UK: Sanctions Update - September 2012

Last Updated: 19 September 2012
Article by Douglas R. Maag and Mia Finsness

US Executive Order 13622 and the Iran Threat Reduction and Syria Human Rights Act of 2012

The US government recently put into effect important new sanctions measures concerning Iran. On 30 July 2012 President Obama signed Executive Order 13622 expanding extraterritorial sanctions on Iran's petroleum sales. Eleven days later, the President signed into law the Iran Threat Reduction and Syrian Human Rights Act, which contains sweeping new and expanded sanctions largely (but not exclusively) targeting Iran's energy sector. These new sanctions have applicability to both US and non-US persons (individuals, companies and other entities), and significantly broaden the landscape of US sanctions on Iran.

Executive Order 13622: "Authorizing Additional Sanctions With Respect to Iran" (EO 13622)

Section 1 of EO 13622 authorizes the US Secretary of the Treasury to impose sanctions against "foreign financial institutions" (including foreign banks) that "knowingly" conducted or facilitated a "significant financial transaction" either (1) with the National Iranian Oil Company or Naftiran Intertrade Company (subject to a limited exception), or (2) "for the purchase or acquisition" of petroleum, petroleum products, or petrochemical products from Iran. Upon finding a violation of Section 1, the foreign financial institution may be prohibited from opening, or have strict conditions imposed upon its opening or maintaining, correspondent or payable-through accounts in the US, effectively preventing the foreign financial institution from processing USD payments.

Section 2 of EO 13622 authorizes the US Secretary of State to impose sanctions against any foreign person (not just a financial institution) who has "knowingly" engaged "in a significant transaction for the purchase or acquisition" of petroleum, petroleum products, or petrochemical products from Iran. Violators may be prohibited from obtaining certain loans from US banks, prohibited from foreign exchange transactions in the US, prohibited from engaging in transfers of credit or payment through US banks, have their US assets blocked (i.e., frozen), and have restrictions imposed upon or be prohibited from having their goods imported into the US. Notably, sanctions will not be imposed under Section 2, however, unless both:

(1) The President has determined that there is a sufficient supply of petroleum and petroleum products from countries other than Iran to permit a significant reduction in the volume of such purchases from Iran. The President has made such determinations on 30 March 2012 and on 11 June 11 2012

(2) An exemption has not been granted under the National Defense Authorization Act of 2011 to the country with primary jurisdiction over the person purchasing the Iranian petroleum or petroleum products. To date, exemptions have been granted to Belgium, the Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland, Spain, the United Kingdom, Japan, India, South Africa, Malaysia, South Korea, Sri Lanka, Taiwan, Turkey, Singapore and China

Section 5 of EO 13622 provides for sanctions against any person who materially assists, sponsors or provides financial, material, or technological support, or goods or services to, the National Iranian Oil Company, Naftiran Intertrade Company or the Central Bank of Iran. Section 5 provides that the property and interests in property in the US of a person determined to have breached its provisions are blocked.

As in most US sanctions, the term 'knowingly" under EO 13622 means, "with respect to conduct, a circumstance or a result that a person has actual knowledge, or should have known, of the conduct, the circumstance, or the result." There are no specific dollar thresholds for triggering the EO 13622 sanctions, but the US Treasury Department expects to consider the following factors to determine whether a transaction is "significant": the size, number, and frequency; type, complexity, and commercial purpose; the level of awareness or involvement by management; whether the activity or payment illustrates a pattern or practice or an isolated event; the ultimate economic benefit conferred upon the sanctions target; and whether the transactions involved the use of deceptive financial practices to obscure the identities of the parties involved.

The Iran Threat Reduction and Syria Human Rights Act of 2012 ("ITRA")

ITRA is the third significant sanctions law passed by the US Congress over the past two years, building upon the Comprehensive Iran Sanctions, Accountability, and Divestment Act in September 2010 (CISADA) and the National Defense Authorization Act in December 2011 (NDAA). Unlike the relatively narrow focus of CISADA and the NDAA, however, ITRA's measures are wide-ranging.

