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Web Alert: Iran Sanctions - “Implementation Day” announced which marks the lifting of EU and US sanctions under the JCPOA

19 January 2016

On 14 July 14 2015, the P5+1 (China, France, Germany, Russia, the UK and US), the European Union (EU) and Iran reached a Joint Comprehensive Plan of Action (JCPOA) to ensure that Iran’s nuclear programme will be exclusively peaceful.  On 18 October 2015 (known as “Adoption Day”) the legal framework for the lifting of sanctions came into effect, as the JCPOA participants were required to make arrangements to implement their respective commitments to lift sanctions. 
On 16 January 2015 the International Atomic Energy Agency verified that Iran has implemented its key nuclear-related commitments under the JCPOA (known as “Implementation Day”) and as a result the EU and the US lifted their nuclear-related sanctions against Iran.  However only US “secondary” sanctions have been lifted i.e. which apply to non-US persons. US “primary” sanctions remain in place with means that US persons will continue to be prohibited from carrying out business with Iran (unless authorised to do so by the US Office of Foreign Assets Control).  US owned or controlled foreign entities are entitled to participate in transactions subject to the lifting of sanctions under the JCPOA only to the extent that the transactions are exempt from regulation or authorised by US OFAC.
The US Treasury and US OFAC has issued detailed Guidance and FAQs relating to the lifting of US secondary sanctions on “Implementation Day” under the JCPOA:

Guidance Relating to the Lifting of Certain Sanctions Pursuant to the Joint Comprehensive Plan of Action on Implementation Day

Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day

The EU and US secondary sanctions which have been lifted are in relation to the financial, banking, energy, petrochemical, shipping, shipbuilding, and automotive sectors; Iran’s port operators; Iran’s trade in gold and other precious metals; trade with Iran in graphite, raw or semi-finished metals such as aluminium, steel, coal, and software for integrating industrial processes; and the provision of insurance, re-insurance and underwriting services in respect of these activities.  It has also resulted in the delisting of hundreds of Iranian individuals and entities that were previously designated as sanctioned entities and subject to an asset freeze (except for those engaged in terrorism, human rights abuses or the proliferation of weapons of mass destruction).
The fact that US “primary” sanctions remain in place (which apply to US companies including banks and reinsurers) may create a shortfall in terms of the club making recoveries from parties to the pooling agreement or its reinsurers (under club rule 6.22 - the 'write down' rule) and may also give rise to difficulties in terms of processing claim payments.  Member should also be aware that US secondary sanctions continue to apply to non-US persons who conduct business with Iranian individuals or entities who remain on the SDN list.
The club is considering the implications of the lifting of Iran sanctions with the I.G. and will provide further guidance shortly.