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On 2 April 2015, talks in Lausanne, Switzerland, ended between Iran and the E3+3 countries (i.e., China, France, Germany, the Russian Federation, the United Kingdom, the United States). These lengthy negotiations resulted in high-level agreement on the key parameters of a Joint Comprehensive Plan of Action (JCPOA). The JCPOA parties will continue drafting the final text of JCPOA, to be agreed by 30 June 2015. There was no common statement from the JCPOA parties on what was agreed regarding the key parameters or processes going forward. Information about the JCPOA comes from two key documents: the Joint Statement by EU High Representative Federica Mogherini and Iranian Foreign Minister Javad Zarif (here), and Parameters for a Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program issued by the US State Department (here). These two key documents are not entirely consistent with each other, which highlights the fact that further negotiations will be required to reach a final agreement.

What we know

Iran’s nuclear capabilities (i.e. enrichment capacity and levels, and stockpile) will be controlled and subject to monitoring by the International Atomic Energy Agency (IAEA) for periods between 10 and 25 years. The current UN Security Council Resolutions (UNSCRs) on Iran (here) will be revoked, with new UNSCRs being adopted to endorse the JCPOA and implement a dedicated “procurement channel” for certain nuclear-related and dual-use materials and technology for Iran’s nuclear program. The EU sanctions on nuclear related issues will be terminated immediately upon IAEA verification of Iran’s key nuclear commitments. The US sanctions on nuclear related issues will be suspended once the IAEA verifies Iran’s key nuclear commitments. The EU also appears to be proposing the termination of its financial sanctions, but apparently the US Government is not publicly proposing the removal of its financial and economic sanctions. It remains to be seen whether the EU intends to terminate all sanctions on Iran, including, for example, those on the oil and gas sector. The US Government stated that “US sanctions on Iran for terrorism, human rights abuses, and ballistic missiles will remain in place under the deal.” At this time, it is not clear which US sanctions are considered to be only “nuclear-related” and the EU statement refers to the cessation only of US “secondary” sanctions targeting Iran. On this basis, EU and US sanctions targeting Iran will remain in place until at least 30 June 2015.

What we do not know

Once the JCPOA is finalized, the IAEA’s process or timetable for verification of Iran’s JCPOA commitments is unclear. The completion of this IAEA process is a critical trigger for the removal or suspension of sanctions. The Iranian delegation has made statements that suggest it believes that UN, US and EU sanctions would be lifted when the JCPOA is finalized, which is clearly not the position of the other JCPOA parties. There is also the issue of the degree of “snap back”, i.e. the degree to which sanctions can be re-imposed if Iran does not fulfil its JCPOA commitments. This issue may be significant with respect to UN sanctions, which were difficult to achieve in the first place between 2006 and 2010. If UN sanctions are terminated entirely, their re-imposition may be difficult if not impossible. The language of the new UNSCRs will be crucial in this regard, as well as the framework for the dedicated “procurement channel” for Iran’s nuclear program.

What does this all mean?

Even after the agreement on key JCPOA parameters announced on 2 April, there are still questions about the feasibility or breadth of a final agreement, for the following reasons. First, some elements of the JCPOA are still subject to ongoing negotiations that will likely be difficult, given the reported challenges to reach agreement on the key parameters announced on 2 April. Failure to reach agreement on these issues could mean the failure of the JCPOA process. In other words, there is no guarantee that the JCPOA will result in a final agreement by 30 June 2015. Second, we do not know what the US Congress can or will do about the JCPOA. The JCPOA may be the subject of intense political activity in the United States. If Congress is able to review, amend, and/or approve the JCPOA, the agreement may fall apart. Third, US sanctions targeting Iran will not be removed in their entirety, with the US Government committing only to the suspension of nuclear-related sanctions upon IAEA verification. The US Government has also said it will retain the architecture of the nuclear-related sanctions to allow for the snap-back of sanctions as may be necessary in the future. Fourth, without action by Congress, non-US subsidiaries owned or controlled by US parent companies will remain subject to US sanctions under the Iranian Transactions and Sanctions Regulations (ITSR), and so any change in EU sanctions may not open the door to Iran for those entities. The ITSR have been codified to a large extent by Congress, which may mean the US President has limited authority to relax US sanctions under the ITSR. Fifth, the position of non-US banks under JCPOA is uncertain. The major obstacle to European re-engagement with Iran is not, and has never been, EU sanctions, but rather heightened scrutiny and enforcement from the US Government on banks that process payments within US jurisdiction related to sanctioned countries like Iran. This has led many non-US banks to take a conservative approach to sanctioned countries, often because of the significant compliance costs and risks that are involved. Until this approach changes, Iran-related payments will likely remain difficult if not impossible.

What should you do?

As negotiations within the JCPOA forum are likely to be conducted with a high degree of secrecy, business has to accept that a prolonged period of uncertainty will continue until 30 June 2015, and likely thereafter while the IAEA undertakes its verification process. In the mean time, companies should continue to comply with applicable US and EU sanctions. While some preparatory activity and contacts related to Iran is possible primarily under EU sanctions, such preparations and contacts will need to be carefully handled from a compliance perspective, particularly to the extent parties subject to US jurisdiction (e.g. non-US subsidiaries of US companies, US banks) are involved directly or indirectly. Second, in any such preparatory activity, it is important to understand how any proposed commercial activity can be paid for, and it would be unwise to assume that EU or Western banks will be prepared to make or receive payments from Iran. This needs to be specifically confirmed with banks. Third, if you intending to supply dual-use items to Iran, you cannot assume that this trade will be “free” because of the likelihood of the internationally monitored procurement channel for dual use goods. However, paradoxically, if this channel does permit supply of dual use items to Iran, then the payment chain is also likely to be approved, meaning that Western banks are more likely to consider making or accepting payments to or from Iran for these sensitive goods.



Ross Denton is a partner in Baker McKenzie’s European Community, Competition & Trade Department in London and member of the Baker McKenzie Japanese Practice Group. He also served as coordinator of the Firm’s International Trade & WTO Practice Group. Ross routinely advises US and Japanese multinationals on EU and UK competition matters and international trade law issues. In addition to his practice, Ross contributes to a number of publications, including Laws of the European Communities and Encyclopedia of Information Technology. He is a member of the UK Customs Practitioners Group and the World Trade Lawyers Association.


Alexandre Lamy joined Baker McKenzie in 2009 and currently works in the Firm's International Trade Practice Group. He assists clients with sanctions and export controls (Export Administration Regulations (EAR); International Traffic in Arms Regulations (ITAR)) and he advises clients on corporate compliance matters. Since August 2011, Alex has served on the steering group for the ABA Section of International Law’s Export Controls & Economic Sanctions Committee and is currently a Vice Chair of the Committee. He has organized several events regarding recent developments in US trade sanctions and export controls for the Committee.


Edward Dyson is a senior counsel in Baker & McKenzie’s Washington office. He advises clients on the legal aspects of international trade regulation and anticorruption. He served on Baker & McKenzie’s worldwide Executive Committee, and is actively involved in various pro bono activities, especially on behalf of the Firm’s Public Law and International Policy Group.

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