EU Regulation 961/2010 in force from 27th October 2010
October 2010
EU REGULATION 961/2010 - IN FORCE FROM 27TH OCTOBER 2010
The EU Regulation implementing the Council Decision of 26th July 2010 was published in the Official Journal on 27th October 2010 (final text attached). In accordance with Article 41 the regulation enters into force as from 27/10/2010 and is binding and directly applicable in all member states with immediate effect and without the need for domestic implementing legislation.
HMT's Notice regarding the Regulation is also attached.
EU Regulation 961/2010- Summary:
This EU Regulation came into immediate effect from the date of its publication, on 27th October 2010. The Regulation has incorporated (and expanded) the provisions relating to asset freeze which were contained in Regulation EC No. 423/2007 which is now repealed. The new Regulation provides for restrictive measures against Iran further to the Council approved decision in July 2010, in particular:
- Additional restrictions contained in Articles 2-9 on trade in, and the provision of technical assistance or brokering services in relation to dual-use goods, technology and equipment which might be used for nuclear proliferation-sensitive activities, the development of WMD or internal repression. Lists of prohibited dual-use goods are set out at Annexes I -IV of the Regulation and also comprise all goods and technology in Annex I to Regulation EC no. 428/2009, with the exception of certain items in its Category 5.
- Restrictions contained in Articles 8 and 11 on trade and key equipment for, and on investment in, the Iranian oil and gas industry; a list of key goods and technology for use in the oil and gas sectors, the sale, supply, transfer or export of which is prohibited, is provided at Annex VI to the Regulation;
- Restrictions (Article 15) on Iranian investment in the uranium, mining and nuclear industry;
- Freezing of funds and economic resources (Articles 16-19). The regulation provides for additional categories of persons to be made subject to the freezing of funds and economic resources. Lists of designated persons and entities are set out at Annexes VII and VIII;
- Restrictions on transfers of funds to and from Iran (Articles 21,22).
- Restrictions concerning the Iranian banking sector (Articles 23,24).
- Restrictions on Iran’s access to the bonds markets of the EU (Article 25).
- Restrictions on the provision of insurance and reinsurance to Iranian entities (Article 26)
- Restrictions on transport (Article 27), in particular the requirement for declaration of cargo and the submission of pre-arrival and pre-departure information in relation to all goods brought into or leaving EU territory from or to Iran;
- Restrictions on providing certain services to Iranian ships and cargo aircraft (Article 28).
It is left to Member States to prescribe effective, proportionate and dissuasive penalties for breach of the Regulation (Article 37).
The issues of most concern to the Club and its Members are:
(a) The scope of application of the Regulation (Article 39) which is very wide, applying to any person/ entity doing business in whole or in part within the territory of the EU, as well as applying to EU Nationals/EU domiciled companies and persons/entities physically present in the EU.
(b) The difficulty of identifying whether a Member is carrying a proscribed dual-use cargo intended directly or indirectly for any Iranian person entity or body or for use in Iran. Article 4 of the Regulation will put a Member subject to the Regulation in breach by mere transport from Iran of a proscribed item, whether it originates in Iran or not. The detailed lists are set out at Annex I of EU Regulation 428/2009 (some 200 pages); and annexes I-IV amd VI of the Regulation. The complexity of the description of many of the items might require expert evaluation. Broadly however, the prohibition encompasses dual-use goods, technology and equipment which might be used for nuclear proliferation-sensitive activities, the development of WMD or internal repression, as well as key equipment and technology listed in Annex VI for key sectors of the oil and gas industry in Iran. These sectors include:
(i) exploration of crude oil and natural gas
(ii) production of crude oil and natural gas
(iii ) refining
(iv) liquefaction of natural gas.
(c) Onerous declaration duties in respect of cargoes (Article 27) for all goods brought into or leaving the customs territory of the EU from or to Iran, which are subject to pre-arrival or pre-departure information to be submitted to the competent customs authorities of the Member State concerned.
(d) Restrictions on funds transfers to/from Iran (Article 21) may make it difficult for persons/entities subject to the Regulation to do business with Iranian entities. Transfers due on transactions regarding foodstuffs, healthcare, medical equipment or for humanitarian purposes, shall be carried out without any prior authorisation, but need to be notified if above Euro 10,000 or equivalent. Any other transfers of funds over Euro 10,000 or equivalent must be notified in advance in writing to the designated competent authorities of the Member States (a list is set out at Annex V); and transfers of or over Euro 40,000 require an application for prior authorisation. An application shall be deemed granted if the authority has not objected in writing within 4 weeks of the application. The relevant authority for the UK is HMT.
Article 21 applies to payments and claims settlements involving Iranian entities but it may also impact the provision of security, because the definition of “Funds” in the Regulation includes guarantees. Although the Regulation is not entirely clear in this regard, it is likely that the provision of security by the Club for claims liabilties will be subject to the notification and authorisation provisions of Article 21. Whilst the provision of security by the Club is always discretionary in accordance with the Club Rules, Members should be aware that security cannot be provided for the benefit of a designated sanctions target and the terms of Article 21 probably prevent the Club from providing security for or on behalf of an Iranian Member, or to an Iranian claimant, if authorisation is refused, or at the very least may cause a delay of several weeks before such security can be provided. The provision of security (or indeed payment) to an Iranian entity may also infringe sanctions regulations applicable in a Member’s own jurisdiction.
(e) A restriction on the provision of services, including supply and bunkering, to ships under direct or indirect Iranian ownership or control, if there are reasonable grounds to believe the ship is carrying prohibited items (Article 28).
(f) IRISL and the companies it owns or controls are identified as targets for asset freeze in Article 16, which also imposes a ban on loading and unloading cargoes on and from vessels owned or chartered by IRISL companies, in the ports of EU Member States. However the detention or impounding of such vessels, the contracted crew, and the cargoes carried is not required.
(g) In Article 26 there is a prohibition on providing insurance to Iranian companies and to a natural person or company (which could be outside of Iran) when acting “on behalf or at the direction of” such an Iranian company, entity or body. This raises issues of corporate control, although it has been clarified that “direction” does not include direction for the purposes of docking, loading or unloading, or safe transit of a vessel temporarily in Iranian waters. Further, the prohibition does not apply to provision of compulsory or third party insurance to Iranian persons, entities or bodies based in the EU. It is also permissible to insure or reinsure the owner of a vessel chartered by an Iranian company, provided that company is not designated for asset freeze in Annex VII and VIII of the Regulation.
Article 26.4 will permit insurers to comply with insurance and reinsurance contracts which incepted prior to the entry into force of the Regulation, but it will not be possible to renew or extend such contracts. The restriction on funds transfers may interfere with the performance of existing contracts.
