Pursuant to our client alert on Dual-Use Items last year, the Ministry of Commerce (“MOC“) has shifted its focus from revising and updating the Notification Regulating the Dual-Use Items, dated 16 October 2015, previously issued under the existing Export and Import of Goods, Act B.E. 2522 (1979) to the enactment of the new Trade Control on Weapons of Mass Destruction Related Items Act (“WMD Act“). On 30 April 2019, the WMD Act was enacted and announced in the Royal Gazette, and its main provisions will become effective on 1 January 2020.Read more…
On April 17, 2019, the Trump Administration announced several decisions that mark a significant shift in US policy toward Cuba, most notably by declaring that the United States will no longer suspend Title III of the LIBERTAD Act of 1996, which is also known as the Helms-Burton Act.Read more…
The European Commission has started the process by which it would add US sanctions measures on Iran to the so-called Blocking Regulation (formerly Regulation 2271/96). This is in direct response to the US President’s withdrawal of his waiver relating to the JCPOA. The effect of the withdrawal was to reintroduce US sanctions that were in force prior to the JCPOA. US sanctions on Iran not only impact US companies and persons, but can, in certain circumstances be applied to non-US persons. The most important extension of US jurisdiction relates to non-US subsidiaries of US companies. However, the US also has powers to place so-called “secondary sanctions” on non-US persons. These can be placed on any person (i.e., including non-US persons acting wholly outside US jurisdiction) engaging in certain “sanctionable activities,” as defined by the relevant US laws and regulations. These “sanctionable activities” are detailed in OFAC’s recent FAQ document available here. The US Government has a considerable degree of discretion in determining whether to impose “secondary sanctions” on non-US persons engaging in these “sanctionable activities,” and this will likely depend in part on the nature and scope of the activities, the parties involved, etc.
Most countries, and all the other signatories of the JCPOA (UK, Russia, China, France and Iran) plus Germany have reaffirmed their adherence to the JCPOA.
What does the Blocking Regulation do?
The Blocking Regulation has four main elements.
First, it requires any EU person to notify the Commission of any effects on the economic and/or financial interests of that person caused by a measure blocked in the Annex.
Second, no judgment of a court or tribunal, and no decision of an administrative authority located outside the EU that gives effect, directly or indirectly, to the measure in the Annex, or to actions based thereon or resulting there from, shall be recognized or be enforceable in the EU in any manner. This is the main blocking measure.
Third, no EU person shall comply, whether directly or through a subsidiary or other intermediary person, actively or by deliberate omission, with any requirement or prohibition, including requests of foreign courts, based on or resulting, directly or indirectly, from the measures specified in the Annex or from actions based thereon or resulting therefrom. EU persons may be authorized, in accordance with the procedures provided in Articles 7 and 8, to comply fully or partially to the extent that non-compliance would seriously damage their interests or those of the Community.
Finally, an EU person shall be entitled to recover any damages, including legal costs, caused to that person by the application of the measures specified in the Annex or by actions based thereon or resulting therefrom. This is sometimes referred as the “clawback” measure.
What is the process now being undertaken?
Based on a 2014 amendment to Regulation 2271/96, the Commission now has power, delegated to it from the Council, to add measures to the Annex of 2271/96. The process by which it is to do this is as follows:
As soon as it adopts a delegated act, the Commission notifies it to the European Parliament and to the Council. That delegated act can only enter into force only if:
- no objection has been expressed either by the European Parliament or the Council within a period of two months of notification of that act to the European Parliament and to the Council; or
- before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object.
The two month period shall be extended by four months at the initiative of the European Parliament or of the Council.
We assume that the Commission has notified the Parliament and Council of the measures to be added to the Annex, and unless either party objects, or both agree to the proposal sooner, the additions will take effect after 2 months
What is the practical implication of the Blocking Regulation?
