LawFlash

Joint Plan of Action Regarding Iran's Nuclear Program Announced

July 15, 2015

US sanctions are not immediately lifted due to the announcement.

On July 14, the United States, European Union, United Kingdom, France, China, Russia, and Germany (P5+1/E3/EU+3 countries) and Iran reached a Joint Comprehensive Plan of Action (JCPOA) deal regarding Iran’s nuclear program. The JCPOA, if fully implemented, will provide Iran with phased US and EU sanctions relief upon verification that Iran has implemented key nuclear commitments outlined in the JCPOA.

Implementation Date

US sanctions relief is to be provided through the suspension (and eventual termination) of nuclear-related secondary sanctions. Under the JCPOA, the sanctions relief will be initiated after the International Atomic Energy Agency (IAEA) verifies that Iran has implemented key nuclear-related measures (Implementation Day). The estimated time frame for when Implementation Day will occur is December 2015. Of course, there is no certain date or assurance that the IAEA will be able to verify from Iran the necessary information to satisfy the conditions described in the JCPOA. The US government has stated it will publish detailed guidance related to the JCPOA relaxation of US sanctions prior to Implementation Day.

In the meantime, the P5+1 and Iran also decided on July 14 to further extend, through Implementation Day, the sanctions relief already provided for in the Joint Plan of Action (JPOA) of November 24, 2013 (as extended through July 2015). The JPOA sanctions relief—which has been in effect since November 2013—is the only Iran-related sanctions relief in effect until further notice. Therefore, the announcement of a deal with Iran does not result in any immediate change in US sanctions against Iran.

US Persons and Prohibition on Negotiating Executory Contracts

Notwithstanding the reaching of a deal regarding the JCPOA, “US Persons” are still currently prohibited from entering into executory contracts for Iran-related transactions until US sanctions are lifted after Implementation Day. The term “US Person” includes the following: any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States and an entity that is “owned or controlled” by a United States person and established or maintained outside the United States. An entity is “owned or controlled” by a United States person if it (i) holds a 50% or greater equity interest by vote or value in the entity; (ii) holds a majority of seats on the board of directors of the entity; or (iii) otherwise controls the actions, policies, or personnel decisions of the entity.

A US Person signing an executory contract involving Iran-related transactions before Implementation Day would constitute dealing in an interest in property involving Iran, which is prohibited. The current Iran sanctions regulations expressly state that such executory contracts are an interest in property because they involve “contracts of any nature whatsoever, and any other property, real, personal, or mixed, tangible or intangible, or interest or interests therein, present, future, or contingent.”

Action by US Congress

Under novel legislation that was recently enacted into law regarding any deal with Iran, the US Congress will now have a 60-day window in which to review the Iran deal. Under this legislation, Congress may (i) pass a resolution approving the deal with Iran, (ii) pass a resolution disapproving the deal, or (iii) do nothing. President Obama has stated that he will veto a resolution of disapproval. Congress would then need to override the President’s veto with a two-thirds vote of each House of Congress.

Aside from US Congressional approval of the Iran agreement (or a failure to override the President’s veto if Congress does not approve the deal), US Congress will need to repeal/terminate a number of statutes found in various Acts of Congress that impose sanctions on Iran. Repeal of such Acts requires affirmative steps by Congress and cannot happen automatically. Congress need not move to repeal the applicable statutes within any particular time frame, if at all.

US State and Local Sanctions

After Implementation Day, if a law at the state or local level in the United States is deemed to be preventing the implementation of the lifting of sanctions as specified in the JCPOA, the US government is supposed to take appropriate steps—taking into account all available authorities—to achieve such implementation. Accordingly, the US government will actively encourage officials at the state or local level to take into account the changes in US policy reflected in the lifting of sanctions and ask that states refrain from actions inconsistent with the policy change. As a result, some state and local Iran sanctions measures may not be lifted contemporaneously with the federal sanctions.

European Union Sanctions

Under Annex II of the JCPOA, the EU and EU Member States commit to terminate all provisions of Council Regulation (EU) No 267/2012 (as subsequently amended) that currently implement all nuclear-related sanctions or restrictive measures against Iran. These measures comprise various financial, banking, and insurance measures; remaining sanctions targeting the oil, gas, and petrochemical sectors; shipping, shipbuilding, and transport sectors; and sanctions on gold and precious metals, arms, and various nuclear proliferation-related measures.

Asset freezes and visa ban measures applicable to targeted individuals and Iranian institutions will also be lifted after Implementation Day. However, the EU states that “unless specifically provided otherwise, the sanctions lifting . . . does not apply to transactions that involve persons still subject to restrictive measures and is without prejudice to sanctions that may apply under legal provisions other than those referred to in Section 1 of Annex II.” This means that individuals, institutions, and companies that are on the target lists for other reasons than the Iran sanctions will not benefit from the measures.

In January 2014, the EU partially suspended its Iran sanctions as a show of good will regarding the nuclear negotiations (certain exports of petrochemical products in the EU, trades with gold and precious metals, and money transfers up to a certain limit were already allowed).

United Nations Sanctions

A UN Security Council resolution endorsing the terms of the JCPOA was introduced on July 14 and is expected to take 7-10 days to be adopted. The JCPOA required such a resolution to be submitted promptly after the conclusion of the JCPOA negotiations for “adoption without delay.” On Implementation Day, UN sanctions against Iran will widely be lifted through termination of the provisions imposed by the following UN Security Council resolutions:

  • 1696 (2006) (demanding that Iran suspend enrichment and reprocessing-related activities)
  • 1737 (2006) (imposing sanctions banning the supply of nuclear materials and technology and freezing assets of persons and companies related to Iran’s nuclear program)
  • 1747 (2007) (imposing a ban on Iranian arms exports and freezing additional Iranian assets)
  • 1803 (2008) (expanding the freeze on Iranian assets, and calling for member states to monitor Iranian individuals and banks involved in Iran’s nuclear program and inspect Iranian ships and aircraft)
  • 1835 (2008) (reaffirming previous sanctions resolutions)
  • 1929 (2010) (freezing Iranian Revolutionary Guard and Islamic Republic of Iran Shipping Lines funds, further restricting the activities of Iranian banks and of non-Iranian banks’ activities in Iran and other “proliferation-sensitive activities,” and tightening the UN arms embargo)
  • 2224 (2015) (extending the UN “panel of experts” mandate to report on issues related to the implementation of UN sanctions on Iran)

These UN sanctions are subject to re-imposition in the event of significant non-performance by Iran of JCPOA commitments, and specific restrictions, including restrictions regarding the transfer of proliferation-sensitive goods, will continue to apply. However, it is not clear whether such a re-imposition would be automatic, or might be blocked by a Security Council member veto.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, DC
Margaret M. Gatti
Carl A. Valenstein
Marynell DeVaughn
Dr. Axel Spies

For further information or assistance, you may contact one of our International Trade Group attorneys listed above, or if you prefer, the Morgan Lewis partner or Of Counsel with whom you normally work.