Further Extension of Sanctions Relief under Joint Plan of Action - 30 June 2015
When on 2 April 2015 the P5+1 countries and Iran announced the basic parameters for a Joint Comprehensive Plan of Action regarding Iran’s nuclear programme, it was also announced that the EU and US sanctions relief then in force pursuant to the Joint Plan of Action (JPOA) reached on 24 November 2013 would be extended through to 30 June 2015.
It had been hoped that within that time frame, the sides would reach a comprehensive resolution which would result in the lifting of sanctions and establishing clear restrictions on Iran’s nuclear programme.
It has been announced that the P5 + 1 countries and Iran have agreed to extend the JPOA sanctions relief for a period of seven days in order to continue negotiations to reach a comprehensive solution.
The limited JPOA sanctions relief is now extended through to 7 July 2015. The categories of relief and the type and extent of sanctions relief provided under the JPOA remain unchanged . All activities conducted in accordance with the sanctions relief must be concluded while the relief is in effect.
Copies of a guidance note published by the US and EU Council Decision 2015/1050 can be downloaded from the link set out below.
Parameters of Joint Comprehensive Plan of Action - April 2015
Following lengthy negotiations in Switzerland between the P5+1 countries and Iran, it was announced on 2 April 2015 that the key parameters of a Joint Comprehensive Plan of Action (JCPOA) regarding Iran's nuclear programme had been agreed, which could eventually result in the lifting of UN, US and EU sanctions against Iran.
Iran has committed to:
- a reduction in the number of its installed centrifuges;
- the conversion of the Fordow facility from an enrichment site into a nuclear, physics and technology centre;
- restrictions on the enrichment of uranium at the Natanz facility;
- inspections under the auspices of the International Atomic Energy Association (IAEA).
Importantly, there is no immediate relief from any US, EU or UN sanctions, save as already provided under the JPOA up to 30 June 2015. Any further relief will take effect only after the IAEA has verified that Iran has complied with its commitments. Copies of a statement issued jointly by the EU and Iran, and a guidance note published by the US, can be downloaded from the links set out below.
Further Extension of Sanctions Relief under Joint Plan of Action - 24 November 2014
On 24 November 2014, the P5+1 countries - China, France, Germany, the Russian Federation, the United Kingdom and the United States - agreed with Iran to extend the implementation of the measures of the Joint Plan of Action (JPA) until 30 June 2015. The JPA originally ran for a period of six months from 20 January 2014. The JPA undertakings were then subsequently extended to 24 November 2014. As the parties have failed to reach a final agreement concerning Iran’s nuclear programme, they have agreed to extend negotiations until 1 July 2015, with the expectation that terms should be reached by 1 March 2015. Discussions between the parties are expected to reconvene in December 2014.
Full details of the relaxation measures may be found on the Club website here. In summary, the US measures broadly include the temporary suspension of sanctions on:
• Iran’s petrochemical exports, as well as sanctions on any associated services;
• The purchase by China, India, Japan, the Republic of Korea, Taiwan, and Turkey of crude oil from Iran so as to maintain their current average level of imports from Iran and to render non-sanctionable a limited number of transactions for the release in instalments of an agreed amount of revenue to Iran for receipt at participating foreign financial institutions in selected jurisdictions;
• Provision of goods or services to Iran’s auto industry;
• The purchase or acquisition of precious metals to or from Iran, as well as sanctions on associated services;
• Provision of goods or services for Iranian civil aviation.
The EU measures involve the suspension of the following restrictive measures:
• The prohibition on the transport (but not the prohibitions on purchase or import into the EU) of Iranian crude oil if it originates in Iran or is being exported from Iran to any other (i.e. non-EU) country;
• The prohibition on the provision of insurance and reinsurance related to the import, purchase or transport of crude oil of Iranian origin or that has been imported from Iran;
• The prohibition on the import, purchase or transport of Iranian petrochemical products and on the provision of related financial services, including insurance and reinsurance;
• The prohibition on trade in gold and precious metals, but not diamonds, with the Government of Iran, its public bodies and the Central Bank of Iran, or persons and entities acting on their behalf;
• The prohibition on making available vessels designed for the storage of oil and petrochemical products to any Iranian person entity or body, or to others where the vessel is used to carry or store oil or petrochemical products that originate in Iran or which have been exported from Iran.
The following EU measures shall also continue to apply until 30 June 2015, unless revoked sooner:
• Increased notification and authorisation thresholds in respect of payment to/ from Iran (as set out in in Regulation 267/2012 Article 30(3)(a)(b) and (c), and Article 30a(1(b) and (c)), meaning that parties may make payments to Iran up to the specified amounts without having to make prior notification or seek prior authorisation from their competent authority;
• A derogation from the asset freezing provisions in Article 23 ( 2) and (3) of Regulation 267/2012 in favour of the Iranian Ministry of Petroleum, to enable funds and economic resources to be made available where necessary for the execution of contracts for import, purchase or transport of petrochemical products (as listed in Annex V of Regulation 267/2012) that originate in Iran or which have been imported from Iran.
