Worldwide: Iran: Following President Trump's "Decertification," New U.S. Sanctions On Iranian Entities And All Eyes On The U.S. Congress

Key Points

  • Effective October 13, 2017, President Trump declined to provide certification that the JCPOA is in the United States' national interest. Following this "decertification," the U.S. Congress has 60 days in which to introduce expedited, filibuster-proof legislation to reinstate nuclear sanctions against Iran, and it remains to be seen what Congress will do by mid-December.
  • President Trump and key members of Congress have called for legislative amendments to provide a basis for automatic snapback of U.S. sanctions that are currently suspended under the JCPOA under certain circumstances and unilateral U.S. elimination of sunset provisions in the Iran nuclear deal.
  • In conjunction with non-recertification of the JCPOA, the President also announced his administration's new policy on Iran, which emphasizes aggressive enforcement of established U.S. sanctions and implementation of additional measures against Iran. Consistent with this policy, on October 13, 2017, OFAC announced the imposition of new sanctions designations against the IRGC and four other Iranian entities under U.S. antiterrorism-related sanctions measures.
  • These actions signal the Trump administration's implementation of a more confrontational U.S. posture toward Iran, aligned with the President's election campaign rhetoric, and indicates a greater U.S. willingness to enforce and increase U.S. sanctions against the country.

Introduction

On October 13, 2017, President Trump announced a new policy toward Iran that includes not recertifying the 2015 Joint Comprehensive Plan of Action (JCPOA or the Iran Nuclear Deal), seeking amendments to domestic U.S. legislation providing congressional oversight over the JCPOA, i.e., the Iran Nuclear Agreement Review Act of 2015 (INARA), and imposing new sanctions on the Iranian Revolutionary Guard Corps (IRGC) and related parties. The President's determination to not recertify alignment of the JCPOA with broader U.S. interests now allows either house of Congress to "fast-track" legislation to re-impose nuclear-related sanctions against Iran that were suspended in conjunction with U.S. ratification of the JCPOA. In addition, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) has designated the IRGC under terrorism-related sanctions and blacklisted four other entities under weapons proliferation-related sanctions. While this action against the IRGC is more symbolic than substantive, given that core OFAC sanctions already generally prohibited U.S. persons from engaging in activities involving the IRGC, it clearly reflects the more confrontational approach to Iran articulated by President Trump.

It is important to note that President Trump has not asserted that Iran has violated the agreement, which would trigger an international dispute resolution process by a joint commission consisting of the JCPOA members. Moreover, President Trump has not terminated, or withdrawn the United States from, the JCPOA, or otherwise re-imposed sanctions. Officials in the Trump administration assert that the JCPOA is a nonbinding political commitment. On this basis, the President could act to reinstate suspended sanctions while claiming that he is not violating an international commitment. However, such action would be expected to trigger a significant and critical reaction from U.S. allied countries in Europe and other parties to the JCPOA, including China and Russia, as well as Iran, who view the JCPOA as a binding agreement subject to the Vienna Convention disciplines, which would complicate other areas of priority in U.S. trade, national security and foreign policy.

Background on the Iran Nuclear Deal

In July 2015, following years of negotiations, the so-called P5+1 (the five permanent members of the U.N. Security Council—China, France, Russia, the United Kingdom and United States—plus Germany) and Iran signed the JCPOA. The agreement, which went into effect in January 2016, required Iran to dismantle much of its nuclear program and allow international inspectors access to its nuclear-related facilities. In exchange, the United States, European Union and United Nations agreed to lift nuclear-related sanctions that had crippled the Iranian economy. The implementation of the complex deal has been tied to the International Atomic Energy Agency's (IAEA) periodic evaluations of Iran's adherence to its JCPOA obligations.

Importantly, the JCPOA contains a sanctions "snapback" provision to reverse and terminate U.S., U.N., and EU sanctions relief in the event that Iran violates the agreement. If any member of the P5+1 believes that Iran has not met its commitments under the JCPOA, that party can refer the matter to a joint commission, consisting of all members to the agreement, to resolve the matter over a 30-day period. If the joint commission fails to resolve the issue, the complaining party may re-impose sanctions, as well as notify the U.N. Security Council that Iran has failed to perform its commitments under the JCPOA. Such action would trigger the automatic reimposition of U.N. sanctions against Iran after 30 days, unless the U.N. Security Council passes a resolution blocking the reimposition of sanctions. In this regard, it is worth noting that, given its veto power, the United States could block a U.N. Security Council resolution that would continue the lifting of sanctions.

U.S. Implementation of the JCPOA

As part of its JCPOA sanctions relief, the United States lifted most of its extraterritorial sanctions targeting non-U.S. individuals and entities that are not owned or controlled by U.S. persons. It also removed more than 400 individuals and entities from the Specially Designated Nationals and Blocked Persons List ("SDN List"). Significantly, the United States suspended sanctions related to Iran's nuclear program only while preserving the core U.S. embargo administered by OFAC. U.S. sanctions against Iran related to activities involving terrorism, human rights abuses, and weapons proliferation activities were generally unaffected and remain in place.

