On July 14, 2015, the "P5+1" working group (China, France, Germany, Russia, the UK and the US) reached an agreement with the Government of Iran to adopt the Joint Comprehensive Plan of Action (the "JCPOA"). This announcement capped a final 18-day marathon negotiating session, and comes after years of discussions among the parties about Iran's nuclear program.

While the precise date on which broad spectrum sanctions relief will occur has not yet been set, the JCPOA provides a framework for doing so. The JCPOA is intended to provide Iran with significant sanctions relief in exchange for assurances regarding the peaceful and civilian nature of its nuclear program, commitments by Iran not to pursue certain weapons proliferation activities, and certain opportunities for inspections and monitoring of compliance with these commitments. In sum, the sanctions relief allows Iran to re-engage in the global economy, including the energy markets, and effectively rolls back significant portions of the international sanctions framework developed by the United Nations, European Union and United States since 2006.

The JCPOA will, as outlined in the Implementation Plan:

  • Allow Iranian banks—including the Central Bank of Iran—to re-connect to the SWIFT messaging system;
  • Further allow Iranian banks to engage in the regular course of financial commerce, currency exchanges and establish new branches and subsidiaries in Europe;
  • Lift restrictions on Iranian crude oil and petrochemical sales;
  • Remove a wide range of sectoral sanctions, targeting Iran's energy, shipping, ship-building and automotive industries;
  • Authorize a wide range of "associated services" to facilitate newly-permitted transactions; and
  • Strike dozens of names from the US Specially Designated Nationals list and Foreign Sanctions Evaders list.

The JCPOA framework of sanctions relief is divided into two primary phases. The first phase commences on "Implementation Day"—when the International Atomic Energy Agency (the “IAEA”) verifies Iran's compliance with nuclear-related measures.1 That date will trigger implementation by the US and EU of a wide range of measures to cease the application of, or in some cases terminate, various sanctions. The second phase centers on "Transition Day." This is when the IAEA, together with the UN Security Council, confirms that Iran's nuclear materials are being used for peaceful activities, or eight years after Adoption Day. As of Transition Day, the P5+1 will terminate the measures it ceased to apply on Implementation Day, and provide further relief, with permanent UN sanctions relief following some time after.

While commercial relationships with Iran will be facilitated by the JCPOA, particularly for European firms, the JCPOA, by its terms, does not restore commercial ties between the United States and Iran, nor does the sanctions relief apply to US Persons, or their non-US subsidiaries at this stage. Rather, the general US commercial embargo remains in place, and US Persons, and their non-US subsidiaries, remain subject to full compliance. The JCPOA does allow US Persons to engage in certain exports or reexports to Iran of commercial aircraft and related items, and restores authority for US Persons to import Iranian carpets and food into the United States.

Initiating this implementation timeline requires the JCPOA to survive scrutiny by the US Congress and the Iranian Majlis (Parliament). Under the Iran Nuclear Agreement Review Act, President Obama is required to submit the JCPOA to Congress by July 20, along with a verification report and certification that the JCPOA, among other things, meets the US's non-proliferation objectives. Congress will then have 60 days to review and potentially adopt a joint resolution disapproving of the JCPOA. Any such disapproval would be subject to Presidential veto. Iran's Majlis will also review the JCPOA, but it is not clear the extent to which it could block Iran from implementing it.

Below please find an initial overview of some of the key sanctions relief provisions in the JCPOA.

US Sanctions Relief Under the JCPOA

US sanctions relief is also implemented in two steps. In the first step, on Implementation Day, the President will halt application of a wide range of sanctions. In the second step, on Transition Day, the US will then "seek" legislative action to terminate the sanctions relief provided in the first step, and provide certain other sanctions relief.

While the JCPOA provides sweeping sanctions relief, it does not restore ordinary commercial ties between the United States and Iran.

Relief generally applies only to non-US Persons. The sanctions relief provided by the US generally applies only to "non-US Persons," a term that the JCPOA defines to mean any individual or entity excluding US citizens, permanent residents, entities organized under US laws (including foreign branches) or any person physically in the United States as well as any entity owned or controlled by a US Person.2 US Person-owned or -controlled entities located outside of the United States will "continue to be generally prohibited from conducting transactions of the type permitted pursuant to this JCPOA unless authorized by OFAC".

The JCPOA opens a path for subsidiaries of US companies abroad to do business with Iran. The US commits under the JCPOA to license overseas subsidiaries of US entities for activities consistent with the agreement. The licensing methodology is not described and remains to be clarified, but the “commitment to license” is likely to provide these entities a significantly greater ability to do business with Iran than under current legislation, following Implementation Day.

