Late on Saturday 16th January 2016, The International Atomic Energy Agency (IAEA) General Director Yukiya Amano submitted a report to the IAEA Board of Directors and the UN Security Council, and subsequently confirmed that Tehran has adhered to all the terms of the JCPOA agreement that were required to trigger Implementation Day. Within hours, nuclear-related sanctions were lifted.
The EU foreign policy chief, Federica Mogherini, announced the lifting of sanctions as set out in the JCPOA, as a result of Iran having "
fulfilled its commitment".
U.S. Secretary of State, John Kerry released the following Press Statement:
"I hereby confirm that the International Atomic Energy Agency has verified that Iran has fully implemented its required commitments as specified in Sections 15.1-15.11 of Annex V of the Joint Comprehensive Plan of Action (JCPOA). The U.S. sanctions-related commitments described in Sections 17.1-17.5 of Annex V of the JCPOA are now in effect."
The sanctions affected by Implementation Day include not only the UN Security Council resolutions in relation to the Iranian Nuclear programme but also, importantly, those imposed separately by the EU and the U.S.
The EU position
The majority of the provisions of EU Council Regulation No. 267/2012, as amended, have been replaced by two EU Council Regulations (2015/1861 and 2015/1862) and an EU Council Decision (2015/1863), which entered into force on the 18th October 2015 but were only applicable from Implementation Day.
In particular, provisions prohibiting or restricting business in the financial, banking, insurance, petroleum and shipping sectors have been lifted. Additionally, numerous Iranian individuals have been delisted (although others will remain listed) and their assets unfrozen.
In relation to the banking sector, the EU guidance note on the lifting of sanctions explains that a number of activities may once more be undertaken including, but not limited to, the following:
- EU financial institutions are now permitted to clear transactions with non-listed Iranian persons or entities;
- It is permissible to transfer funds with non-listed Iranian banks. As such, all limitations to transfer funds to or from Iran, applicable to non-listed Iranian banks, financial institutions and bureaux de change, as well as any subsidiary or branch, cease to apply;
- Iranian Banks are now able to re-connect with SWIFT (subject to the completion of SWIFT’s normal connection process: administrative and systems checks, connectivity and technical arrangements);
- As of Implementation Day, a number of listed Iranian banks and financial institutions are delisted. Consequently, delisted Iranian banks and financial institutions will have access to their frozen funds in the EU;
- EU Member States are no longer prohibited from entering into new commitments to provide financial support for trade with Iran, including the granting of export credits, guarantees or insurance, to EU nationals or entities.
Similarly, as of Implementation Day, the provision of underwriting services, insurance, or reinsurance to Iranian bodies, entities and persons including extending insurance coverage to, or paying claims involving, Iranian entities is now permitted.
A few sanctions (relating to nuclear proliferation, metals, software and arms) will either remain in place or will be amended. For instance, in the case of trade relating to metals the amendments now apply the requirement:
"Prior authorisation to be granted on a case-by-case basis by the competent authorities of the Member State is needed for the sale, supply, transfer or export of graphite and raw or semi-finished metals and the provision of technical assistance or training, financing or financial assistance. The list of items covered by this restriction can be found in Annex VIIB to Council Regulation 267/2012, as modified by Council Regulation No 2015/1861."
The extensive list of items includes the metals, and associated products of, Iron and Steel, Aluminium, Titanium and Nickel.
The U.S. position
On the 18th October 2015, and to apply from Implementation Day, the United States issued contingent waivers on the secondary sanctions on non-U.S. individuals or entities for engaging in certain Iranian transactions, as set out above. Importantly, from a U.S. point of view, these sanctions are merely being suspended, and further, the prohibitions and restrictions on U.S. persons and entities, including foreign subsidiaries of U.S. companies, entering into Iranian transactions, will remain in force.
The United States has also committed to allow certain other transactions. Those relating to, (i) commercial passenger aircraft; (ii) the license of non-U.S. entities that are owned or controlled by a U.S. person to engage in activities with Iran that are consistent with the JCPOA; and (iii) to license the import into the United States of certain Iranian-origin products, such as carpets and foodstuffs. Additionally, several individuals and entities will be removed from the list of "specially designated nationals" whose assets are blocked by the U.S.
