Iran Sanctions Update - October 2015

Iran Sanctions Relief

On Tuesday July 14, 2015, after 22 months of negotiations, the Islamic Republic of Iran and the G5+1 group of countries - the United States, Britain, France, Russia and China plus Germany – together with the EU High Representative for Foreign Affairs finally reached an agreement to end sanctions against Iran.

When will Sanctions Relief happen?

Following the landmark nuclear deal the Swiss Federal Council officially lifted most of Switzerland’s sanctions against Iran on 12 August 2015.

However, before the US and the EU implement meaningful economic and sectoral sanctions relief (including the lifting of the asset freezes against various Iraninan banks and financial entities), the IAEA (International Atomic Energy Agency) will have to confirm that Iran has fulfilled certain technical steps and reported them to the UN Security Council.

Timeline of sanctions relief from 2015

The JCPOA (Joint Comprehensive Plan of Action) establishes a specific timeline for sanctions relief which is scheduled to proceed in stages broadly in step with Iran’s fulfilment of its obligations under the deal.

Finalisation Day (14 July 2015) – the day the agreement was reached. Following the conclusion of the negotiations of the JCPOA, United Nations Security Council Resolution (UNSCR) 2231 was adopted unanimously (20 July 2015). Under UNSCR 2231, if a JCPOA participant state believes that Iran has not performed its commitments, it can bring the issue before the Security Council and require Iran to resolve the matter. Commencing with the day of the adoption of UNSCR 2231 the U.S. Congress has a 60-day Congressional review period (20 July 2015-17 September 2015) to approve, stay silent, or disapprove of the deal. If a majority of both houses of Congress disapprove, President Obama can veto the resolution of disapproval and – unless Congress can override that veto with a two-thirds majority – the deal will be approved from the US side. A week before the end of the adoption period it is clear that opponents of the deal have failed to secure the required two-thirds majority in both Houses of Congress necessary to sink the agreement. During the 60-day review period, President Obama cannot lift sanctions. Adoption Day (Approximately 20 October 2015) – 90 days after the UNSC endorses the JCPOA, or earlier based on a date agreed by JCPOA participants. On Adoption Day the EU and U.S. will adopt appropriate measures terminating (or waiving) restrictive measures imposed against those entities listed with Annex 1 of Attachment of JCPOA.

This will include the majority (but not all) of listed Iranian banks and financial institutions and their EU based subsidiaries as well as major petrochemical, shipping and oil and gas companies. Implementation Day (likely to be in the first quarter of 2016) when the International Atomic Energy Agency verifies that Iran has taken a number of steps under the agreement related to its nuclear programme. Simultaneously, the EU will terminate certain Council Regulations that impose sanctions on Iran’s financial, banking, oil, petroleum, transport, and insurance sectors, as well as lifting sanctions on various individuals. The US will also cease the application of many so-called “secondary sanctions”. i.e., those sanctions that prevent non-US persons from conducting transactions with Iran and Iranian persons. These sanctions target Iran’s financial and banking sectors, as well as its oil and petrochemical industries. The majority of US sanctions preventing US persons from conducting transactions in Iran will remain in place, though foreign subsidiaries of US persons may be permitted to engage in certain transactions, and US companies will be able to sell commercial passenger aircraft to Iran. OFAC will also issue general licenses in order to authorize activities that would otherwise remain prohibited under the remaining sanction with regard to Iran. The United Nations Security Council will also terminate Security Council Resolutions 1696, 1737, 1747, 1803, 1835, 1929 and 2224, subject to their re-imposition in the event of significant non-performance by Iran of its JCPOA commitments.

What does this mean for existing litigants and those who still wish to challenge EU sanctions?

For the time being all EU and US sanctions remain in force and they will do so at least until implementation day. Litigants challenging sanctions should therefore continue their actions. Where appropriate, individuals and companies subject to sanctions should also consider filing new challenges before the implementation date, as this might be important in terms of reserving any possible right to bring a future claim for damages. Despite the termination of sanctions, those successful in challenging the sanctions will be able to claim damages from the relevant authorities such as the Council of the European Union.

What does it mean for business?

The JCPOA is an historic moment in engagements with Iran. Many EU companies have already extended their marketing efforts in Iran over the last 12 months. A few days after Finalisation Day the German minister of economics and the French foreign minister made high-profile visits to Tehran, easing an early entry by German and French industry and finance. Other senior EU ministers from the Italy, Austria and the UK have also followed suit. Many EU countries, including the United Kingdom, have now formally re-established diplomatic relations with Iran.

