When the Iran nuclear deal (the JCPOA1) came into effect in January 2016, ushering in the sanctions relief, a much discussed element was the "snapback" mechanism, by which UN sanctions would snap-back, without the need for a further UN resolution, in the event of non-compliance by Iran with its nuclear commitments. Since the US withdrawal in 2018, the UK, France and Germany (together, the E3) have worked hard to try to keep the JCPOA alive. However, following Iran's announcement on 5 January 2020 that it will no longer respect any JCPOA restrictions, the E3 have now initiated the JCPOA dispute resolution process, a step which could lead to the re-imposition of UN and EU sanctions on Iran.
The E3 joint statement of 14 January 2020
In a statement 2 issued on 14 January 2020 by the UK, France and Germany, together with the EU High Representative, these countries announced that they have collectively triggered the dispute resolution mechanism under the JCPOA. In doing so, they noted that Iran has been in non-compliance for many months, and said that they have been "left with no choice" but to take action following Iran's statement on 5 January Iran that it will no longer be bound by "any operational restrictions" in terms of the numbers or type of centrifuges that can be operated or the level of enrichment of uranium that it can pursue. The E3 recalled their "regret and concern" at the US withdrawal in 2018, and emphasised that they have tried to save the nuclear deal since then through INSTEX and other initiatives. They confirmed their commitment to the JCPOA and their "determination to work with all participants to preserve it".
In an illustration of the unusual loyalties of this situation, France, Germany and the United Kingdom distanced themselves from the US "maximum pressure" strategy against Iran, and extended their gratitude to Russia and China.
What triggered this development and what do E3 hope to achieve?
While Iran's statement of 5 January 2020 may have been the last straw, the JCPOA has been in difficulty ever since the US withdrawal, and re-imposition of secondary sanctions, in 2018. The E3 acknowledge that Iran has "ceased meeting some of its commitments" since May 2019. However another factor may have been the easing of UN restrictions on the export of conventional weapons to Iran, due to occur 5 years after JCPOA Adoption Day, namely on 18 October 2020.3
The E3 have stated that they are not looking to re-impose sanctions, and "hope to bring Iran back into full compliance with its commitments under the JCPOA", although UK Prime Minister Boris Johnson has also indicated an openness to the possibility of a new replacement deal to bring the US back on board. The E3 may ultimately have felt it prudent to address openly the issue of Iran's non-compliance before the lifting of the UN arms export restrictions to Iran, which was predicated on an assumption of JCPOA compliance.
The Dispute Resolution Process
The dispute resolution mechanism ("DRM") in the JCPOA was drafted principally in anticipation of disputes as to whether Iran was in compliance with JCPOA commitments. Under the DRM:
- any dispute is referred first to a Joint Commission for resolution;
- EU High Representative Josep Borrell is Coordinator of the Joint Commission; all JCPOA participants can be represented on the Commission;
- the Joint Commission will have 15 days to resolve the issue, following which it may be referred to Ministers, then to an Advisory Board;
- following a 35 day process, the E3 (as complainant) may elevate the issue to the UN Security Council on the basis of Iran being in "significant non-performance". This could lead, in the absence of any other agreement, to the cessation of performance of the E3's commitments under the JCPOA in whole or in part, including the re-imposition of pre-JCPOA UN sanctions under the "snap back" provision in UN Security Council Resolution 2231 (2015).4 The E3 say that this is not what they want, but it may be where the triggering of the DRM leads, absent Iranian (and possibly US) cooperation in seeking an alternative solution.
The UN Security Council and Snapback
The UN Security Council Resolution 2231 (2015) snapback provision was drafted to ensure that any breach by Iran would, lead to the re-imposition of sanctions, without the need for a fresh UN Security Council consensus . The provision therefore in effect reverses the consensus requirement, providing that sanctions will be re-imposed following an allegation of significant non-performance unless the Security Council unanimously agrees otherwise. This does not mean that UN snapback is now likely but it is a foreseeable outcome. The earliest that snapback could apply is 75 days from the date of the EU reference to the Joint Commission.
Prior to the JCPOA, the EU not only implemented the UN sanctions in relation to Iran; it went further and applied additional sectoral and targeted measures which, while less comprehensive than US sanctions on Iran, were nonetheless very broad. It confirmed in 20165 that "in the event of a significant non-performance by Iran of its commitments under the JCPOA ... the European Union will re-introduce the lifted EU sanctions. ... Such a decision will reintroduce all the EU sanctions taken in connection with the Iranian nuclear programme that have been suspended and/or terminated ...".
Unlike UN snapback, EU snapback does not arise automatically in the absence of agreement on an alternative approach; the EU statement is a purely political statement which, to be effected, would need to be backed up by a CFSP decision and EU Regulation in the usual way. At the time of making that statement in January 2016, it was not anticipated that the UK, generally a staunch proponent of EU sanctions, would not be at the table for any debate as to whether to adhere to the EU snapback commitment. At this stage, it is too soon to tell whether such consensus might be sought as to whether to re-impose these additional EU-only restrictions, or whether such consensus might be achieved among the EU's 27 remaining Member States.
This E3 statement comes only two weeks before the UK's anticipated exit from the EU. However, for the remainder of 2020, the UK will be in a Transition Period during which it will not have a seat at the table for policy decisions on EU sanctions, but will give effect to EU sanctions. Aside from the absence of the UK from the EU decision-making table, Brexit will not be a material factor in this matter, since, until the Transition Period expires, the UK is committed to complying with EU sanctions laws, and remains a member of the UN Security Council, and a JCPOA signatory in its own right.
Considerations for EU and UK businesses
The risk of US sanctions exposure already makes any dealings involving Iran complex, even where there is no US nexus. The possibility of UN and potentially EU sanctions snapback adds a further layer of complexity and risk. European firms that currently have business in or with Iran may wish to review their activities in the light of the possibility of these developments in the months ahead. Dentons' international trade teams in London, Brussels and across the EU, as well as in Washington, are available to assist clients in evaluating the risks and in developing strategies to ensure sanctions compliance.
1 Joint Comprehensive Plan of Action, signed on 14 July 2015 by Iran, France, Germany, UK, Russia, China and USA.
3 UN Security Council Resolution 2231 (2015), Annex B, paragraph 5
4 A resolution to that effect would require nine votes in favour and no vetoes by the Permanent Members of the Security Council, i.e. US, Russia, China, Britain or France, to pass.
5 "Information Note on EU sanctions to be lifted under the JCPOA", 23 January 2016, at page 8
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