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On August 9, 2012, a new Executive Order signed by President
Obama once again tightened U.S. sanctions against Iran. While one
part of the new Executive Order authorizes the framework for
implementing the Iran Threat Reduction and Syria Human Rights Act
of 2012 that was signed into law in August 2012
("ITRSHRA"), there are additional provisions relating to
increased sanctions against those entities and individuals
conducting business with Iranian interests. Certain actions by
non-U.S. subsidiaries of U.S. parent companies will now also result
in direct liability to those U.S. parent companies.
Background
The U.S. continues to close perceived loopholes and strengthen
existing sanctions programs targeting Iran, including the Iranian
petroleum and petrochemical industries. This latest Executive Order
is titled "Authorizing the Implementation of Certain Sanctions
Set Forth in the Iran Threat Reduction and Syria Human Rights Act
of 2012 and Additional Sanctions with Respect to Iran" (http://www.treasury.gov/resource-center/sanctions/Programs/Documents/2012iranthreat_eo.pdf).
Among other things, this Executive Order authorizes the enforcement
of the ITRSHRA provisions. There are also specific additional
measures now put into place to prevent persons sanctioned under
other pieces of legislation, namely the Iran Sanctions Act of 1996,
as amended ("ISA"), and the Comprehensive Iran Sanctions,
Accountability and Divestment Act of 2010 ("CISADA"),
from being able to conduct any business with U.S. financial
institutions and U.S. investors as well as subject the property and
interests in property of sanctioned persons to blocking by U.S.
entities and their foreign branches.
Likely of most interest to non-U.S. based or incorporated
companies is Section 4 of the new Executive Order. Section 4 now
specifically extends prohibitions to foreign subsidiaries of U.S.
entities from knowingly engaging in any transaction, directly or
indirectly, with the Government of Iran or any person subject to
the jurisdiction of the Government of Iran, if that transaction
would be prohibited for a U.S. person under the previous Executive
Orders and regulations relating to Iranian sanctions by the U.S.
Government. "Knowingly" engaging in a transaction
includes a person that has actual knowledge or should have
known of the relevant conduct, circumstance or result. A
"person subject to the jurisdiction of the Government of
Iran" means an Iranian entity or a person or entity in Iran,
ordinarily resident in Iran, or owned or controlled by any of the
foregoing (i.e., a non-Iranian subsidiary of an Iranian
company).
For the first time, penalties assessed for these violations may
now be imposed directly on the U.S. parent of the foreign
subsidiary or subsidiaries engaging in these transactions, unless
the parent entity divests or terminates its business with the
subsidiary not later than February 6, 2013.
Advice
The advice relating to engaging in business with Iranian
interests remains unchanged. There are significant and increasing
risks to companies and individuals, regardless of location or
jurisdiction of formation, that engage in transactions with Iranian
companies, subsidiaries and assets. It is difficult for most
international companies, especially those involved in energy,
shipping and other forms of transportation, to avoid the reach of
U.S. sanctions against Iran. There is no indication that these
sanctions programs will be relaxed at any point in the near future
and, to the contrary, one should expect continuing tightening of
the sanctions programs by the U.S. Government and other governments
and organizations around the world.
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.
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