Early entrants will have a significant advantage in taking advantage of the opening up of trading links between Iran and the rest of the world. For those hoping to capitalize on the unique opportunities the time to prepare the groundwork for future business starting on implementation is now.

We expect international business to jockey for pole position in an effort to become an exclusive supplier. On 4 August 2015 it was announced that German banks would set up branches in Iran on a joint-venture basis with domestic branches.

This will give German and other EU investors and exporters a head start. Clients will be inhibited from taking full advantages of opportunities open to them from Implementation Day, if their governments and bankers are not well prepared to reestablish and facilitate trade and credit facilities. Where you think they might not be, no time is to be lost in lobbying government, the public sector and the banking sector, before the wholesale easing of US and EU sanctions on Implementation Day – which is still some months off.

Further, we anticipate that the billions of dollars of previously blocked funds which will now be released may in part be earmarked to pay listed Western suppliers. This will provide the West transparency over the use of unblocked funds.

A “sanctions snap-back” forms part of the deal. If the West feels Iran has not lived up to its side of the bargain then sanctions may snap back within 65 days. Some international businesses therefore continue to tread carefully and are reticent to rush back into the Iranian market, fearful that sanctions may snap back, preventing performance of contracts agreed but not yet fulfilled. In our view, this possibility cannot and should not be discounted, but legal and practical precautions, rather than outright reluctance are the best policy here.


Some reports have suggested Iran’s annual economic growth could increase by three per cent in the year following the nuclear deal, with estimates pegging it at seven or eight per cent at 18 months post-deal — the same rate of growth as some of Asia’s “tiger economies.”

What does the JCPOA actually say?

The JCPOA runs to some 159 pages. In summary:

  • Iran’s nuclear program which was hitherto perceived as a threat to global security will now be recognized as a field for international cooperation with other countries.

  • Iran will be recognized by the UN as a country with nuclear technology and be entitled to rights of peaceful nuclear program including enrichment and full fuel cycle.

  • All UN economic and financial sanctions against Iran are scheduled to be removed by a Security Council resolution.

  • All UN economic and financial sanctions against Iran are scheduled to be removed by a Security Council resolution.

  • Iran will continue nuclear enrichment. Iran’s nuclear infrastructure will be preserved. No centrifuge will be destroyed and research and development on all advanced centrifuges including IR-4, IR-5, IR-6 and IR-8 will continue.

  • The Arak heavy water reactor will not be dismantled. Any demands to return the facility to a light water reactor have been dismissed. The facility will be modernized and enjoy new additions through cooperating with owners of most advanced and secure world technologies.

  • Iran will enter global markets as a producer of nuclear products especially in the case of ‘enriched uranium’ and ‘heavy water’. All sanctions and limitations against imports and exports of nuclear material will be annulled.

  • All economic and financial sanctions in the fields of banking, oil, gas, petrochemicals, insurance, and transportation as imposed by the EU and the US under the pretext of Iran’s nuclear program will be immediately lifted upon the implementation of the agreement.

  • The ban on Iran’s missile activities including ballistic missiles will be limited to missiles designed for nuclear weapons.

  • Iran’s arms embargo will be lifted, replaced with some restrictions to be removed in 5 years.

  • The ban on purchasing sensitive dual-use items will be lifted and Iran’s needs will be met more easily through Iran and 5+1 joint commission.

  • The ban on Iranian students studying in the fields related to nuclear energy will be fully lifted.

  • For the very first time, the ban on the purchase of passenger aircraft will be lifted and Iran will be provided with the opportunity to reconstruct the country’s air fleet and improve its flight security.

  • Billions of Iran’s blocked revenues in foreign banks will be unfrozen.

  • A total of 800 individuals and legal entities, including the Central Bank of Iran (CBI), the Islamic Republic of Iran Shipping Lines and the National Iranian Oil Company (NIOC), will be released from any sanctions.

  • Iran’s access to trade, technology, financial and energy will be facilitated.

  • The ban or limitations on Iran’s economic cooperation in all fields including investment in oil, gas and petrochemical industries will be removed.

  • Iran will be offered international cooperation for building nuclear power plants and research reactors.

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