Decertifying the Iran Deal

President Trump must make a decision prior to October 15th on the certification of the Iran Nuclear Deal or Joint Comprehensive Plan of Action (JCPOA) that was implemented in January 2016. If it were decertified, the onus would be on the U.S. Congress to decide in 60 days whether to impose nuclear-related sanctions that were revoked due to the implementation of the JCPOA. Accordingly, decertification does not violate the JCPOA unless nuclear-related sanctions are brought back by Congress.

Senior administration officials believe that President Trump is leaning towards decertification. The president could also reimpose sanctions on his own through executive orders. This could lead down a path where the United States reimposes secondary sanctions on persons and entities transacting with Iran at direct odds with the unanimous agreement of the European and Asian members of the P5+1 that the deal should not be altered or revoked.

Sanction Relief from the JCPOA

To understand what is at stake if the United States reimposes nuclear-related sanctions, it is best to look at what nuclear-related sanctions were revoked by the U.S. on Implementation Day of the JCPOA.

  • Secondary Sanctions: Non-US entities and persons engaging in a wide range of transactions with Iran as well as relevant financial and banking sanctions
  • Primary Sanctions: Import of Persian Carpets and Foodstuffs
  • Licensing Policy: Sale of civil aviation aircraft under a favorable licensing policy
  • Sale of non-US goods, technologies or services by US-person owned subsidiaries
  • List-based sanctions: Listing of majority of Iranian banks and airlines

If the United States reimposes nuclear-related sanctions that were revoked due to the JCPOA, most if not all of these sanctions could be re-imposed. The conundrum would rest in the hands of the European and Asian businesses who would then risk losing access to the United States economy and financial system in exchange for trade with Iran. Certainly, the United States would attempt to convince its European and Asian allies to reimpose sanctions on Iran as well to renegotiate the nuclear deal but the outlook on this prospect is bleak.

UN Sanctions and Snapback Provisions

The Obama White House described the dispute resolution mechanism as follows:

  • If Iran believed that any or all of the E3/EU+3 were not meeting their commitments under this JCPOA, Iran could refer the issue to the Joint Commission for resolution; similarly, if any of the E3/EU+3 believed that Iran was not meeting its commitments under the JCPOA, any of the E3/EU+3 can do the same. The Joint Commission would have 15 days to resolve the issue, unless the time period was extended by consensus.
  • After Joint Commission consideration, any participant could refer the issue to ministers of foreign affairs, if it believed the compliance issue had not been resolved. Ministers would have 15 days to resolve the issue, unless the time period was extended by consensus.
  • If the issue has still not been resolved to the satisfaction of the complaining participant, and if the complaining participant deems the issue to constitute significant nonperformance, then that participant could treat the unresolved issue as grounds to cease performing its commitments under this JCPOA in whole or in part and / or notify the UN Security Council that it believes the issue constitutes significant non-performance.

Article 37 of the JCPOA outlines how sanctions would be reimplemented on Iran:

Upon receipt of the notification from the complaining participant, as described above, including a description of the good-faith efforts the participant made to exhaust the dispute resolution process specified in this JCPOA, the UN Security Council, in accordance with its procedures, shall vote on a resolution to continue the sanctions lifting. If the resolution described above has not been adopted within 30 days of the notification, then the provisions of the old UN Security Council resolutions would be re-imposed, unless the UN Security Council decides otherwise. In such event, these provisions would not apply with retroactive effect to contracts signed between any party and Iran or Iranian individuals and entities prior to the date of application, provided that the activities contemplated under and execution of such contracts are consistent with this JCPOA and the previous and current UN Security Council resolutions.

In all practical terms, this means that any security council member can veto ongoing sanction relief but no member can veto the snapback of UN sanctions on Iran. This puts US opposition to the Iran Deal on high ground relative to the agreement of non-US members that the deal is working and should not be disrupted. Alternatively, it is possible that non-US members disagree that good-faith efforts to exhaust the dispute resolution process were made and it never reaches the sections of the provision that would dismantle the deal. Furthermore, the Europeans and Asians could decide to continue the deal with the Iranians on their own without reimposing sanctions and resist all sanctions from the United States.

The United Nations revoked six UN resolutions that imposed sanctions on Iran per the JCPOA. Resolutions 1696, 1737, 1747, 1803, 1835, and 1929 could be reinstated against Iran if the outcome of the mechanism outlined in Article 37 is pursued. Resolution 2231’s termination mechanism requires the accusing party to have a good faith belief that the opposing party is in breach of the agreement. If P5+1 believes that a good faith belief is absent then the revocation of sanctions and resolution 2231 could still be in place post decertification.

Sanctions Compliance and the Future of Iran Sanctions

Although it is very possible that the JCPOA and the underlying sanction relief that stemmed from the agreement will be kept in place, it would be prudent to evaluate the risks of engaging in large and long-term transactions as a US person or entity in the current circumstances. Speaking with a knowledgeable OFAC lawyer on the implications of the decertification of the JCPOA by the US and the snapback of sanctions on Iran is highly recommended. Every previous or current transaction is different in the context and may or may not be affected by the possibility of the snapback of sanctions.