The E3/EU+3 (France, Germany, the United Kingdom, the European Union, China, Russia and the United States) and Iran announced on 14 July 2015 that they had reached agreement on a Joint Comprehensive Plan of Action (JCPOA) regarding Iran’s nuclear program.
If the JCPOA is implemented according to plan, it will open up important business opportunities for many foreign companies, allowing them to invest in the Iranian economy and enter into various transactions with Iranian parties and relating to Iranian products. At the same time, it is clear that there will be no immediate relief of sanctions and that none is expected to come into force in the coming months.
The JCPOA requires Iran to implement stringent restrictive measures regarding its nuclear programme in exchange for broad relief of EU and US sanctions against Iran. Any sanctions relief will be implemented in phases if and when Iran implements the measures imposed on it, which is to be verified by the International Atomic Energy Agency (IAEA). This process will probably take considerable time, and any relief of sanctions is not expected to become effective until early 2016.
In anticipation of this, the existing suspension of certain EU and US sanctions has been extended. The other EU and US sanctions, however, must still be complied with. The JCPOA also provides for a “snap back” mechanism, allowing the reinstatement of all or certain sanctions if Iran does not comply with the JCPOA. Certain non-nuclear related sanctions are not affected by the JCPOA and will remain in full force.
In the coming months, many companies are expected to consider whether to prepare to enter or re-enter the Iranian market and establish or renew relationships with Iranian parties in anticipation of the JCPOA’s implementation. While doing so, companies should, in relevant part:
- continue to comply with all current sanctions until sanctions relief is implemented
- determine which current sanctions apply to the contemplated activities and whether and when those sanctions will be lifted
- verify whether any relevant agreements (such as financing and banking facilities, or supplier agreements) must be amended before the contemplated activities can be developed.
In addition, companies should be mindful that:
- certain existing EU or US sanctions may not be lifted at the same time or not at all
- any US subsidiaries and US employees remain subject to stringent sanctions against Iran
- sanctions may be re-imposed, which might require winding down the newly developed activities.