The unilateral withdrawal by the US from the JCPOA, outlined in FAQ published by OFAC on 8 May 2018 and President Trump's issuance of the National Security Presidential Memorandum, have immediate practical consequences for companies doing business in Iran, and in particular for those having a direct presence there through a subsidiary or a joint-venture company. For further information about the details of the US decision, please read the related alert on our website.
The scope and extent of potential sanctions will evolve over the coming weeks, and months, but early actions by OFAC make clear that companies in sectors covered by US sanctions and affected by President Trump's decision must carefully re-evaluate their operations and explore potential options for winding down those operations. Whether or not companies are directly affected by the re-imposition of US secondary sanctions, operational challenges are likely as a result of enhanced banking sanctions and potential derisking measures by foreign financial institutions, insurers, and other counterparties. An action plan should be put in place and implemented on time, unless a clear solution (and safe harbour) is proposed by the European Union and other non-US non-Iranian Governments to their nationals. Many of these countries actively encouraged their citizens and companies take advantage of the JCPOA and re-engage with Iran. While it would be reasonable to assume that they should now move to try to protect those citizens from the effect of US secondary sanctions against Iran, the practical and political difficulties of doing so cannot be underestimated. We would strongly recommend planning now to manage sanctions risk exposure rather than waiting for a political solution or some form of safe harbour while the period for winding down expires.
Companies affected by the wind down obligation (Potential Options for Wind Down)
Companies concerned by the wind down obligation (for instance, by 6 August 2018 for the automotive sector and by 4 November 2018 for the energy Sector) should prepare a wind down plan, regardless of their respective government's attempt to secure any waiver or other form of arrangement with the government of the United States. The wind down means that their operation need to have ceased by the relevant date, though there may be a limited scope to continue to receive payments in respect of goods or services delivered before the expiration of the wind down periods. There are many ways of implementing a wind down of business activity in Iran and we would be happy to assist in this regard. Please note that future legislation in the US might affect, wholly or partially, any of the above-mentioned wind down arrangements.
Companies not directly affected by the wind down obligation
During the previous sanctions period (2004-2016), certain sectors that were exposed to limited sanctions, or operating under license, had to find operational solutions to ensure lawful continuity of their business activities. Planning in the next several months as US primary and secondary sanctions take full effect will be critical.
Your team at Dentons Europe LLP and Dentons UK and Middle East LLP is on hand to assess and ensure compliance with the new international legal environment regarding Iran.
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