FINANCIAL RESTRICTIONS (IRAN) ORDER 2012

Under the Financial Restrictions (Iran) Order 2012 of 21 November 2012, no UK bank may have dealings with an Iranian bank subject to a number of exceptions where licences will allow payment to be received. One of those exceptions relates to humanitarian and medical goods. A UK bank may legitimately receive payment from an Iranian bank not listed on the asset freeze list in relation to exempt goods but in practice it will be difficult to find a UK bank willing to do so.

COUNCIL REGULATION (EU) 1264/2012

One further individual and 18 additional entities were added to the list of persons and entities which are subject to the asset freeze on 21st December 2012. 2 entities have been deleted from the asset freeze list. Further details are available upon request.

Any company or individual with ongoing commitments with one of these companies or persons should immediately seek legal advice. No funds or economic resources may be made available to them and all funds and economic resources belonging to, owned, held, or controlled by them must be frozen.

COUNCIL REGULATION (EU) 1263/2012 ("REGULATION")

On 21 December 2012, restrictive measures were announced by the EU against Iran, implementing the EU Council Decision 2012/635/CFSP. The Regulation amends Council Regulation (EU) 267/2012.

TO WHOM DOES THE REGULATION APPLY?

The Regulation applies:

  • within the territory of the EU;
  • to nationals of EU Member States (wherever they are);
  • to any legal person, entity or body incorporated or constituted in the EU;
  • to any legal person, entity, or body in respect of any business done in whole or part within the EU; and
  • on board any vessel or aircraft under the jurisdiction of an EU Member State.

You must ensure that you do not become liable for anything done by your branches, subsidiaries or trading partners.

SUMMARY OF THE REGULATION

The Regulation prohibits:

a) The purchase, import, or transport of natural gas, propane and butane from Iran or which has been exported from Iran (or swapping it if it has originated in Iran or been exported from Iran),

b) The sale, supply, transfer, or export to Iran, of graphite and listed raw or semi-finished metals including aluminium and steel products (preexisting contracts may be executed before 15 April 2013).

c) The sale, supply or transfer to Iran of software for integrating industrial processes (pre-existing contracts may be executed before 15 January 2013).

d) The sale, supply or transfer to Iran and Iranian or Iranian owned enterprises of listed key naval equipment and technology for ship building, maintenance or refit, including equipment or technology used in the construction of oil tankers (pre-existing contracts may be executed before 15 February 2013).

e) The provision of flagging, inspection and classification services to Iranian oil tankers and cargo vessels – including if such vessels are owned, chartered, or operated directly or indirectly by an Iranian person, entity or body (applying from 15 January 2013).

f) The supply of vessels designed for the transport or storage of oil and petrochemical products to Iranian persons, entities or bodies (or to others transporting or storing Iranian oil or petrochemical products that originate in Iran or have been exported from Iran – unless appropriate action has been taken to prevent the vessel from being so used).

g) The construction of new oil tankers for Iran or for Iranian persons or entities.

Further additions have been made to the list of prohibited oil and gas related products.

These provisions may impact those who have entered into contracts not yet performed, alternatively, to those who have performed but who are contractually required to provide ongoing training, support or post delivery services. You may also be required to notify the relevant authorities if you wish to continue to perform certain pre existing contracts within the permitted timeframe.

OTHER PROHIBITED ACTIVITIES

For the newly prohibited products, you must check whether you may provide technical assistance, training, brokering, insurance, reinsurance financing and financial assistance "and other services".

Specific legal advice should be sought in order to check what further work you may perform and whether you may avail yourselves of the "grandfathering" provisions.

SHIPPING

The transport of Iranian natural gas is prohibited. It is also prohibited for vessels under the jurisdiction of a Member State to be used to ship graphite, and listed raw or semi-finished metals such as aluminium and steel. Finally, for all such products which are prohibited to be exported to Iran, you must not "transfer" such products to Iran. Whilst "transfer" may have a different definition to the definition of "transport" this may well include being involved in any manner with a shipment.

These new measures will certainly require robust systems to be implemented by those involved in the shipping industry.

The prohibitions on crude oil and petroleum products do not apply to the purchase of bunker oil produced and supplied by a third country other than Iran, intended for the propulsion of the engines of vessels.

EU BANKS

Transactions between EU banks and Iranian credit and financial institutions and bureaux de change domiciled in Iran - including all their branches and subsidiaries worldwide are prohibited unless authorised in advance by the relevant Member State in accordance with the Regulation. The same applies to credit and financial institutions and bureaux de change worldwide which are merely "controlled" by persons, entities or bodies domiciled in Iran. This may catch money exchanges. It appears that payments relating to non prohibited products will likely be authorised moving forward although EU banks may take a commercial view not to be involved in any transactions relating to Iranian banks.

The existing EU sanctions measures on Iran which impose obligations on those arranging transfers to or from an Iranian person, entity or body remain. 3

Funds transfer controls now apply not only to the flow of funds to and from an Iranian person, entity or body but also between EU banks and Iranian banks. The concept of Iranian persons is broad and includes non- Iranian companies anywhere in the world which are owned or controlled by Iranian persons, entities or bodies. A company with a majority Iranian shareholder will likely be caught by the definition. Likewise, this may also extend to companies with a significant minority Iranian shareholder - depending on the level and nature of control.

CIRCUMVENTION

You must heed the provisions of the Regulation which prohibit the participation, knowingly and intentionally in activities the object or effect of which is to circumvent the prohibitions.

If you are an EU entity or an EU national, you should not novate, assign or otherwise transfer business which is prohibited for you to perform to those who may legitimately perform it. This includes the transfer of business to your non EU subsidiaries or related parties.

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.