The EU Commission has now "adopted" the much awaited EU blocking statute. What does it do? In short it seeks to provide protection to EU-based companies from engaging in sanctions-compliant business with Iran. It is in effect the EU trying to keep the Iran nuclear deal alive despite the withdrawal by the US. This article highlights the key features of the recent action.
On 06 June 2018, in the interests of attempting to:
- save the Joint Comprehensive Plan of Action (JCPOA - known more commonly as the Iran Nuclear Deal), and
- provide protection for EU-based entities undertaking sanctions-compliant business with Iran from US secondary sanctions that are due to be re-instated,
the European Commission announced that it had formally adopted an update to the EU’s blocking statute (formally, EU Regulation 2271/96). The update (currently EU Commission Delegated Regulation C/2018/3572) maintains the existing wording of EU Regulation 2271/96, but wholesale replaces its annex which outlines the specific US statutes and regulations it aims to "block". This follows a previous Press Announcement by the EU Commission issued on 18 May 2018 supporting this approach.
The original EU Regulation 2271/96 annex listed (a) the Cuban Liberty and Democratic Solidary Act 1996, known as the “Helms-Burton Act,” and (b) the Iran and Libya Sanctions Act (ILSA). As the ILSA is vastly outdated, and to ensure that the EU blocking statute includes "blocking" coverage of the US secondary sanctions on Iran-related business that will be re-imposed as a result of the US’ withdrawal from the JCPOA, the updated annex lists the following US sanctions statutes and regulations:
- Iran Sanctions Act of 1996, as amended (formerly the ILSA)
- Iran Freedom and Counter-Proliferation Act of 2012
- National Defense Authorization Act for Fiscal Year 2012
- Iran Threat Reduction and Syria Human Rights Act of 2012, and the
- Iranian Transactions and Sanctions Regulations.
The result is that the secondary sanctions impact of these US laws on EU persons are blocked ie under EU law they have no legal effect.
We have analysed the EU blocking statute in detail in our previous elexica note (available here).
The European Parliament and the European Council will have a period of two months from 06 June 2018 to object to these measures, before the statute is implemented into EU law on or around 05 August 2018 (a day before the first (90-day) "wind-down" period for the re-imposition of US Iran-related nuclear sanctions is set to start).
The EU Commission’s Press Announcement also states that it has launched the formal process to remove obstacles for the European Investment Bank (EIB) External Lending Mandate to finance activities outside the European Union, in Iran, under the EU budget guarantee.
Since President Donald Trump announced the US’ withdrawal from the JCPOA, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) has announced five Iran-related updates to its Specially-Designated Nationals (SDN) List, including designating the Governor of the Central Bank of Iran, Valiollah Seif, on alleged connections with the Iranian Revolutionary Guard Corps-Qods Force (IRGC-QF). All recent OFAC actions can be found here.
For further specific guidance on the potential next steps, please contact Adrian Nizzola, Muneer Khan, and Samir Safar-Aly, or your usual contact.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.