On September 10, 2015, Senate Democrats in the U.S. Congress blocked a vote on a widely anticipated resolution to reject the Joint Comprehensive Plan of Action (“JCPOA”) regarding Iran’s nuclear program. On September 11, the U.S. House of Representatives voted overwhelmingly to reject the deal, although this vote will have no practical effect. The JCPOA now will continue toward implementation. Prior to its implementation, which is not expected to occur for many months, international sanctions against Iran will remain in effect. Even after implementation occurs, many restrictions (primarily those imposed by the United States) are not expected to be removed.

What Happened?

Under the Iran Nuclear Review Act passed earlier this year, the U.S. Congress had until September 17 to vote on the JCPOA. Given recent expressions of public support from a sufficient number of Senate Democrats, it was anticipated that any congressional resolution of disapproval would be met with an override-proof presidential veto. Ultimately, 42 Democratic Senators on September 10 prevented a proposed resolution of disapproval from being brought to a vote. As a result, the subsequent vote in the House became symbolic.

What Comes Next?

It is anticipated that the JCPOA will be formally adopted on October 19 (the so-called “Adoption Day”), 90 days after it was endorsed by the United Nations Security Council. (A vote by the Iranian parliament is expected prior to Adoption Day.) At that time, the parties to the deal should begin taking steps to comply with their obligations – with the early burden falling on Iran to meet its commitments to roll back its nuclear program. As described in our prior OnPoint, it is important to remember the following points regarding the deal:

• No U.S. or EU sanctions relief will occur on Adoption Day. Certain sanctions will be lifted thereafter, upon the occurrence of the so-called “Implementation Day.” No specific date for implementation has been set. The international community must first confirm that Iran has met its initial commitments, a process that is expected to take many months. Accordingly, Implementation Day is not expected to occur until 2016.
• After Implementation Day occurs, it is expected that the EU will lift most of the nuclear-related economic and financial sanctions which it currently imposes on Iran. This includes its sectoral sanctions restrictions (on banking, insurance, SWIFT, oil and gas, petrochemicals, graphite, certain precious metals, etc.) and the asset freeze on most listed persons and entities. However, certain EU sanctions will remain, including arms restrictions, nuclear proliferation-related measures and some asset freezes.
• The scope of U.S. sanctions relief will be more limited. So-called secondary sanctions – i.e., those applying to non-U.S. persons – will be lifted, permitting non-U.S. persons to engage in certain activities involving Iran, including transactions involving Iran’s financial, energy, shipping, automotive and precious metals industries. However, primary sanctions will continue to prohibit U.S. persons from engaging in most transactions involving Iran even after implementation occurs. Note that non-U.S. entities owned or controlled by U.S. persons are and will continue to be considered U.S. persons for these purposes.
• The United States also will establish a licensing regime with respect to certain transactions involving Iran, including certain transactions involving non-U.S. entities that are owned or controlled by U.S. persons. Guidance has not yet been issued on the precise manner in which this commitment will be implemented and what activities may be covered. It appears that license authorizations will extend only to non-U.S. entities, and that participation by U.S. entities in positions of ownership or control over the licensed non-U.S. entities will remain prohibited. It is expected that the licensing regime also will cover exports of U.S.-origin commercial aircraft items and services, and imports of Iranian-origin carpets and certain food items into the United States.
• The European Union and United States also will lift asset freezes on an extensive list of Iran-related individuals and entities.
• Some members of Congress have announced their intention to advance bills that would impose additional sanctions on Iran. Even if such measures pass, it is not clear that such restrictions will be implemented by the Obama administration.

What Does This Mean for You?

In the immediate future, the current sanctions regime will remain in place. For companies outside of U.S. jurisdiction, Implementation Day will bring significant changes and a re-opening of access to Iran due to the suspension of most EU measures and U.S. secondary sanctions. U.S.-based companies and their non-U.S. subsidiaries, as well as U.S. natural persons, will remain broadly prohibited from engaging in most transactions in and with Iran. Companies subject to EU and/or U.S. jurisdiction will need to proceed carefully to ensure that any activities involving Iran are consistent with the timing of sanctions relief and with the varying restrictions that will remain in place after the nuclear agreement takes effect.