Iran Nuclear/Sanctions Deal discussion

30/07/15

On 27 July 2015 Brick Court Chambers, in association with the British Iranian Chamber of Commerce and W Legal, hosted a discussion about the Iran nuclear/sanctions deal. The diversity of panellists and audience members reflected the enormous significance of this agreement for a wide range of disciplines, including banks, law firms and policymakers.

David Anderson QC (Brick Court) opened the discussion by quoting the Foreign Secretary, who said that the Joint Comprehensive Plan of Action (“JCPOA”), agreed in Vienna on 14 July 2015, was an “historic victory for diplomacy”. Its effect, according to the Minister, would be to un-freeze approximately $150 billion worth of assets (although the exact figure was a matter of debate).

Lord Lamont of Lerwick (BICC) followed with an insight into the political context of the deal. He said the agreement was a “pivotal moment” for relations between Iran and the UK.  The content of the JCPOA could be traced back to the nature of the Iranian regime. He described Iran as a complex and diverse state, which had often been misunderstood. In reality, it was a post-revolutionary society with a clear “capacity to change”. Although the sanctions relief contained in the JCPOA will not be implemented overnight, Lord Lamont thought that the commercial opportunities in Iran would “eventually be huge”.

Sam Evans (Foreign and Commonwealth Office) said that the JCPOA was the direct result of pressure applied by sanctions. The deal was the product of three weeks’ of intense negotiations, where it was clear that all parties wanted to reach an agreement. Although the JCPOA was a “historic moment in engagements with Iran”, sanctions will not be lifted straight away. Under the terms of the JCPOA, sanctions will remain in force until Iran complies with certain parts of the agreement, including the nuclear transparency requirements. Miss Evans concluded by expressing the government’s firm intention to engage with British businesses about commercial opportunities in Iran.

Maya Lester (Brick Court) gave a short summary of the terms of the JCPOA. She outlined current EU sanctions on Iran, including broad financial, oil, gas, insurance & shipping restrictions, & approximately 500 asset-freezes and travel bans. Those measures would eventually be repealed, the first tranche on ‘Implementation Day’, which is the day on which the International Atomic Energy Association reports that Iran has complied with its side of the deal, and the rest on Termination Day. There will be a ‘Joint Commission’ to deal with disputes. Miss Lester said that the JCPOA raised a number of interesting questions for lawyers. For example, what is the legal status of the agreement? And what is the effect of an apparent ouster provision which bars damages claims for breach of contract? An important question was de-listed individuals and entities: what will be their de facto position after de-listing? Will they return to normality, or will banks still refuse to deal with them out of an abundance of caution?

Nigel Kushner (W Legal) began by urging us to be “excited” about the deal. He said that many Iranians viewed the JCPOA as a significant opportunity. As a country which enjoys a young and well-educated workforce, it also represented an important opportunity for foreign investors. However, he advised foreign businesses to exercise caution in the aftermath of the deal. He said they needed to know their customers and be aware of the changing legal and regulatory environment. According to Mr Kushner, the “critical” question was whether EU banks will allow their customers to recommence legitimate business in Iran. He was hopeful that this would be the case, especially after US ‘secondary’ sanctions are lifted. However, previous experience (for example, in the aftermath of sanctions against Myanmar) suggested that the position would not be straightforward.

Qudsi Rasheed (UK representation to the EU, Brussels) followed with some interesting lessons that could be drawn from Iranian sanctions. He said that the JCPOA was proof that sanctions worked. In the UK’s view, they were a major motivator for bringing Iran to the negotiating table. Mr Rasheed thought that the full and proper implementation of the JCPOA would be an ongoing diplomatic process. That process would be brokered by the ‘Joint Commission’, which has been set up to deal with disputes. He ended with the observation that the next phase of the deal was “in Iran’s hands”, and the UK government expected Iran to take six to nine months to take the next steps. Continued constructive engagement between economic operators and government would be value in order to ensure greater clarity as the implementation of the Deal progresses.

Erich Ferrari (Ferrari & Associates) offered a US perspective on the deal. He said that speculation about Congress dismantling the JCPOA was misplaced. Although Congress had the power to pass “disapproving” resolutions, these could be overridden by Presidential veto. In any event, most of the Iran sanction implementing powers belonged to the executive rather than Congress.  Mr Ferrari thought that relief from ‘secondary’ US sanctions would be a particularly significant change. However, it was unclear what this would mean for the behaviour of banks, who are often just as (if not more) concerned about compliance with money-laundering rules as they are with sanctions.

Fleur Cowan (US Embassy in London) began by noting that the deal was “just the beginning”; and that sanctions lawyers were unlikely to be out of a job any time soon. She made clear the U.S. government’s position that sanctions had been intended to bring Iran to the negotiating table to address the international community’s concerns about the Iranian nuclear program. She reiterated that if the IAEA certifies that Iran has met all of the requirements under the JCPOA, certain sanctions will be lifted, however U.S. sanctions relating to Iran’s funding of terrorism, human rights violations, and its ballistic missiles programme will be maintained. Miss Cowan said that the U.S. government welcomed input from private sector companies about the practical effects of sanctions relief under the JCPOA.

The panellists’ talks were followed by penetrating questions from a wide group of audience members, including lawyers, bankers and politicians. Key themes were whether the UK government should be investing more diplomatic resources into its relationship with Iran, and whether there will be a process of ‘re-listing’ after the sanctions relief contained in the JCPOA begins to bite.