Worldwide: Implementation Day For The P5+1 Iran Nuclear Agreement: What It Means For Canadian And International Businesses

Last Updated: January 19 2016
Article by Milos Barutciski, Matthew S. Kronby and Jessica B. Horwitz

January 16, 2016, marked "Implementation Day" for the Joint Comprehensive Plan of Action (JCPOA), the historic nuclear non-proliferation and sanctions reduction agreement reached between the "P5+1" countries (the United States, the United Kingdom, China, Russia, France and Germany), the European Union (EU), and the Government of Iran on July 14, 2015. Canada was not party to the JCPOA agreement.

Under the JCPOA, Iran promised to scale back its nuclear program in exchange for the lifting of certain economic sanctions on the country. On Saturday, the International Atomic Energy Agency (IAEA) officially verified that Iran had met its commitments under the agreement, triggering the sanctions reduction commitments of the other parties. Although the JCPOA marks a positive shift in diplomatic relations with Iran, a wide range of international sanctions on Iran remain in place. These include all of the "primary" unilateral sanctions imposed by the United States that apply to the activities of U.S. persons and trade in U.S. products.

The newly elected Liberal government has hinted that it plans to reopen diplomatic relations with Iran and review the comprehensive sanctions imposed by the previous government. Those signals were publicly reiterated by Foreign Affairs Minister Stephane Dion yesterday, noting the negative consequences for Canadian companies of maintaining broad sanctions against Iran while other countries' sanctions are being relaxed.

The phased lifting of the JCPOA sanctions will dramatically reduce the constraints on Iranian companies' ability to do business internationally, particularly in Europe. It is estimated that as a result of the loosening of the sanctions, Iran will gain access to more than US$100 billion in assets previously frozen overseas, and it will be able to resume selling oil on international markets and using the international financial system to facilitate trade.

The changes could represent significant new business opportunities in Iran for companies that can successfully navigate the patchwork of remaining restrictions. The Canadian government can be expected to amend its Iran sanctions program in short order in light of these developments to level the playing field for Canadian businesses competing with foreign companies for these new opportunities.

Lifting of UN, EU and U.S. Sanctions

The sanctions removed as a result of JCPOA Implementation Day notably include the following:

The UN Security Council has terminated its resolutions that had imposed nuclear-related sanctions on Iran and UN members, including Canada, will be expected to amend or repeal their domestic implementing legislation for these sanctions. However, the UN will retain certain specific restrictions, including restrictions regarding the transfer of proliferation-sensitive goods. The sanctions will also be re-imposed if subsequent IAEA inspections identify significant non-performance by Iran of its JCPOA commitments.

The European Union's sanctions reductions represent the most significant change that will impact business with Iran. The EU has terminated all nuclear-related economic and financial sanctions contained in Council Regulation (EU) No 267/2012 and the related Council Decision 2010/413/CFSP, including asset freeze and travel ban restrictions on designated persons, restrictions on financial services (such as wire transfers, correspondent banking services, export credit, trade guarantees and insurance, grants and financial assistance among others), imports and transportation of Iranian oil, petroleum, gas and petrochemical products, exports of key equipment and technology for the Iranian oil, gas and petrochemical sectors and investment in these sectors, exports of gold, precious metals, diamonds, graphite, and semi-finished metals, exports of software integrating industrial processes, naval, aviation and transportation restrictions, and various associated services.

The United States has removed nuclear-related economic and financial "secondary" sanctions, i.e., sanctions directed toward non-U.S. persons for specified conduct (covering similar activities to those described in the EU section above) involving Iran that occurs entirely outside of the U.S. and does not involve U.S. persons. The United States also removed over 400 individuals and entities from its restricted parties lists. Most significantly, the U.S. took steps to (i) allow exports to Iran from the United States of commercial passenger aircraft and related parts and services, (ii) license non-U.S. entities that are owned or controlled by a U.S. person to resume trading with Iran to the extent that their activities are consistent with the JCPOA (more on this below), and (iii) license the importation into the United States of certain Iranian-origin carpets and food products such as pistachios and caviar. (Concurrently, however, the U.S. has added 11 individuals and firms to its restricted party lists for their links to Iran's ballistic missile program. U.S. nationals—and foreign nationals under certain circumstances—are prohibited from doing business with these designated persons.)

All other U.S. sanctions against Iran applicable to U.S. persons remain in place, including the U.S. domestic trade embargo on Iran and asset freezes on the Government of Iran and Iranian financial institutions. Non-U.S. persons also continue to be prohibited from knowingly engaging in conduct that seeks to evade or circumvent U.S. sanctions (such as causing the export of U.S. origin goods or services to Iran, directly or indirectly). Non-U.S. financial institutions also continue to be prohibited from clearing U.S. dollar-denominated transactions involving Iran through U.S. financial institutions.

Lifting of Restrictions on Foreign Subsidiaries of U.S. Companies

Of potential significance for Canadian businesses is General License H issued by the U.S. Treasury Department's Office of Foreign Assets Control (OFAC), which authorizes "Certain Transactions Relating to Foreign Entities Owned or Controlled by a United States Person". Under the previous U.S. sanctions on Iran, any foreign entity owned or controlled by a U.S. person was also fully subject to the U.S. sanctions. This included any foreign entity in which a U.S. person holds a 50% or greater interest by vote or share value, holds a majority on the board of directors or otherwise controls the actions, policy and decisions of the entity. This new general license means that Canadian subsidiaries of U.S. parents will no longer be extraterritorially subject to the U.S. sanctions restrictions on Iran (although they will continue to be subject to any Canadian sanctions that remain in place).

Canada's Response

Canada has historically imposed economic sanctions only as a result of multilateral action such as UN Security Council Resolutions. The previous Conservative government departed from this tradition by imposing unilateral sanctions against Iran and several other countries (including Russia). Canadians can expect the current Liberal government to revert to a more multilateral approach to economic sanctions.

A timely response by the Canadian government is critical for several Canadian business sectors, including notably oil and gas services, engineering and construction, financial services, auto parts and civil aviation. Prior to the imposition of Canadian sanctions in 2010, Canadian oil and gas, engineering and construction companies had well-established competitive footholds in Iran. Canadian firms in these sectors are well-placed to quickly re-enter the Iranian market.

Other sectors, including financial services, auto parts and civil aviation, also have a potential competitive edge provided that the Canadian government moves quickly to align its sanctions with those of the EU and other trading partners. European and even U.S. companies have been actively positioning themselves to re-enter the Iranian market by establishing contacts with potential business partners. It is notable that the United States will move immediately to liberalize U.S. exports of civil aircraft in direct response to Iran's stated intention of purchasing more than 300 passenger aircraft in the next few years. The Iranian auto sector is similarly in need of major investments and an expansion of its international supply chain. Canadian companies are poised to become significant players in these markets, provided that the Government of Canada takes prompt action. That competitive edge will quickly evaporate if the government delays action.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Milos Barutciski
Matthew S. Kronby
Jessica B. Horwitz
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions