Holland & Knight: The Iran Nuclear Deal and Its Implications for the Maritime Industry

By Jonathan M. Epstein and Farid Hekmat, Holland and Knight

HIGHLIGHTS:

On July 14, 2015, the United States, France, China, Russia, the United Kingdom, Germany and the European Union entered into the Joint Comprehensive Plan of Action (JCPOA) with Iran after years of adverse negotiations.
On July 20, 2015, each the United Nations Security Council and the Council of the European Union took motion to endorse the JCPOA.
Assuming the accord is applied as deliberate, the lifting of European Union and most U.S. secondary sanctions will, as a authorized matter, largely normalize maritime-related transactions between non-U.S. firms and Iran.
However, even after implementation, many of the prohibitions on U.S. firms doing enterprise straight or not directly with Iran and Iranian entities will stay in place.

On July 14, 2015, the U.S., France, China, Russia, United Kingdom, Germany and the European Union (EU) entered into the Joint Comprehensive Plan of Action (JCPOA) with Iran after years of adverse negotiations. Iran agreed to various restrictions and oversight on its nuclear actions in return for the rollback of sure United Nations (U.N.), EU and U.S. sanctions. Companies in a variety of industries are keen to know the implications of the JCPOA. While official briefings have accomplished little to make clear the JCPOA, this alert gives a high-level evaluation of the JCPOA’s potential affect for the maritime group.

Implementation of the JCPOA

The United Nations Security Council handed a decision on July 20, 2015, affirming the JCPOA and prospectively authorizing the removing of most U.N. sanctions on Iran upon implementation. On the identical day, the Council of the European Union additionally affirmed the JCPOA. However, precise implementation of sanctions adjustments are possible a number of months away, as various implementation steps should happen. In explicit, the International Atomic Energy Agency (IAEA) should confirm that Iran has met sure nuclear-related commitments. For the U.S. to implement the JCPOA, along with the 60-day U.S. congressional evaluate interval, the Obama administration might want to concern implementing orders/rules. In the interim interval, all U.S. sanctions will stay efficient, together with the restricted sanctions suspensions underneath the present interim Joint Plan of Action (JPOA).

Limited Lifting of Sanctions for U.S. Maritime Companies and Their Foreign Subsidiaries

Even after implementation, most prohibitions on U.S. firms doing enterprise straight or not directly with Iran and Iranian entities will stay in place (e.g., these referring to terrorism, human rights violations and ballistic missile improvement), though, the import of Iranian carpets and foodstuffs together with pistachios and caviar into the U.S. will probably be allowed (possible underneath a licensing regime).

In 2012, the U.S. expanded sanctions to incorporate non-U.S. firms owned or managed by U.S. individuals (international subsidiaries), and these restrictions will not be being expressly lifted. However, the JCPOA does present for licensing international subsidiaries of U.S. firms to have interaction in actions with Iran “that are consistent” with the JCPOA. From early statements, the U.S. authorities itself could not but have determined how you can implement this provision of the JCPOA. A liberal method could be for the Office of Foreign Assets Control (OFAC) to concern common licenses permitting international subsidiaries of U.S. firms to have interaction in transactions with Iran topic to sure limitations. This could be in some methods a reversion again to the pre-2012 guidelines. A extra conservative method would contain requiring U.S. firms to acquire particular licenses, although this might show unwieldy. Clear steerage is vital, as international subsidiaries of U.S. firms play vital roles in worldwide maritime transport and insurance coverage. For instance, clarification could:

scale back the tough protection points when there’s participation by insurers finally owned by U.S. father or mother firms
permit third-country flag vessels not directly owned by U.S. traders to take part in swimming pools that permit voyages to Iran or in any other case commerce with Iran
license power firms and oil providers companies owned by U.S. father or mother firms to re-enter the Iranian offshore drilling market

Impact for Non-U.S. Owned Maritime Companies

The U.S. has agreed to take away many of the “secondary” sanctions imposed on non-U.S. firms that aren’t owned or managed by U.S. individuals. These sanctions have had a profound impact on worldwide maritime commerce with Iran. Of explicit significance to the maritime business are the next:

secondary sanctions referring to the carriage of oil, petrochemicals and most different cargoes to/from Iran will probably be lifted
secondary sanctions for partaking in transactions with the power, transport, shipbuilding and port sectors of Iran will probably be lifted
secondary sanctions on non-U.S. insurers for insuring sure voyages to Iran will probably be lifted, offering considerably extra certainty to vessel homeowners and operators that coverages are in impact to voyages to Iran carrying most cargoes
secondary sanctions on international monetary establishments for facilitating transactions with Iran will probably be lifted
many of the Iranian transport, banking and power firms designated as Specially Designated Nationals (SDNs) will probably be faraway from the SDN record – together with the National Iranian Oil Company (NIOC), the Islamic Republic of Iran Shipping Lines (IRISL) and the National Iranian Tanker Company (NIOC) – and it seems that most Iranian vessels listed in rem as SDNs additionally will probably be faraway from the SDN record
whereas Tidewater Middle East Company (Tidewater) will stay an SDN, the U.S. has clarified that secondary sanctions will not be in impact for actions within the port of Bandar Abbas with port operators that aren’t managed by Tidewater

European Union Sanctions Being Lifted

The EU is eradicating many of the sanctions that considerably impacted the worldwide maritime group together with these within the power, monetary, transport and transport, and insurance coverage sectors. In addition, the EU is delisting numerous Iranian entities. For a extra detailed evaluation concerning the EU sanctions being lifted, see “Sanctions Relief Agreed Under Joint Comprehensive Plan of Action” issued by Ince & Co LP.

Restrictions and Practical Considerations

There are various sensible points and potential dangers in potential transactions with Iranian entities.

It seems that U.S. greenback (USD) clearing transactions will stay prohibited. This signifies that USD funds for cargos and charters hires for voyages to Iran will stay prohibited, besides the place such exercise falls underneath an OFAC common or particular license.

The JCPOA has “snap back” provisions that will permit the U.S. or EU to re-impose sanctions rapidly if Iran doesn’t meet its commitments. (These provisions are in discovered within the expedited dispute decision provisions of the JCPOA). There is a “contract sanctity” provision for contracts entered into with Iran in accordance with the JCPOA. However, it’s unclear whether or not this is applicable solely to the U.N. Security Council resolutions, or whether or not it additionally could be binding on a U.S. unilateral snap again of sanctions.

As a sensible matter, main banks could also be reluctant to permit transactions, even as soon as the legislation permits such exercise, due to threat administration issues.

Given the years of accelerating sanctions, many ship mortgages, charter-parties and different agreements have strict sanctions clauses that in some circumstances could have to be modified.

This article was initially printed by Holland and Knight, LLP