The reinvigoration of the Blocking Regulation is an unwelcome development as it is intended to put EU businesses between a rock and hard place. Unfortunately, the US rock is far more compelling than the EU hard place, and very few EU businesses will rely on the Blocking Regulation to guarantee their ability to keep doing business in the US and Iran.
The Blocking Regulation was of very little use in curtailing US policy on Cuba, and almost certainly will not curtail US policy on Iran. The US financial system is now so important to global and EU businesses that it cannot easily be avoided. Even during the US adherence to the JCPOA, all Western banks were reluctant to do business with Iran, because of the risks posed under US law. This reluctance has now turned into positive dislike.
As noted above, the US is also stressing the possibility of secondary sanctions, which in principle force non-US businesses to choose between doing business in the US and doing business in Iran. The revivification of the Blocking Regulation will not affect that choice.
HR/VP Federica Mogherini met with the Foreign Ministers of France (Jean-Yves Le Drian), Germany (Heiko Maas), the United Kingdom (Boris Johnson) and of the Islamic Republic of Iran (Mohammad Javad Zarif) on 15 May 2018, in two separate meetings, to discuss our common lines and the work ahead of us, following the announcement made by the United States of its withdrawal from the Joint Comprehensive Plan of Action (JCPOA), the Iran nuclear deal.
They recalled their commitment to the continued, full and effective implementation of the Iran nuclear deal that was unanimously endorsed by the UN Security Council Resolution 2231, as a key element of the global nuclear non-proliferation architecture and a significant diplomatic achievement.
They, together, regretted the withdrawal of the United States from the Iran nuclear deal and they recognised that the lifting of nuclear-related sanctions and the normalisation of trade and economic relations with Iran constitute essential parts of the agreement.
They stressed the commitment they all share to ensure that this will continue to be delivered and they agreed to this end to deepen their dialogue at all levels.
In particular, they undertook to launch intensive expert discussions – which have been started – with Iran, addressing the following issues with a view to arriving at practical solutions in the next few weeks:
- Maintaining and deepening economic relations with Iran;
- The continued sale of Iran’s oil and gas condensate petroleum products and petrochemicals and related transfers;
- Effective banking transactions with Iran;
- Continued sea, land, air and rail transportation relations with Iran;
- The further provision of export credit and development of special purpose vehicles in financial banking, insurance and trade areas, with the aim of facilitating economic and financial cooperation, including by offering practical support for trade and investment;
- The further development and implementation of Memoranda of Understanding and contracts between European companies and Iranian counterparts;
- Further investments in Iran;
- The protection of European Union economic operators and ensuring legal certainty; and
- Further development of a transparent, rules-based business environment in Iran.
They reaffirmed together their resolve to continue to implement the nuclear deal in all its parts, in good faith, and in a constructive atmosphere, and they agreed to continue to consult intensively at all levels and also with other remaining participants of the Joint Commission to the JCPOA.
They will also hold a Joint Commission meeting in Vienna next week at the level of Deputy Foreign Ministers or Political Directors – which is the usual level at which the Joint Commission meets – and will continue to work along these lines following the good exchanges we had today, during the day and during the evening.
They also decided that EU Member States – starting with the E3 but also other Member States – will work on complementary mechanisms and measures, not only so as to go at the European Union level but also at national level to, in particular, protect the economic operators of the EU Member States. HR/VP Mogherini will also have the opportunity to also brief the Heads of State or Government of the 28 EU Member States tomorrow evening at the leaders’ dinner that we will have in Sofia. The E3 leaders will also be present and HR/VP Mogherini believes that they will also have a first exchange with the other 25 Member States.
She stressed that the implementation of the JCPOA is also on the agenda of the next Foreign Affairs Council in some 10 days from now [on 28 May 2018]. So the Foreign Ministers of all the 28 Member States will have – at the latest at that stage – the possibility of working together on common work along these and similar lines.
For more details (including Q&A with HR/VP Mogherini), please see https://eeas.europa.eu/delegations/iran/44599/remarks-high-representativevice-president-federica-mogherini-press-conference-following_en