed strict sanctions against Iran and brought the European Union's position more closely into line with that of the United States as regards nuclear proliferation activity. EU Regulation 267/2012 was adopted into BVI law in the Iran (Sanctions) (Overseas Territories) Order 2012. The overseas territory order and EU regulation, despite being amended on numerous occasions, continue to represent the cornerstone of sanctions legislation on Iran in the British Virgin Islands and European Union, respectively.

Under the JCPOA, the following sanctions were relaxed as of 'Implementation Day':

  • transfers of funds between EU persons and entities, including financial institutions, and Iranian persons and entities, including financial institutions;
  • banking activities, including the establishment of new correspondence banking relationships and the opening of new branches and subsidiaries of Iranian banks in territories of EU member states;
  • provision of insurance and reinsurance;
  • supply of specialised financial messaging services, including the Society for Worldwide Interbank Financial Telecommunication, the Central Bank of Iran and Iranian financial institutions;
  • financial support for trade with Iran (export credit, guarantees or insurance);
  • commitments for grants, financial assistance and concessional loans to the Iranian government; and
  • transactions in public or public-guaranteed bonds.

The JCPOA indicated that the European Union will terminate all provisions of EU Regulation 267/2012 implementing all EU/Iran proliferation-related sanctions, including related designations, either eight years after adoption day or when the International Atomic Energy Agency has reached the broader conclusion that all nuclear material in Iran remains in peaceful activities, whichever is earlier.

Across EU member states and other jurisdictions, the Implementation Day of the JCPOA was January 16 2016. In the British Virgin Islands, the terms of the JCPOA were adopted into the overseas territory order as of March 17 2016.

For further information on this topic please contact Aki Corsoni-Husain or Mirza Manraj at Harney Westwood & Riegels by telephone (+1 284 852 2565) or email (aki.corsoni-husain@harneys.com or mirza.manraj@harneys.com). The Harney Westwood & Riegels website can be accessed at www.harneys.com.

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