In response to the United States’ withdrawal from the Joint Comprehensive Plan of Action (JCPOA, also informally known as the Iran nuclear deal) on May 8, 2018, the European Union (EU) has announced that it will take several actions in an effort to continue the full implementation of the JCPOA and to protect EU businesses. These actions are:
- Initiate the formal process to activate the “blocking statute” by updating the list of U.S. sanctions on Iran falling within its scope. The blocking statute forbids EU persons from complying with U.S. extraterritorial sanctions, allows companies to recover damages arising from such sanctions from the person causing them, and nullifies the effect in the EU of any foreign court judgments based on them. The intent is to have these blocking regulations in force before August 6, 2018, when the first wind-down period ends and certain U.S. trade and economic sanctions are reinstated.
- Begin the formal process to remove obstacles for the European Investment Bank (EIB) to decide under the EU budget guarantee to finance activities outside the EU in Iran. This will allow the EIB to support EU investment in Iran and could be useful for small and medium-sized companies.
Before full implementation of these actions, the European Parliament and the Council of the European Union will have up to a two-month period to object to these measures. The EU has also encouraged the following actions:
- As confidence-building measures, the European Commission will continue and strengthen the ongoing sectoral cooperation with, and assistance to, Iran, including in the energy sector and as to small and medium-sized companies. Financial assistance through development cooperation or partnership instruments will also be mobilized.
- The Commission is encouraging member states to explore the possibility of one-off bank transfers to the Central Bank of Iran. This could help the Iranian authorities to receive their oil-related revenues, particularly with U.S. sanctions that could target EU entities active in oil transactions with Iran.
Once implemented, these measures will likely leave foreign companies in the difficult position of determining any associated risks and potential penalties of continuing business transactions in Iran in support of the EU position to maintain the terms of the JCPOA, or risk running afoul of U.S. secondary sanctions pertaining to Iran that seek to limit and possibly penalize non-U.S. companies that conduct business in Iran as well as in the United States.