Energy[1]

1. The Council Decision introduces new restrictions in relation to the oil and gas sectors. There is a new prohibition on the sale, supply or transfer of key equipment and technology for the following key sectors of the oil and natural gas industry in Iran, or to Iranian, or Iranian-owned enterprises engaged in those sectors outside Iran, by nationals of Member States or from the territories of Member States, or using vessels or aircraft under the jurisdiction of Member States whether or not originating in their territories (the “Key Sectors”):

1.1 Refining;

1.2 Liquefied natural gas;

1.3 Exploration; and

1.4 Production.

The Union shall take the necessary measures in order to determine the relevant items covered by this provision.

2. The provisions set out in paragraph 1 are without prejudice to the execution of an obligation relating to the delivery of goods provided for in contracts that were concluded before the Council Decision was adopted.

3. In addition, the following is also prohibited in relation to the Key Sectors:

3.1 Providing technical assistance or training and other services relating to the key equipment and technology as determined according to paragraph 1 to enterprises in Iran that are engaged in the Key Sectors or to Iranian, or Iranian-owned enterprises, engaged in those sectors outside Iran; 

3.2 Providing financing or financial assistance for any sale, supply, transfer or export of key equipment and technology as determined according to paragraph 1 or for the provision of related technical assistance or training, to enterprises in Iran that are engaged in the Key Sectors or Iranian or to Iranian-owned enterprises engaged in those sectors outside Iran;

3.3 Participate, knowingly or intentionally, in activities the object or effect of which are to circumvent the provisions contained in paragraphs 1, 3.1 and 3.2;

3.4 Granting any financial loan or credit to enterprises in Iran that are engaged in the Key Sectors or to Iranian or Iranian-owned enterprises engaged in those sectors outside Iran; 

3.5 The acquisition or extension of a participation in enterprises in Iran that are engaged in the Key Sectors or to Iranian or Iranian-owned enterprises engaged in those sectors outside Iran. This includes the acquisition in full of such enterprises and the acquisition of shares and securities of a participating nature; 

3.6 The creation of a joint venture with enterprises in Iran that are engaged in the Key Sectors and with any subsidiary or affiliate under their control.

4. The prohibitions set out at paragraphs 1 and 3.1 to 3.3 are without prejudice to the execution of an obligation arising from contracts concluded before the date of adoption of the Council Decision and relating to investments made in Iran before the same date by enterprises established in Member States. In addition, the prohibitions contained in paragraphs 3.4 and 3.5 shall: (i) be without prejudice to the execution of an obligation arising from contracts or agreements concluded before the adoption of the Council Decision; and (ii) not prevent the extension of a participation, if such extension is an obligation under an agreement concluded before the Council Decision was adopted.

Financial Sector[2]

5. Various provisions in the Council Decision in relation to the financial sector are a restatement of the previous sanctions over Iran but include new requirements for processing the transfer of funds to and from Iran.

6. The Council Decision provides new requirements regarding the processing of the transfer of funds to and from Iran, as follows:

6.1 Transfers due on transactions regarding foodstuffs, healthcare, medical equipment, or for humanitarian purposes shall be carried out without any prior authorisation. However, the competent authority of the Member States shall be notified if the transfer is above 10,000 Euros;

6.2 Any other transfer below 40,000 Euros shall be carried out without any prior authorisation. However, the competent authority of the Member States shall be notified if the transfer is above 10,000 Euros;

6.3 Any other transfer above 40,000 Euros shall require the prior authorisation from the competent authority of the Member State concerned. The authorisation shall be deemed to be granted within four weeks unless the competent authority of the Member State concerned has objected within the time limit.

7. Branches and subsidiaries of banks domiciled in Iran within the jurisdiction of the Member States shall also be required to notify the competent authority of the Member State where they are established, of all transfers of funds carried out or received by them, within 5 working days after carrying out or receiving the respective transfer of funds.

8. There is a prohibition on opening new branches, subsidiaries or representative offices of Iranian banks in the territories of Member States, and the establishment of new joint ventures, or the taking of an ownership interest, or the establishment of new correspondent banking relationships by Iranian banks, including the Central Bank of Iran, its branches and subsidiaries, and other financial entities referred to below at paragraph 12 with banks in the jurisdiction of Member States.

9. Financial institutions within the territories of Member States or under their jurisdiction shall be prohibited from opening representative offices, subsidiaries or banking accounts in Iran.

10. The direct or indirect sale or purchase of, or brokering or assistance in, the issuance of public or public-guaranteed bond issues after the entry into force of this Council Decision to and from the Government of Iran, Central Bank of Iran, or banks domiciled in Iran, or branches or subsidiaries within and outside the jurisdiction of Member States of banks domiciled in Iran, or financial entities that are neither domiciled in Iran nor within the jurisdiction of the Member States, but are controlled by persons and entities domiciled in Iran as well as any individuals and entities acting on their behalf or at their direction, or entities owned or controlled by them, shall be prohibited.