The US embargo on Iran remains in place, subject to certain exceptions. The JCPOA, by its terms, does not lift the general commercial embargo which prohibits US Persons from doing business with Iran. However, the JCPOA does authorize US Persons to engage in or facilitate certain sales of civilian commercial aircraft to Iran. The JCPOA also permits imports into the US of Iranian-origin carpets and foodstuffs, including pistachios and caviar.

Other US sanctions are unaffected. US sanctions relief under the JCPOA also does not, by its terms, extend to counter-terrorism or human rights-related sanctions. Some of these continuing sanctions measures assert extraterritorial application, such as sanctions under Executive Order 13606 (also known as the GHRAVITY Executive Order).3

Relief Effective as of Implementation Day

On Implementation Day, the President will cease the application of sanctions that target "non-US Persons" who engage in a wide range of activity involving Iran, including:

  • Financial and banking sectors: transactions with Central Bank of Iran and other Iranian financial institutions, Naftiran Intertrade Company (NICO), National Iranian Oil Company (NIOC) and other individuals and entities identified as "Government of Iran;" providing US banknotes to the Government of Iran; transactions in the Iranian Rial, Iranian sovereign debt, and transferring Iranian revenues held abroad.
  • Insurance sector: providing underwriting services, insurance, or reinsurance services by non-US Persons in connection with activities consistent with this JCPOA.
  • Energy and petrochemical sectors: Iranian crude oil sales to countries other than the US; engaging in joint ventures and providing expertise and support for Iran's oil, gas and petrochemical sectors; engaging in the purchase, sale, transport, or marketing of oil, gas and petrochemicals from Iran, the export, sale or provision of refined petroleum products and petrochemical products to Iran, or transactions with Iran's energy sector including NICO, NIOC, and National Iranian Tanker Company (NITC).
  • Shipping, shipbuilding, and port sectors: engaging in transactions with Iran's shipping and shipbuilding sectors and port operators.
  • Gold and other precious metals: trading with Iran in gold and other precious metals.
  • Software and metals: trading with Iran in graphite, raw or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes, in connection with activities consistent with the JCPOA.
  • Automotive sector: selling, supplying, or transferring goods and services used in connection with Iran's automotive sector.

The US will also:

  • Authorize "associated services". The JCPOA provides that sanctions relief in each of the above categories of transactions will extend to "associated services." By its terms, this means any service, "including technical assistance, training, insurance, re-insurance, brokering, transportation or financial service —necessary and ordinarily incident to the underlying activity for which sanctions have been lifted pursuant to the JCPOA," but again, only as to non-US Persons.
  • De-list scores of Specially Designated Nationals (SDN) and Foreign Sanctions Evaders (FSE). The US will remove dozens of individuals, entities, and vessels (e.g., oil tankers) from the list of SDNs and FSEs maintained by the US Treasury Department's Office of Foreign Assets Control (OFAC). 

    As discussed below, a separate set of SDNs / FSEs will remain on the books until Transition Day.
  • Provide licensing opportunities for overseas subsidiaries of US Persons. The US will license entities owned or controlled by US Persons to engage in the activities with Iran that are "consistent with" the JCPOA.

Relief Effective as of Transition Day

On Transition Day, the US has committed to seek legislative action to terminate the sanctions which were waived, ceased to apply or were otherwise licensed by the US to take effect on Implementation Day, as well as lifting:

  • sanctions under the Iran, North Korea, and Syria Nonproliferation Act4 on the acquisition of nuclear-related commodities and services for nuclear activities contemplated under the JCPOA, to be consistent with the US approach to other non-nuclear weapons states under the Non-Proliferation Treaty;
  • sanctions on joint ventures related to the mining, production, or transportation of uranium;
  • exclusion of Iranian citizens from higher education coursework related to careers in nuclear science, nuclear engineering, or the energy sector; and
  • designations of certain SDNs and/or FSEs.

EU and EU Member States Sanctions Relief Under the JCPOA

The EU sanctions relief tracks the two-step process of the JCPOA. In the first step, the EU and EU Member States have agreed to terminate5 —on Implementation Day—certain provisions of Council Regulation 267/20126 and Council Decision 2010/413/CFSP7 (and any national implementing legislation) imposing “economic and financial sanctions.” In the second step, on Transition Day, the EU will seek to terminate the sanctions suspended in the first step and terminate EU proliferation-related sanctions. As such, EU proliferation-related sanctions, among some other measures, will remain in place for eight years after Implementation Day.8

The following is a broad overview of the main EU sanctions relief that will occur on Implementation Day:

Financial, banking and insurance measures. The transfer of funds between EU and Iranian persons (including EU and Iranian natural persons and legal entities such as financial and credit institutions) will be permitted without prior authorization or notification. Thus, Iranian nationals and EU Member State nationals will be free to conduct business with one another, with the exception of transactions involving proliferation-related goods or services.