On the 16th January 2016 the U.S. Office of Foreign Asset Control (OFAC) also published a number of papers containing guidelines on the effects of Implementation Day. Whilst these will take some time to consider, one statement did stand out:
"With the exception of the three categories of activities described above, none of the sanctions-related commitments outlined in this guidance apply to U.S. persons, and U.S. persons, including U.S. companies, continue to be broadly prohibited from engaging in transactions or dealings with Iran and the Government of Iran unless such activities are exempt from regulation or authorized by OFAC [emphasis added]"
The JCPOA also provides for the United States to take measures for the termination of sanctions, set out above, that will be suspended on Implementation Day. However, this will not be done until "Transition Day", which will take place 8 years after "Adoption Day" at the latest.
Conclusion re U.S. and EU position
From a U.S. perspective, things are still rather uncertain. A substantial number of congressmen oppose the moves and are attempting to restrict the President’s ability to readily lift nuclear-related sanctions. Allegations that Iran acted improperly in the recent detention of US sailors, also gives support to the sceptics, though their recent release along with detainees including a Washington Journalist, will have gone some way to redressing those arguments. However, U.S. Republican House Speaker Paul Ryan said the Obama administration had moved to lift economic sanctions "on the world's leading state sponsor of terrorism", which neatly illustrates the dichotomy of political feeling in Washington.
Somewhat frustratingly, the situation is very fluid at the moment and no one wants to commit themselves to predicting what the U.S. Trade situation is likely to be after Implementation Day and in the coming months and years. There is certainly a feeling in some factions that the U.S. will be left behind in trade with Iran, if it continues to stringently uphold its self-imposed sanctions, when the rest of the world has relaxed theirs.
Further, from a European point of view, the levels of uncertainty in the extent to which remaining U.S. sanctions may affect world trade with Iran, are likely to cause European companies to proceed with extreme caution. This situation has been compounded by new U.S. sanctions imposed, merely a day after Implementation Day took effect, on 11 individuals and companies for their alleged involvement in Iran’s Ballistic Missile programme.
Perhaps the largest remaining uncertainty is precisely what the U.S. Treasury Department / OFAC (which administers most of the sanctions) will do after Implementation Day in order to effect the required nuclear-related sanctions relief.
Our U.S. sources indicated optimistically that there will be a commercial relaxation of sanctions in order to promote trade with Iran at an initial stage.
The detailed guidelines on sanctions relief that have been issued by OFAC do give further clarity, though they are not particularly positive reading from the point of view of a U.S. company wishing to do trade in Iran. However, we will still have to wait and see how these guidelines are put into practice and are monitoring this very closely.
Indeed, we understand that the number of applications to OFAC for licences to trade with Iran has increased tremendously. Companies such as Daimler Benz have sought a licence to trade and applications for materials such as Aluminium and other minerals have been received.
Iranian Shipping and Trade Disputes
Given the fact that regular trade may now resume between Iran and the international community, it is natural to assume that all of the concomitant disputes associated with the normal course of international trade are likely to arise at some point. Iran presents a myriad of complex issues that require a knowledgeable and practised approach with strong local knowledge and contacts. M Taher & Co have a broad network of the best local correspondents and we, as a firm, are well equipped to deal with a broad range of legal issues arising in this area including, amongst others:
- The enforcement of foreign and Iranian Judgments in Iran, including English judgments and Arbitration Awards and those of New York Convention states;
- The Arrest of Foreign and Iranian Vessels in Iran (Under the 1952 International Arrest Convention for Ships, The Maritime Law of Iran 1964 and the Civil Procedure Code of Iran);
- The Arrest of cargo in Iranian ports;
- Counter Security provisions;
- Updates on Civil and Commercial procedural reforms in Iran.
What is certain is that this is a watershed moment in global trade, which will have a major impact on trade planning for the shipping and international trade community. It is vital that those with potential interests in the region maximize their opportunities as quickly as possible.
The M Taher & Co Team