11. Member States should continue to refrain from entering into new commitments for grants, financial assistance and concessional loans to the Government of Iran, including through their participation in international financial institutions, except for humanitarian and developmental purposes.

12. Member States are also required to continue exercising enhanced monitoring over all the activities of financial institutions within their jurisdiction with:

12.1 Banks domiciled in Iran, in particular the Central Bank of Iran;

12.2 Branches and subsidiaries within the jurisdiction of the Member States of banks domiciled in Iran;

12.3 Branches and subsidiaries outside the jurisdiction of the Member States of banks domiciled in Iran;

12.4 Financial entities that are not domiciled in Iran, but are controlled by persons and entities domiciled in Iran.

The provisions at paragraphs 12.2 to 12.4 now have a wider application as they are no longer limited to the branches, subsidiaries and entities which are contained in an annexed list.

13. The Council Decision also reiterates the requirements for financial institutions in relation to their activities with banks and financial institutions as set out in paragraph 12. This includes: (i) exercising continuous vigilance over account activity including through their programmes on customer due diligence and under their obligations relating to money laundering and financing of terrorism; (ii) requiring that all information fields of payment instructions which relate to the originator and beneficiary of the transaction in question are completed and if that information is not completed refuse the transaction; (iii) maintaining all records of transactions for a period of 5 years and making them available to national authorities on request; and (iv) if they suspect or have reasonable grounds for suspecting that funds are related to proliferation financing (i.e. financing relating to nuclear, chemical or biological weapons and related materials), promptly report their suspicions to the Financial Intelligence Unit (FIU) or another competent authority designated by the Member States concerned.

Insurance and Reinsurance[3]

14. The provisions on insurance and reinsurance have been extended by the Council Decision. There is a prohibition on the provision of insurance and reinsurance to the Government of Iran or to entities incorporated in Iran or subject to Iran’s jurisdiction, or to any individuals or entities acting on their behalf or at their direction, or to entities owned or controlled by them including through illicit means. It is also prohibited to participate, knowingly or intentionally, in activities which have the object or effect of circumventing the provision of insurance and reinsurance to the Government of Iran or entities and individuals detailed above. These prohibitions do not apply to the provision of health and travel insurance to individuals.

Restrictions on Financial Support for Trade[4]

15. Member States are required to exercise restraint in entering into new short-term commitments for public and private provided financial support for trade with Iran including the granting of export credits, guarantees or insurance to their nationals or entities involved in such trade. In addition, Member States should not enter into new medium- and long-term commitments for public- and private-provided financial support for trade with Iran. It is hoped that this will avoid any financial support contributing to the proliferation-sensitive nuclear activities or to the development of nuclear weapon delivery systems.

16. This prohibition does not affect commitments established prior to the entry into force of the Council Decision and does not concern trade for food, agricultural, medical and other humanitarian purposes.

Export and Import Restrictions[5]

17. The Export and Import restrictions contained within the Council Decision largely reiterate the previous EU sanctions over Iran.

18. There is a continued prohibition on the direct or indirect supply, sale or transfer of the following items, materials, equipment, goods and technology, including software, to or for the use in, or benefit of, Iran by nationals of Member States, or through the territories of the Member States, or using their flag vessels or aircraft, whether or not originating in their territories:

18.1 Items, materials, equipment, goods and technology contained in the Nuclear Suppliers Group and Missile Technology Control Regime lists;

18.2 Any additional items, materials, equipment, goods and technology, determined by the Security Council or the Committee, which could contribute to enrichment-related, reprocessing or heavy water-related activities, or to the development of nuclear weapon delivery systems;

18.3 Arms and related material of all types. This includes weapons and ammunition, military vehicles and equipment and spare parts for such arms and related materials, as well as equipment which might be used for internal repression. This prohibition shall not apply to non-combat vehicles which have been manufactured or fitted with materials to provide ballistic protection, intended solely for protective use of personnel of the EU and its Member States to Iran; 

18.4 Certain other items, materials, equipment, goods and technology that could contribute to enrichment related, reprocessing or heavy water-related activities, to the development of nuclear weapon delivery systems or to the pursuit of activities related to other topics about which the International Atomic Energy Agency (“IAEA”) has expressed concerns or identified as outstanding;

18.5 Other dual use goods and technology listed in Annex I to Council Regulation EC No 428/2009 that are not covered by paragraph 18.1 except for Category 5 – Part 1 and Category 5 – Part 2 in Annex 1.

