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90 or 180, wind-down and legacy: Iran, 8 May and the JCPOA

Introduction
 
On 8 May 2018 President Trump announced US withdrawal from the JCPOA and phased reintroduction of the US nuclear-related sanctions removed by that agreement.
 
Amid the major geopolitical upheaval, commercial parties must concentrate on acting advisedly on any Iran-related business, and this brief note offers some initial guidance.  
 
First of all
 
Many will have contracts with Iran and Iranian entities, and the measures are not immediate. Instead parties have either 90 or 180 days, so until 6 August and 4 November respectively, to wind down and conclude existing affected business, or face action. This is very likely to include secondary sanction – action against the non-sanctioned who deal with the sanctioned – though this is not yet wholly clear.
 
Key dates
 
So direct US sanctions previously removed under the JCPOA, and any secondary action, will not resume until either 6 August (90 days from 8 May) or 4 November (180 days from 8 May), depending in each case on the subject matter.
 
6 August 2018
 
This applies to more general activities like Iran's purchase of USD banknotes, trade in precious metals, the supply of commodities like graphite, aluminium, steel and coal and also software for integrating industrial processes, dealings in rials and Iranian sovereign debt and as to its car sector.
 
4 November 2018
 
This applies specifically to:
 
(a) Iran’s port operators and shipping and shipbuilding sectors, including as to IRISL;
 
(b) petroleum-related transactions, including as regards NIOC and NITC;
 
(c) transactions with the Central Bank and other designated financial institutions; 
 
(d) underwriting services, insurance or reinsurance; and
 
(e) Iran’s energy sector. 
 
Wind-down
 
Parties are expected to wind down all affected trades by the applicable key date - or face "exposure to sanctions or an enforcement action”.
 
A key point will be the fate of term and other contracts whose activity would ordinarily go beyond. As a matter of private contract, much would depend on (i) their governing law (ii) any provision dealing with reimposition of sanctions - wording addressing any JCPOA "snap back" might be relevant here and (iii) civil law concepts like frustration and anything similar.
 
Immediate steps
 
Parties should first consider the actual subject of their contract and obtain guidance on which (if either) timetable applies. While it may in some cases be possible to renegotiate or otherwise bring matters forward, many will want to seek urgent advice if any outstanding performance will or could fall after the applicable key date.  
 
Payments falling due later
 
Provided that all activity was originally compliant, a party can still validly receive payment after the applicable key date:
 
(a) for goods or services which had been wholly supplied or provided beforehand and under a written agreement concluded before 8 May 2018; and 
 
(b) of a loan or other credit amount which had been extended beforehand and under a written agreement concluded before 8 May 2018.
 
US persons
 
This major JCPOA exception is of course unchanged, and after each applicable key date the US will revoke all relevantgeneral and specific licences to US companies and their non-US subsidiaries (for example, General Licences H and L) and will not likely issue any further broad waivers.
 
Those blocked under Executive Order 13599, and pre JCPOA SDNs
 
Many such will (again) become Specially Designated Nationals no later than 5 November. Any who then deal with them will, or in some cases may, be subject to secondary sanctions.
 
General 
 
The more detailed response of for example France, Germany, the UK and the wider EU remains to be seen, and it is not yet known whether some EU blocking legislation – perhaps like that relating to Cuba sanctions - will emerge as an attempt to insulate EU entities from secondary reach.
 
M Taher & Co has long experience and great expertise in advising on all aspects of sanctions, including of course their interpretation, scope and applicability and any action that either must be avoided or might be taken, whether in general or as regards any individual case, and on a personal life or corporate trade basis.
 
Yesterday’s announcement will bring about much uncertainty and may in some cases require considerable and careful commercial reversal, and if you need specific advice or would like generally to discuss any point or topic in this note please contact Maryam TaherTim Stephenson or Paris Pantelis.


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