Important provisions of ITRA include the following:

  • Section 201 contains new sanctions against persons who (1) invest in construction of Iran's transportation infrastructure if its primary purpose is to support the delivery of refined petroleum products, (2) participate in petroleum joint ventures in which the Iranian government is a substantial partner or investor, or (3) provide support for Iran's development of petrochemical products
  • Section 202 contains new sanctions in respect of the shipping of Iranian petroleum. Sanctions are provided against persons who are controlling beneficial owners of, or otherwise own, operate, control or insure a vessel that, 90 days after the enactment of ITRA, was used to transport crude oil from Iran to another country (subject to certain knowledge standards), unless the destination of such crude oil is a country that has been granted an exception under the NDAA. Sanctions are also provided against such persons if they permit the operator of a vessel to conceal that it is transporting Iranian crude or refined petroleum by suspending the vessel's satellite tracking device or concealing or obscuring ownership, operation or control of the vessel by the Iranian government, the National Iranian Tanker Company, the Islamic Republic of Iran Shipping Lines, or any other entity determined to be owned or controlled by these entities. Vessels subject to these sanctions may be refused entry to US ports for a period of two years. These sanctions will not be imposed upon persons who provide underwriting services, insurance or reinsurance if they are determined to have "exercised due diligence in establishing and enforcing official policies, procedures, and controls to ensure" against engaging in the conduct sanctioned in Section 202
  • Section 204 expands from three to five the number of sanctions to be imposed upon sanctioned persons under the Iran Sanctions Act, and adds three new sanctions to the "menu" of twelve. These new sanctions provide for: (1) a prohibition against US persons' investing in the debt or equity of the sanctioned person, (2) denial of entry into the US for corporate officers of the sanctioned person, and (3) the blocking of assets of principal executive officers of the sanctioned person
  • Section 211 authorizes sanctions against a person who knowingly sells or otherwise provides a vessel or insurance, reinsurance or other shipping services "for the transportation to or from Iran of goods that could materially contribute to" Iran's proliferation of weapons of mass destruction or support for terrorism. Upon breach of this provision, the sanctioned person is subject to asset blocking and prohibition of transactions with US persons or in the US. Persons subject to sanction under Section 211 include not only the person who engaged in the conduct, but also such person's parent company if it had actual knowledge or should have known of the subsidiary's conduct, as well as the person's subsidiaries who knowingly engaged in the conduct
  • Section 212 provides a menu of new sanctions applicable to insurers and reinsurers. Specifically, Section 212 provides for sanction against persons who knowingly provide "underwriting services or insurance or reinsurance for the National Iranian Oil Company or the National Iranian Tanker Company" (or their successors). The President is required to impose 5 of the 12 sanctions on the "menu" upon determining that a person provided such underwriting services, insurance or reinsurance. There are three important exceptions provided for in Section 212:
    • First, the President is authorized not to impose the sanctions upon a person providing such underwriting services, insurance or reinsurance if the person is determined to have "exercised due diligence in establishing and enforcing official policies, procedures, and controls to ensure" against engaging in the sanctioned conduct
    • Second, sanctions will not be imposed for the provision of underwriting services, insurance or reinsurance related to provision of agricultural commodities, food, medicine or medical devices to Iran, or for the provision of humanitarian assistance to the Iranian people
    • Third, the President is authorized not to impose the sanctions if the President "receives reliable assurances that the person will terminate the provision of underwriting services or insurance or reinsurance" for the National Iranian Oil Company or the National Iranian Tanker Company (and their successors) within 120 days of enactment of ITRA (i.e., by 8 December 2012)
  • Section 213 imposes sanctions against persons who purchase, subscribe to or facilitate issuance of sovereign debt by the Iranian government, or of any entity owned or controlled by the Iranian government
  • Section 216 requires that regulations implementing CISADA sanctions that apply to foreign financial institutions be revised to encompass a broader range of institutions
  • Section 217 codifies into law various sanctions imposed by Presidential Executive Orders
  • Section 218 provides that new sanctions shall be imposed upon US companies for conduct by their "owned or controlled" foreign subsidiaries and other foreign entities if such conduct would be prohibited if engaged in by the US company. This provision contains a safe harbor if the US company divests or terminates its business with the foreign entity within 180 days of enactment of ITRA
  • Section 219 requires companies listed on US stock exchanges to make disclosures of sanctions violations in their public reports
  • Section 302 calls for imposition of sanctions against persons who knowingly materially assist, sponsor or provide financial, material or technological support to Iran's Revolutionary Guard Corps or its officials, agents or affiliates whose property and interests in property are blocked in the US
  • Section 504 requires a finding that a country granted an NDAA exception reduce its Iranian crude imports to zero in order to receive a further exemption
  • Titles IV and VII of ITRA provide for additional sanctions in respect of human rights abuses in Iran and Syria
  • Regulatory action will follow in due course to implement and clarify provisions of ITRA.

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
 
In association with
Related Topics
 
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