The President of the United States, Donald Trump, announced this evening that he would not certify to the Congress that Iran is complying with the terms of the Joint Comprehensive Plan of Action (“JCPOA”) and that such agreement is in line with national interest. It should be stressed that such decertification will not result in any automatic termination of the JCPOA or the immediate reinstatement of sanctions against Iran.

THE DECERTIFICATION OF IRAN’S COMPLIANCE WITH JCPOA

Pursuant to article 6 of the Iran Nuclear Agreement Review Act (“INARA”) adopted by the Congress in May 2015, the President of the United States is required, every 90 calendar days, to certify to the Congress (i) that Iran is complying with the provisions of the JCPOA, (ii) that Iran has not directly supported or carried out an act of terrorism against the United States or a United States person and finally, (iii) that suspension of sanctions is appropriate and proportionate to the measures taken by Iran and vital to the national security interests of the United States[1].

Such certification was granted by President Trump in May and July 2017 and the Iran sanctions waivers have been extended by his administration over the time. Today’s decision marks a long-anticipated shift in American position towards Iran.

DIRECT CONSEQUENCE: TRIGGERING OF THE 60-DAY PERIOD FOR THE CONGRESS TO TAKE FURTHER ACTIONS

It should be noted that the decertification of Iran’s compliance with JCPOA does not bear any immediate legal consequence insofar as the JCPOA remains a valid and legally binding agreement for all its signatories and the sanctions against Iran are not reinstated.

The only direct legal consequence of today’s decision is the triggering of the 60-day period during which the Congress might decide to introduce a bill reinstating statutory sanctions with respect to Iran in accordance with the INARA[2].

Please note that if the Congress decides not to take any further action, the JCPOA will remain in place in its current shape.

POSSIBLE YET UNLIKELY LONG-TERM CONSEQUENCES: REINSTATEMENT OF U.S. AND U.N. NUCLEAR SANCTIONS AGAINST IRAN

Even though the reinstatement of the US and UN nuclear sanctions against Iran is still unlikely, it cannot be completely excluded as it could be triggered in several different ways.

Firstly, the Congress has 60 days from the decertification to use the possibility provided under the INARA and introduce the bill reinstating the sanctions.

Secondly, President Trump could simply use its executive power to decline to exercise the waivers of the sanctions or to issue an executive order reinstating designations of Iranian persons and entities as Specially Designated Nationals (SDNs).

Finally, the United States could trigger a complex and lengthy amicable dispute-resolution mechanism provided under paragraph 36 of the JCPOA and commonly known as the “snapback” provision to reinstate their domestic and the UN sanctions against Iran. Indeed, should the non-compliance issue not be resolved through this mechanism, the United States could cease performing their commitments under the JCPOA in whole or in part. They could also notify the UN Security Council that such issue constitutes significant non-performance of the JCPOA. Such notification would lead the UN Security Council to vote on a resolution to continue the waiver of the UN sanctions or not. On the absence of a vote deciding future waiver, the UN sanctions could be effectively reinstated.

Please note, however, that even if the UN sanctions were to be reinstated, they will not apply with retroactive effect to contracts signed prior to the date of reinstatement as long as the activities contemplated under and execution of such contracts are consistent with the provisions of JCPOA[3].