Expansion of the Iran Sanctions Act
Parent company liability
SEC disclosure requirements


On August 10 2012 President Obama signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012.(1) Capping months of congressional debate over Iran's nuclear weapons programme and Syria's crackdown on opposition groups, the new law expands the Iran Sanctions Act of 1996 and the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010.(2) It also codifies various prohibitions recently imposed by executive order.

In addition to strengthening existing sanctions, the Iran Threat Reduction and Syria Human Rights Act imposes liability on US parent companies for activities by their foreign-owned or controlled subsidiaries that would be prohibited if undertaken directly by a US person. Combined with new Securities and Exchange Commission (SEC) disclosure obligations, the result is a substantial broadening of the prior sanctions regime.

Expansion of the Iran Sanctions Act

The Iran Threat Reduction and Syria Human Rights Act adds several new triggers to the list of activities sanctionable under the Iran Sanctions Act (as amended by the Divestment Act), including:

  • owning, operating, controlling or insuring a vessel that is used to transport crude oil from Iran to another country, except to countries that have received exemptions as a result of their reduction in imports of Iranian oil;
  • participating in a joint oil and gas development venture with Iran, outside Iran, if that venture was established after January 1 2002 and Iran could receive technological knowledge or equipment not previously available to it that could enhance its ability to develop petroleum resources. The effective date appears intended to carve out the Shah Deniz project;
  • participating in a joint venture with Iran relating to the mining, production or transportation of uranium; and
  • purchasing or facilitating the issuance of sovereign debt of the government of Iran or any entity that it owns or controls, including Iranian government bonds.

The Iran Threat Reduction and Syria Human Rights Act also amends the Iran Sanctions Act by adding three new sanctions and increasing from three to five the number of sanctions that the president is required to impose on violators. The new law permits the president to:

  • prohibit US persons from investing in or purchasing significant amounts of equity or debt instruments of a party sanctioned under the Iran Sanctions Act. This could effectively prevent US underwriters and institutional investors, among others, from investing in companies sanctioned under the Iran Sanctions Act;
  • deny visas to corporate officers of companies that violate the Iran Sanctions Act, thereby preventing them from travelling to the United States; and
  • impose Iran Sanctions Act sanctions on the principal executive officers of companies that violate the Iran Sanctions Act, including blocking their property and prohibiting all banking transactions involving such officers.

Parent company liability

Until now, foreign-incorporated companies that were owned or controlled by US companies were not prohibited from trading with Iran, provided that they did so independently of their US parents. Under this approach, the Office of Foreign Assets Control treated foreign subsidiaries in the same fashion as other non-US corporations.

The Iran Threat Reduction and Syria Human Rights Act requires the president to promulgate regulations prohibiting the foreign subsidiaries of US companies from knowingly engaging in activities that would be prohibited if undertaken by a US person and makes their US parents liable for any violations. Unlike their US parents, however, the foreign subsidiaries will not be strictly liable for activities involving Iran.

SEC disclosure requirements

In addition to extending the scope of possible liability, the Iran Threat Reduction and Syria Human Rights Act requires any company that files annual or quarterly reports under Section 13(a) of the Exchange Act of 1934 to disclose publicly whether it has knowingly engaged in:

  • certain Iran Sanctions Act-sanctionable activities; or
  • transactions or dealings with an Iranian government entity or persons whose property is blocked for terrorism or proliferation reasons.

These mandatory disclosures must describe:

  • the nature of the activity;
  • the revenue and profits attributable to the activity; and
  • whether the company intends to continue the activity.

The act also requires an issuer to notify the SEC separately as to whether its annual or quarterly report discloses such activity.

Upon receipt of such a notice, the SEC is required to transmit promptly the report to the president and various congressional committees, and to make the report available on the SEC website. Except in cases where the activity involves dealings with Iranian government entities, the president will be required to initiate an investigation into the possible imposition of sanctions under the Iran Sanctions Act or other applicable law. The act mandates that such investigations culminate in a determination not later than 180 days after commencement of the investigation. This new disclosure obligation applies to reports filed 180 days after the date of enactment.


With regard to Syria, the act requires the president to identify and sanction persons responsible for or complicit in the commission of serious human rights abuses against Syrian citizens or their family members, regardless of where such abuses occur. The sanctions that may be imposed are any of those authorised by the International Emergency Economic Powers Act, including the blocking of property and a prohibition on all financial transfers.

For further information on this topic please contact Robert Torresen or Lisa Crosby at Sidley Austin LLP by telephone (+1 202 736 8000), fax (+1 202 736 8711) or email ([email protected] or [email protected]).


(1) See

(2) See