Global menu

Our global pages

Close

Exemption from US secondary sanctions: a request from the UK, France and Germany

  • United Kingdom
  • France
  • Germany
  • Fraud and financial crime

08-06-2018

In a letter dated 4 June 2018 addressed to the US Treasury Secretary Steven Mnuchin and US Secretary of State Mike Pompeo (the “Letter”), the UK Chancellor and the Foreign Secretary, jointly with their French and German counterparts (the “E3”), have sought a reprieve on behalf of EU entities and individuals from US secondary sanctions in respect of Iran.

Background

On 8 May 2018, President Trump announced that the US will withdraw from the Iran nuclear deal (known as the Joint Comprehensive Plan of Action (“JCPOA”) and begin re-imposing those sanctions which were lifted as part of the JCPOA (please see our previous briefing note here).

Shortly after the announcement, the High Representative of the EU for Foreign Affairs and Security Policy issued a declaration of her regret concerning President Trump’s decision and confirmed the EU’s commitment to the JCPOA as long as Iran remains in compliance with its obligations pursuant to the JCPOA.

Those countries remaining signatories to the JCPOA (namely the UK, France, China, Russia and Germany) have since expressed their continued commitment to its terms. However, the US’s declaration that secondary sanctions (which apply to non-US persons) will come back into force has caused much concern for EU businesses which have invested in Iran post JCPOA. In order to mitigate the impact of President Trump’s decision on EU businesses, the European Commission devised a response plan including the amendment of Council Regulation (EC) 2271/96 to include US legislation in respect of Iran, in an effort to protect against the effects of the extra-territorial application of such legislation (the “Blocking Regulation”) (Please see our previous briefing note here).

Given the historic ineffectiveness of the Blocking Regulation at counteracting the effects of US sanctions (particularly in the context of sanctions against Cuba), EU businesses are looking for additional reassurance when it comes to the extraterritorial reach of the US sanctions.

Requests

The Letter is the latest step in an international effort to keep the Iran deal in place despite the US withdrawal.  It formally requests exemptions on behalf of EU entities from US sanctions in respect of Iran.  The Letter reiterates the EU’s commitment to the JCPOA and states that the E3 expect the US to “refrain from taking action to harm Europe’s security interests”. In it, they acknowledge the ongoing concerns regarding Iran’s ballistic missile programme and its destabilising actions in the region, however, the E3 argue that maintaining the JCPOA remains the best way to prevent a nuclear-armed Iran and to enter into continued engagement with Iran regarding more broader concerns. 

In the Letter, the E3 concede that EU entities and individuals will be unable to do business with Iran if the US takes an aggressive approach in respect of the application of secondary sanctions.  Highlighting their position as allies of the US, the E3 state that they expect that the extraterritorial effects of US secondary sanctions will not be enforced on EU entities and individuals and make a number of specific requests of the US.  These include:

  • specific exemptions to be granted from US sanctions for EU companies that initiated or concluded their contracts after JCPoA Implementation Day (16 January 2016);
  • prolong General License H (to enable foreign subsidiaries of US companies to be able to continue business);
  • reaffirm the exemption for Embassy bank accounts;
  • extension of the winding-down periods;
  • confirmation that secondary sanctions will not apply to pharmaceuticals and healthcare; and
  • exemptions to be granted to enable relationships and transactions in key sectors (including energy, automotive, civil aviation and infrastructure) as well as enabling appropriate banking and financing channels (including maintaining links with the Central Bank of Iran as well as with the other Iranian banks that are not sanctioned by the EU and the preservation of financial messaging services (SWIFT) to these banks).

Conclusion

The Letter makes it clear that these are preliminary requests and notes that EU companies may also approach OFAC with specific requests, a process which the E3 has pledged to support.  Irrespective of the latest requests, there is already evidence of the knock-on effect flowing from the US pulling out of the JCPOA, with some large EU companies already announcing that they are ceasing or suspending their Iranian linked operations. 

With transatlantic allies at such an impasse, a refusal by the US administration to grant the exemptions requested by the E3 and the EU will only contribute to the frustration felt within the EU that the US is once again attempting to dictate their foreign policy.

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings