The Office of Foreign Assets Control (OFAC) has updated its guidance in relation to the potential “snapback” of US sanctions against Iran. The updated guidance is contained within its Frequently Asked Questions relating to the lifting of certain US sanctions under the Joint Comprehensive Plan of Action (JCPOA). These confirm:
the US will not retroactively impose sanctions for legitimate activity undertaken after Implementation Day (the day that the US sanctions relief came into force). However, the JCPOA does not grandfather contracts signed prior to snapback (FAQ M4)
- the US government will work with US and third country companies to minimise the impact of sanctions on legitimate activities undertaken prior to the imposition of sanctions (FAQ M5)
- non-U.S. non-Iranian persons will be afforded a 180-day period to wind down operations in or business involving Iran that was permitted under the JCPOA and undertaken pursuant to a written agreement entered into prior to snapback (FAQ M5)
- the provision or delivery of additional goods or services and/or the extension of additional loans or credits to an Iranian counterparty after snapback, including pursuant to written agreements entered into prior to snapback, may result in the imposition of U.S. sanctions unless such activities are exempt from regulation, authorised by OFAC, or not otherwise sanctionable (FAQ M5).
Accordingly, where parties enter into written agreements with or related to Iran that are permitted under the JCPOA or relevant licences, they will:
- be permitted to receive repayment for any goods or services, or loans or credit, that were fully provided during the relief period, for a period of 180 days following snapback, pursuant to the terms of the written agreement
- however, they will not be permitted to enter into new agreements or to provide additional goods and services, loans or credits, including under agreements entered into in the relief period.
The amendments are designed to allow parties to recover debts and obligations that are due to them for goods or services fully provided prior to snapback.
It should be noted that any payments would need to be consistent with U.S. sanctions, including that payments could not involve U.S. persons or the U.S. financial system, unless the transactions are exempt from regulation or authorised by OFAC.
We would recommend that non-US parties seeking to conduct business with Iran include appropriate contractual provisions in agreements to protect against snapback and develop strategies for winding-down or exiting Iranian business, in the event that this becomes necessary.
It should be noted that OFAC has also amended General Licence J, which authorises the re-exportation of certain civil aircraft to Iran, to allow the temporary re-export of eligible aircraft that involve code sharing arrangements.