19. This prohibition also applies to the procurement by nationals of Member States, or using their flagged vessels or aircraft, of the items, materials, equipment, goods and technology referred to in paragraph 18, whether or not originating in the territory of Iran.

20. The following prohibitions continue to apply in relation to the items listed above:

20.1 Providing technical assistance, training, investment or brokering services related to items, materials, equipment, goods and technology set out in paragraph 18;

20.2 Providing, manufacturing, maintaining and using the items, materials, equipment, goods and technology set out in paragraph 18, directly or indirectly to any person, entity or body in, or for use in Iran;

20.3 Providing financing or financial assistance related to the items and technologies referred to in paragraph 18, including in particular grants, loans and export credit insurance for any sale, supply, transfer or export of these items and technologies, or for the provision of related technical training, services or assistance directly or indirectly to any person, entity or body in, or for use in Iran;

20.4 Participating, knowingly or intentionally, in activities the object or effect of which is to circumvent the prohibition referred to in paragraphs 20.1 to 20.3 above.

21. Authorisation by the competent authority of the exporting Member States on a case by case basis is also required for the direct or indirect supply, sale or transfer to, or for use in, or for the benefit of Iran, by nationals of Member States or through their territories of Member States, or using vessels or aircraft under their jurisdiction of items, materials, equipment, goods and technology, including software, which are not covered by paragraph 18 that could contribute to the enrichment related, reprocessing or heavy water related activities, to the development of nuclear weapon delivery systems or to the pursuit of activities related to other topics about which the IAEA has expressed concerns or identified as outstanding. The Union shall take the necessary measures in order to determine the relevant items to be covered in this provision. Authorisation is also required for the activities listed in paragraphs 20.1 to 20.3 as they relate to the goods not covered by paragraph 18 but that could contribute to Iran’s nuclear activities as explained above.

22. The competent authorities of the Member States shall not grant any authorisation for any supply, sale or transfer of the items, materials, equipment, goods and technology which are not covered by paragraph 18 if they determine that the sale, supply, transfer or export concerned or the provision of the service concerned would contribute to enrichment related, reprocessing or heavy water-related activities, to the development of nuclear weapon delivery systems or to the pursuit of activities related to other topics about which the IAEA has expressed concerns or identified as outstanding.

23. The exceptions to the above Export and Import restrictions detailed at paragraphs 18.1 to 18.3 and 20 are reiterated in the Council Decision. The measures will not apply where the Committee determines in advance and on a case-by-case basis that such supply, sale, transfer or provision of such items or assistance would clearly not contribute to the development of Iran’s technologies in support of its proliferation-sensitive nuclear activities and of its development of nuclear weapon delivery systems, including where such items or assistance are for food, agricultural, medical or other humanitarian purposes, provided that: (i) the contracts for delivery of such items or assistance has the appropriate end use guarantees; and (ii) Iran has committed not to use such items in the proliferation-sensitive nuclear activities or for the development of nuclear weapon delivery systems. An almost identical exception applies to paragraphs 18.5 and 20 above, however, the exception does not extend to instances where the items or assistance are for food or agricultural purposes. In addition, it is the Competent Authority in the relevant Member State who determines whether the exception applies and not the Committee.

Other Restrictions

24. In addition to the provisions detailed above, the Council Decision contains:

24.1 Restrictions on admission of certain persons through the territories of the Member States;

24.2 The freezing of funds and economic resources which belong to, are owned, held or controlled by certain persons and entities;

24.3 Restrictions on the transport sector.

This article was prepared by Lista M. Cannon (Partner, lcannon@fulbright.com or +44 0 20 7832 3601), David M. Harris (Associate, dharris@fulbright.com or +44 0 20 7832 3637) and Nicola Kelly (Associate, nkelly@fulbright.com or +44 0 20 7832 3630) of Fulbright & Jaworski International LLP in London. Lista and David are lawyers in Fulbright & Jaworski L.L.P.'s International Trade Practice Group. Fulbright’s International Trade Practice Group, chaired by J. Scott Maberry (Partner, smaberry@fulbright.com or +1 202 662 4693) and Stephen M. McNabb (Partner, smcnabb@fulbright.com or +1 202 662 4528), advises clients worldwide in the areas of economic sanctions, export controls, munitions exports, and other areas of international trade regulation.

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[1] Articles 4 to 7 of Council Decision of 26 July 2010. Note paragraph references are references to the paragraph numbers in this briefing and not to the Council Decision.
[2] Articles 9 to 14 of Council Decision of 26 July 2010.
[3] Article 12 of Council Decision of 26 July 2010.
[4] Article 8 of Council Decision of 26 July 2010.
[5] Articles 1 to 3 of Council Decision of 26 July 2010.