The International Atomic Energy Association (IAEA) issued a report on Saturday (16 January 2016) confirming that Iran has completed the necessary steps to start the implementation of the Joint Comprehensive Plan of Action (JCPOA), triggering much awaited sanctions relief from the EU and US. For background of the JCPOA, see our Member Alert of 15 July 2015. 

The EU has lifted all sanctions which had targeted, amongst others, Iran’s oil, gas, shipping, petrochemicals, insurance and financial sectors. Over 400 entities that have previously been designated for asset freezes by the EU have also been delisted. Members are however advised to still exercise due diligence since there are residual asset freezes in place against individuals and entities linked to Iran’s ballistic missile program and human rights violation. Members should therefore carry out proper due diligence on their counterparts before concluding contracts. The UK government has issued a helpful summary of the liftings and also links to the regulations which can be found in the pdf below.

HMT-JCPoA_2016.pdf

The US has broadly lifted “nuclear-related secondary sanctions” which had targeted non-US companies/persons dealing with Iran’s energy, shipping, financial, shipbuilding and automotive sectors, Iran’s port operators, providers of related insurance, Iran’s trade in gold and other precious metals, and trade with Iran in graphite and raw or semi-finished metals, such as aluminium, steel and coal. The US has also de-listed number of “specially designated nationals”. However, the US has not lifted its “primary sanctions” against Iran. “Primary sanctions” apply to US persons and transactions with a US nexus. As a result, US persons remain prohibited to have transactions with Iran and Iranian interests. US Department of the Treasury has issued guidance that can found below.

US-Iran-secondary-sanctions-lifting-FAQs-1-16-2016.pdf
US-Iran-secondary-sanctions-lifting-guidance-1-16-2016.pdf

Members should take due note that the agreement which is basis for the sanction liftings contain so called “snap back” provisions, meaning EU and US can reinstate the sanctions on a very short notice. Hence, members contemplating engaging in business with Iran are recommended to, apart from conducting the due diligence investigations mentioned above, ensure that all contracts contain proper sanction clauses addressing such a scenario in particular so that contracts can be terminated. Members are recommended to seek further legal advice on this point.

Insurance implications

The fact that US maintains its “primary sanctions” may result in that US insurers and reinsurers in various global marine reinsurance programs may be unable to meet their obligations and pay a claim with an Iranian nexus. This could apply to both Iranian vessels and any other vessel having a casualty or claim in Iran, or with an Iranian connection. Under the P&I Rules, the shortfall from reinsurance is an excluded risk (Rule 11:4). All other P&I clubs in the International Group has a similar exclusion. Other classes of insurance can have similar exclusions, pending wording of any sanction clause. Members are therefore advised to take note that sanction risks regarding Iran remain despite the comprehensive lifting of Iran sanctions.

The Club is monitoring developments closely and will revert with further guidance when available.

Member Alert is published by The Swedish Club as a service to members. While the information is believed correct, the Club cannot assume responsibility for completeness or accuracy.