The Obama administration negotiated and entered into the JCPOA at the international level. Congress oversees U.S. commitments under the JCPOA through INARA, which was enacted on May 22, 2015. Among other provisions, INARA requires the President to certify every 90 days that Iran is in compliance with the JCPOA and that continued suspension of sanctions is vital to U.S. national security interests. The most recent 90-day period ended on Sunday, October 15, 2017.

Consequences of Noncertification by the Trump Administration

On October 13, 2017, the President announced that he would not certify that the JCPOA was in the national interest of the United States. Under INARA, this decision not to recertify the deal triggers a 60-day period (running through mid-December) in which either house of Congress may propose "qualifying legislation" under "expedited consideration." INARA defines qualifying legislation as a bill reinstating statutory sanctions related to Iran's nuclear program. Only congressional leadership (the House majority or minority leader, or the Senate majority or minority leader) can initiate the process for reimposition of sanctions under the expedited procedures. The expedited procedures limit the timeline for congressional review and disallow procedural motions and filibusters that might otherwise stall passage of legislation.

Following this determination by President Trump, congressional leaders now face a choice as to whether to introduce and pass legislation reimposing nuclear-related sanctions. Despite President Trump's decision not to recertify and claim that "the Iran deal was one of the worst and most one-sided transactions the United States has ever entered into," a number of key officials in the administration have stated that they are not seeking to re-impose nuclear sanctions at this time. In close proximity to the administration's announcement of its decision, U.S. Ambassador to the U.N. Nikki Haley said on Meet the Press that "I think, right now, you're going to see us stay in the deal."  Secretary of State Rex Tillerson also stated "We're going to stay in," but added that "we're going to work with our European partners and allies to see if we can't address these concerns."  In his speech, however, President Trump raised questions and concerns regarding what future actions his administration might take by stating that this could change at any time, saying that the JCPOA "is under continuous review, and our participation can be canceled by me, as president, at any time."

The Trump administration appears to be signaling that the intention of declining to certify that the JCPOA is in U.S. national security interest was to set in motion a process to possibly renegotiate the terms of the deal. Specifically, President Trump directed the administration "to work with our allies to fully enforce the agreement while addressing the deal's many flaws."

The international ramifications of a potential U.S. repudiation are unclear. Other members of the P5+1 have stated that they will not re-impose sanctions if the United States breaks the accord. Immediately after the President's October 13 remarks, the leaders of France, Germany and the United Kingdom issued a joint statement of concern regarding President Trump's decision, noting that they "stand committed to the JCPOA and its full implementation by all sides." Additionally, key leaders of the EU have announced their intention to continue complying with the terms of the JCPOA. This includes statements by the EU Foreign Ministers, as well as EU Foreign Affairs Chief Federica Mogherini. Mogherini intends to visit Washington, D.C., in early November to address the sharp disagreement between European countries and President Trump over Iran's compliance with the deal.

Further, if the United States re-imposes nuclear sanctions without following the JCPOA protocols (described above), the U.N. procedures for a snapback of sanctions would not be triggered, and the United States' reimposition of suspended sanctions could be interpreted as a basis on which Iran would no longer be bound by the agreement and could cease performing its commitments under the terms of the JCPOA. Ultimately, Iran's response to any act by the United States to re-impose sanctions will likely depend very much on whether the U.S. acts in isolation; whether or not the EU and U.N. re-impose sanctions; and, importantly, whether non-U.S. companies cease doing business with Iran as a result of the threat or reality of reinstated U.S. extraterritorial sanctions.

Proposed Legislation in the U.S. Congress

In addition to not recertifying the agreement, President Trump called on Congress to amend INARA. Specifically, the administration is seeking to amend the legislation to include the imposition of sanctions related to Iranian ballistic missile development ,as well as alleged support for terrorist groups if certain "trigger points" are met. While Secretary Tillerson stated that the trigger points would draw lines for Iran separate from the nuclear deal, he did not specify what the actual trigger points would be. In addition, the White House would like to address sunset clauses that allow Iran to begin engaging in certain nuclear activities beginning eight years after the deal went into effect in 2015.

Senate Foreign Relations Committee Chairman Sen. Bob Corker (R-TN) and Sen. Tom Cotton (R- AK) have released a summary of their goals for INARA amendment. These include the automatic snap back of sanctions if Iran comes within one year of nuclear weapons capability, bolstering IAEA oversight, and preventing the United States from recognizing the sunset provisions of the JCPOA. Sen. Corker stated that he plans to introduce the bill as early as this week and intends to "develop a legislative strategy to address bipartisan concerns about the JCPOA without violating U.S. commitments."  Nevertheless, the administration may face an uphill battle, since this legislation would not be subject to fast-track authority, and, as such, the bill would need at least some Democratic support in the Senate and would be susceptible to filibuster.

