On Saturday, 16 January 2016, the UN nuclear watchdog, the International Atomic Energy Agency ("IAEA"), confirmed that Iran had dismantled significant elements of its nuclear programme and fulfilled its nuclear-related commitments under the Joint Comprehensive Plan of Action ("JCPOA"). This confirmation enabled "Implementation Day" to take effect, prompting the UN, EU and US sanctions relief set out in the JCPOA to commence. The new EU measure can be found here, and the US announcement can be accessed here.

By way of Regulation 2015/1861, which was signed on 18 October 2015 and which entered into force on 16 January 2016, the EU has terminated its nuclear-related economic sanctions against Iran. These sanctions included prohibitions on dealing with certain designated parties and a freezing of their funds; an embargo on purchasing Iranian crude oil and gas products and other product controls; and funds transfer controls and reporting requirements.

The EU's terrorism- and human rights-related sanctions remain in place, therefore those blacklisted under anti-terrorism and human rights sanctions will continue to be listed, and the arms embargo will remain in force.

EU Sanctions Relief

Below we provide a brief summary of the sanctions relief instituted by the EU on Implementation Day. More detailed guidance can be found in the related Information Note published by the European Union External Action Service ("EEAS"), which sets out the EU nuclear-related economic and financial sanctions that were lifted on Implementation Day, the new EU legislative framework, and the sanctions that remain in place post-Implementation Day.

  1. Designated Parties

The EU has de-listed over 400 blacklisted Iranian people and entities, who will now be able to do business with the EU. Certain entities and individuals remain listed under EU sanctions, including a number of banks, namely Ansar Bank, Bank Saderat Iran, Bank Saderat PLC, Bank Sepah, Bank Sepah International, and Mehr Bank.

When considering business in Iran, it is important to continue to screen counterparties, as well as their owners and directors, against EU sanctions lists to ensure that they do not remain listed.

The removal of restrictions on certain persons, entities and bodies who were currently subject to asset freezes will also result in the releasing of funds currently frozen in accounts around the globe. Speculation as to the amount of funds that will be released ranges from US$ 29 billion (as quoted by the Central Bank of Iran) to US$ 50 billion (as quoted by the US Treasury) to as high as US$ 100 billion (as speculated by critics of the JCPOA).

  1. Product Controls

Prior to Implementation Day, supplying dual-use items, nuclear items and military items, as well as certain oil, gas and petrochemicals products, was prohibited. Post-Implementation Day, Regulation 2015/1681 provides, inter alia, that:

  • the supply to Iran of military items (Missile Technology Control Regime items listed in Annex III to Regulation 2015/1861), including the provision of technical assistance, brokering or financial assistance related to those goods, remains prohibited (Article 1(5));
  • the sale, supply, transfer or export of nuclear "Trigger List" items, certaindual-use and other items (listed in Annexes I and II to Regulation 2015/1861), and technical assistance or brokering related to these items, which was prohibited under Council Regulation (EU) 267/2012, is now permitted subject to prior authorisation (although we note that it is unlikely that permission will be granted for Trigger List items) (Article 1(2));
  • the sale, supply, transfer or export to Iran of key equipment or technology, including equipment in the oil and gas sectors, which was prohibited under Council Regulation (EU) 267/2012 is now permitted under Regulation 2015/1861 (Article 1(7));
  • the import or purchase of crude oil, petrochemicals and gas, originating in Iran or having been exported from Iran, which was prohibited under Council Regulation (EU) 267/2012 is now permitted by Regulation 2015/1861 (Article 1(9));
  • the sale, purchase, supply, transfer, import or export of gold, precious metals, diamonds, banknotes and coinage to or from the Government of Iran or any person controlled by it, which was prohibited under Council Regulation (EU) 267/2012 is now permitted by Regulation 2015/1861 (Articles 1(9) and (11)); and
  • the provision of granting financial loans or credit to Iranian persons involved with oil and gas or petrochemicals which was prohibited under Council Regulation (EU) 267/2012 is now permitted by Regulation 2015/1861 (Article 1(11)).
  1. Funds Transfer Controls

Additionally, Regulation 2015/1861 removes fund transfer controls currently in place, including prohibitions on the transfer of funds to or from financial institutions in Iran, the opening of representative offices or bank accounts in Iran, the sale or purchase of public bonds from Iran and the provision of insurance or reinsurance to Iran and its government (Article 1(15)).

The obligation to make a prior notification, or to obtain prior authorisation, before funds transfers over certain amounts to or from Iran has also been removed. However, while the funds transfer reporting requirements have been removed under EU law, EU banks may not yet feel confident in dealing with funds originating from Iran, due to the possibility of violating the remaining US sanctions against Iran. For more on this, see our US blog post "Overview of U.S. "Implementation Day" Sanctions Relief Under the JCPOA", available here.

Snap Back

The EU, like the US, has reserved the right to re-implement sanctions against Iran (known as "snap-back" provisions) in the event that Iran is found to have violated its obligations under the JCPOA.

Future Steps

Following Implementation Day, the next milestone set out under the JCPOA is Transition Day, which will be 8 years from July 2015, or the date on which the IAEA confirms that Iran's nuclear material remains peaceful.

On Transition Day, the EU and US will terminate or modify their remaining nuclear-related sanctions against Iran. Provided that the resolutions and sanctions against Iran are not reinstated, the JCPOA will terminate 10 years from July 2015 on what will be known as Termination Day.