In the case of both the EU and US measures, the relief granted may be revoked at any time if Iran does not meet its commitments under the JPA. All other EU and US sanctions remain in place save for the limited and specific sanctions relief under the JPA which has now been extended until 30 June 2015.
Copies of an FAQ and Guidance Note on the JPA measures published by the US can be downloaded from the links set out below.
Iran Sanctions - Extension of Sanctions Relief under the Joint Plan of Action - 20 July 2014
This Alert should be read in conjunction with the Alert published on 21 January 2014 regarding the temporary relief of EU and US sanctions measures relating principally to transportation and insurance of petrochemical cargoes from Iran and Iranian crude to NDAA[1] waiver countries.
By way of background, on 24 November 2013, China, France, Germany, the Russian Federation, the United Kingdom and the United States (the P5+1) reached an agreement with Iran on its nuclear programme and jointly published a Joint Plan of Action (JPoA) which included the implementation of a temporary suspension of certain transportation and insurance prohibitions measures for a period of six months with effect from 20 January 2014.
Timing
The six month temporary suspension period expired on 20 July 2014. Subject to the parties to the JPoA meeting certain conditions, it has been agreed that a further period of temporary suspension of prohibition measures will apply until 24 November 2014. The United States has issued FAQs and Guidance through the Office of Foreign Assets Control and Department for State. The European Union has issued Council Decision 2014/480/CFSP of 21 July 2014, but it has not amended implementing Regulation 2014/42/EU so this Regulation remains in force in its original form extended beyond 20 July 2014 to 24 November 2014. It should also be noted that the temporary suspension of prohibitions may be withdrawn and the prohibitions reinstated with immediate effect if the commitments and undertakings on the part of Iran in the JPoA are not fulfilled.
General issues to note
In reviewing the extension of the sanctions suspension measures discussed briefly below, two important points in relation to these measures should be borne in mind by shipowners and Clubs;
(i) Period of suspension of current measures
It is important to note that the extension of the suspension of sanctions measures is for a defined period until 24 November 2014. To the extent that shipowners wish to take advantage of the extension period and enter into transportation contracts, they are advised to ensure that all transactions under any contract/s will be fully executed by 24 November 2014 at the very latest.
(ii) Transactions with Designated Entities
The extension of the suspension of sanctions will not provide relief from the current prohibitions concerning transactions with U.S. and or EU designated persons or entities (identified on lists published by OFAC, the EU and HMT in the UK[2])
What is the practical effect of the extension of the Joint Plan of Action on Insurance for Owners and Clubs?
The wider position as regards insurance cover during the period up to 24 November 2014 is different in the U.S. and EU.
US
Following earlier engagement with the Group. the U.S. Department for State has now confirmed that “Insurance payments for claims arising from incidents that occur during the JPOA period and/or the extended JPOA period may be paid after November 24, 2014, so long as the underlying transactions and activities conform to all others aspects of the sanctions remaining in place and the terms of the sanctions relief provided by the JPOA. Insurance and reinsurance companies should contact the USG directly with any inquiries. U.S. persons and U.S.-owned or -controlled foreign entities remain prohibited from participating in the provision of insurance or reinsurance services to or for the benefit of Iran or sanctioned entities, including with respect to all elements of the sanctions relief provided pursuant to the JPOA, unless specifically authorized by OFAC”.
U.S. participants on the Group’s reinsurance contract may therefore continue to be prohibited from participation in the event of a claim or claims triggering their involvement.
Members should be aware that the Club’s cover excludes liabilities and losses to the extent that such liabilities and losses are not recoverable from reinsurers by reason of sanctions, and that a possible shortfall of this kind is therefore a risk for the Member’s own account.
EU
At the time of writing the European Union has not made the same or a similar concession to that of the US, and it may be prohibited for EU regulated, incorporated or domiciled insurers to pay claims after 24 November 2014.
The International Group has voiced concerns with the European Commission regarding the lack of provision permitting insurers to respond to liabilities incurred during the suspension period but which were not pursued or paid until after the suspension period. The IG will continue efforts to engage the European Commission with a view to aligning European Union policy with the U.S and further updates will be provided if the situation changes.
However, in the absence of satisfactory clarification by EU member states on this fundamental issue, clubs are in no better position than they were prior to the US clarification.
At this point, all Clubs in the International Group will therefore continue to warn their Members that cover for claims arising during the extended JPoA period could be adversely affected by reinsurance shortfalls or by inability to make payments after 24 November.
Members should also be mindful that, notwithstanding the JPoA period, the ability of Clubs to respond to any incident arising from trading to Iran, including the provision of security, remains limited, not least by the reluctance of banks and other service providers to be involved in business related to Iran.
All Clubs in the International Group of P&I Clubs have issued similar alerts.
[1] U.S. National Defence and Authorisation Act waivers are granted by the U.S. Administration to countries who have demonstrated a significant reduction in imports of Iranian oil. The most recent list of waiver countries is limited to India, China, Japan, South Korea, Taiwan and Turkey
EU: http://eeas.europa.eu/cfsp/sanctions/consol-list/index_en.htm
UK: https://www.gov.uk/government/publications/financial-sanctions-consolidated-list-of-targets
US: http://sdnsearch.ofac.treas.gov/