Iranian banks will be allowed to open new branches, subsidiaries, or representative offices, and to establish new joint ventures, in the territories of EU Member States. Similarly, EU persons, including financial and credit institutions, will be allowed to open representative offices, subsidiaries, joint ventures or bank accounts in Iran. EU persons will be able to provide insurance and reinsurance to Iranian persons as well as the Iranian government.

EU Member States will be free to provide financial support for trade with Iran, including the granting of export credits, guarantees or insurance. Finally, the JCPOA would liberalize the trade of public or public-guaranteed bonds to and from Iran, the Iranian government, the Central Bank of Iran or Iranian banks and financial institutions.

Oil, gas and petrochemical sectors. The JCPOA will allow trade in Iranian crude oil and petroleum products, natural gas and petrochemical products, as well as related financing. Similarly, the sale, supply or transfer of equipment and technology, as well as the provision of technical assistance and training in this sector will be permitted. EU persons will also be free to grant financial loans or credit, and to participate in joint ventures with any Iranian persons engaged in the oil, gas and petrochemical sectors in Iran or elsewhere.

Metals, shipbuilding and transport sectors. The sale, supply, transfer or export of graphite and raw or semi-finished metals (such as aluminium and steel) to any Iranian person in connection with activities not prohibited by the JCPOA will be permitted.

The JCPOA also allows the sale, supply, transfer or export of naval equipment and technology for shipbuilding, maintenance or refit. It will also be permitted to provide or design cargo vessels and oil tankers for both the private and public sectors.

EU Member States will grant access to all cargo flights operated by or originating from Iran. EU persons will also be allowed to provide goods and services to Iranian vessels and aircraft not carrying prohibited items.

Precious metals, banknotes and coinage. The JCPOA will also permit trade in gold and other precious metals, as well as diamonds. The Central Bank of Iran will be able to receive newly printed or minted or unissued Iranian denominated banknotes and coinage from EU persons.

Delisting blocked persons. Annex II to the JCPOA contains a list of Iranian persons to be delisted, and accordingly whose funds and economic resources will no longer be frozen. The travel ban applying to these persons will also be lifted.

UN Sanctions Relief Under the JCPOA

Under the JCPOA, all sanctions imposed by United Nations Security Council (UNSC) resolutions concerning Iran9 will be lifted on Implementation Day. This includes the current arms embargo. There are, however, two important caveats to this sanctions relief.

  • First, in the event of “significant non-performance” by Iran of its obligations under the JCPOA, the UNSC may re-impose the sanctions using a "snap-back" mechanism. If, having exhausted a mediation-based dispute resolution process, a complaining party notifies the UNSC of “significant non-performance” by Iran, the UNSC shall vote on a resolution to continue the sanctions relief. If such a resolution is not adopted, the sanctions would be re-imposed. This means that a permanent member of the UNSC can use its veto power to block lifting of the UN sanctions.
  • Second, the JCPOA explicitly contemplates that the UNSC will establish “specific restrictions, including restrictions regarding the transfer of proliferation sensitive goods.”10

In accordance with the terms of the UNSCR (UN Security Council resolution) endorsing the JCPOA, 10 years from Adoption Day will mark UNSCR Termination Day, provided that the provisions of previous UNSC resolutions have not been reinstated. On UNSCR Termination Day, the provisions and measures imposed in resolutions concerning Iran would terminate and the UN Security Council would no longer be seized of the Iran nuclear issue.


The JCPOA is a significant and likely historic agreement, intended to address the major geo-political challenge posed by Iran's nuclear ambitions. The JCPOA provides Iran with significant sanctions relief, and facilitates Iran's re-entry into the global economy, including the energy markets. It will also allow for European and other non-US Persons to return to Iran, and to engage in business with a wide range of individuals and entities that had been subject to sanctions designations in recent years.

The timing of major sanctions relief remains dependent on a number of political, commercial and legal variables, particularly with respect to the inspection timeline for nuclear facilities and programs within Iran. Nevertheless, it is anticipated that many businesses will begin to explore the parameters of expanded commercial ties with Iran, subject to the remaining legal and practical restrictions to doing so. As this environment evolves, we will continue to provide further updates on the changing dynamics for US and non-US persons seeking to further engage in the Iranian market.