Additionally, reports indicate that Secretary Tillerson is considering alternatives to having the administration certify that Iran is meeting its technical commitments under the deal. One option is that the administration would report to Congress regularly about broader Iranian behavior, such as support for terrorism and its ballistic missile program, and what the administration is doing to counter it. This approach would allow the JCPOA to remain intact but eliminate the requirement for the President to affirmatively recertify that the agreement is aligned with U.S. interests every 90 days. On October 4, 2017, Secretary Tillerson added that the State Department will recommend "a couple of options" to the President regarding a workaround to certification, noting that the relationship between the United States and Iran should not be "defined solely by that nuclear agreement." 

New Iran-Related Sanctions Designations

Section 105 of the Countering America's Adversaries Through Sanctions Act (CAATSA) requires the imposition of sanctions pursuant to the global terrorism Executive Order (EO) 13224 on the IRGC and non-U.S. persons that are officials, agents or affiliates of the IRGC. Consistent with that requirement of CAATSA, on October 13, 2017, OFAC designated the IRGC and four other entities under EO 13224. According to the Treasury Department press release, the IRGC was designated for "activities it undertakes to assist in, sponsor, or provide financial, material, or technological support for, or financial or other services to or in support of, the [IRGC-Qods Force]."  While the IRGC was already designated under sanctions related to weapons proliferation and human rights abuses, the new designation carries additional consequences. Specifically, the IRGC may not avail itself of the so-called "Berman exemptions" under the International Emergency Economic Power Act, which generally exempt transactions related to personal communications, humanitarian donations, information and informational materials, and travel from regulation.

OFAC also designated three Iran-based entities—Shahid Alamolhoda Industries, Rastafann Ertebat Engineering Company and Fanamoj Company— and China-based Wuhan Sanjiang Import and Export Co. LTD, pursuant to EO 13382 (weapons proliferation-related sanctions) for their activities related to Iran's military.

In addition, President Trump has authorized the Treasury Department to take additional action against IRGC officials, agents and affiliates. In a speech on October 16, 2017, Undersecretary of the Treasury for Terrorism and Financial Intelligence Sigal Mandelker stated that "as part of the new Iran policy, Treasury will use its executive authority to place additional sanctions on the Iranian government, targeting its financing of terrorism and other destabilizing activity."  This signals that the United States will aggressively apply its secondary sanctions authority to designate non-U.S. parties engaging in sanctionable conduct under the various existing authorities that were not waived under the Iran Nuclear Deal.

Consistent with this stated policy and approach of the Trump administration, effective October 31, 2017, OFAC  amended the Global Terrorism Sanctions Regulations, pursuant to Section 105(b) of CAATSA, to block the property and interests in property of  foreign persons that have been identified by OFAC as officials, agents or affiliates of the IRGC. It remains to be seen what additional actions of this kind will be taken by the administration in the months ahead, but further action of this kind would be consistent with President Trump's general rhetoric and stated approach to Iran.

Practical Implications

While the decision by the Trump administration not to certify consistency of the JCPOA with U.S. national interest does not have any immediate consequences as a matter of U.S. adherence to the agreement, in terms of the continuation of corresponding U.S. sanctions relief, it creates greater uncertainty for companies with existing or potential business interests in Iran. Even with nuclear sanctions suspended, and prior to the President's statements, many commercial lenders and companies in other sectors have been wary of engaging in business activities associated with Iran for fear of incurring fines or being barred from dealing with the United States and based on related business risk concerns.

Given President Trump's continued combative rhetoric regarding Iran, and based on stated priorities of U.S. officials at key agencies charged with U.S. sanctions enforcement, it is foreseeable that investigations and enforcement of established U.S. sanctions on Iran will continue and can be expected to only increase in the months ahead, regardless of whether the U.S. Congress takes action to re-impose extraterritorial U.S. nuclear-related sanctions on Iran that have been suspended under the JCPOA. Separately, the U.S. Congress is considering enactment of new U.S. sanctions, focusing on concerns regarding Iran's ballistic missile capabilities, support for international terrorism and human rights concerns, which could impose additional new U.S. sanctions challenges even while the United States does not walk away from the JCPOA. A snapback of the suspended sanctions measures that would result from termination of U.S. adherence to the JCPOA would result in a greater divergence between the sanctions regimes of the United States and other countries, including U.S. allies in Europe, the Middle East and Asia, posing even more substantial challenges for companies with Iran-related interests that span this geography.

In this context, it will be increasingly important for companies with a global footprint and interests in Iran to carefully evaluate the potential intersection of their interests and operations with U.S. jurisdiction, including related business and legal risk exposure, in evaluating and managing Iran-related opportunities and activities. To the extent that potential changes in U.S. sanctions could impact operational, financial or other dimensions of Iran-related activities, these are factors that should be built into related contingency planning, strategy, business projections, and the development and implementation of effective sanctions compliance safeguards necessary to protect related commercial interests.

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
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
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