OUR PRACTICAL
EXPERIENCES WITH THE
IRAN SANCTIONS SO FAR
Jakob Hans Johansen, Partner
Luise Kromann, Attorney-at-law
Simon Fasterkjær Kjeldsen, Assistant Attorney
This does not constitute legal advice.
Kromann Reumert is not liable for loss of
profits, loss of income or other indirect
losses.
SUNDKROGSGADE 5, DK-2100 KØBENHAVN Ø
CVR. NR: DK 62 60 67 11
IRAN IS OPEN FOR
EUROPEAN BUSINESS,
BUT LEGAL DETAILS MAY
CAUSE OBSTACLES*
* In practice, financial services have also been difficult to access, see e.g. The Economist:
The Over-promised Land, www.economist.com/news/business/21697276-it-proving-harder-expected-investors-make-start-over-promised-land
SIDE 2
MAIN LEGAL CHALLENGES THAT
DANISH COMPANIES FACE WHEN
THEY ARE CONTEMPLATING
BUSINESS IN IRAN
1. Getting access to financial services (e.g. getting funds in/out of Iran, financing
investments, complying with US sanctions and getting access to correspondent banks)
2. Avoiding US jurisdiction (e.g. securing no involvement of any American product,
company, employee or US Dollars)
3. Making sure a contemplated transaction, sale or investment is in compliance with the
remaining sanctions and relevant commercial contracts (e.g. financing agreements,
insurance policies etc.)
SIDE 3
OUR INVOLVEMENT WITH
RESPECT TO THE IRANIAN
SANCTIONS SO FAR
1. Before/during contemplated trade/transaction
› We are typically asked – by financial institutions or private companies - for a legal
opinion regarding the legality of a specific commercial set-up and/or customer,
product, entity etc.
› The legality shall be assessed both under the current sanctions (incl. applicable
export control regulation) and the relevant commercial agreements (typically
insurance and loan/financing agreements)
2. After a conducted trade/transaction
› When a breach is suspected/has been detected we have been involved in
investigating potential violations of the sanction regimes and mitigating risks and
fines, including correspondence with authorities
SIDE 4
SIMPLIFIED CASE 1
Subsidiary GmbH (GER)
Company 1 A/S
Subsidiary A.S. (TUR)
Goods
› Company 1 A/S contemplated a commercial set-up with
Iran through their subsidiary in Turkey based on a
specific contract with an Iranian customer
› Company 1 A/S was party to a Danish loan under which
it´s subsidiaries were guarantors
a Danish bank
Subsidiary Inc. (US)
Payment
(EUR)
Iranian customer
› US counsel: Such a guarantee might amount to
“facilitation” under US sanctions in the view of OFAC
› Thus it was necessary to legally “carve out” the
guarantee of the US subsidiary from the loan
agreement and obtain an acceptance from the Danish
bank
SIDE 5
SIMPLIFIED CASE 2
• Company 2 A/S contemplated a commercial set-up based
on specific potential orders
Company 2 A/S
• Company 2 A/S was party to a credit facility agreement
where the counterparty was a syndicate of international
banks
• The facility agreement included a clause in pursuance of
which “proceeds from this agreement cannot be used for
trade with any sanctioned entities or in any sanctioned
country or territory”
• Company 2 A/S and the entire commercial set-up
including the customers were not subject to any specific
sanctions, however Iran remains “a sanctioned country”
under e.g. US primary sanctions
Syndicate of
financing banks
Subsidiary Ltd. (Dubai)
Goods
Payment
(not USD)
• Due to the clause a transaction would be a breach of the
credit facility agreement
• The set-up would thus require an individual waiver or an
amendment to the financial agreement
Iranian Customers incl. previous SDNs
SIDE 6
TYPICAL CONTRACTUAL CLAUSES
PREVENTING DANISH COMPANIES FROM
DOING BUSINESS IN IRAN
› Unsurmountable obligations e.g.: “The lender shall comply with all current sanctions regulations irrespective of
the Designating Authority”
› Specific prohibitions e.g.: “The insured Vessels can not operate within Iranian territory” or “The proceeds from
this facility agreement can not be used to conduct business in Sanctioned Countries” (Iran would legally still be
considered a “Sanctioned Country” under e.g. US primary sanctions)
› Exceptions e.g.: “Coverage under this agreement is provided worldwide except from Algeria, Cabinda, Burundi
[…] Iran”
› Too broad definitions e.g.: "Sanctions" “means any economic, trade or sanctions financial laws or regulations
administered, enacted or enforced by any Sanctions Authority that apply to the Company or any other member of
the Group.”
Such clauses should be waived and/or amended in order to allow trade with Iran or other sanctioned countries!
SIDE 7
”SNAP-BACK” MECHANISM
The lifted sanctions can quickly be reenacted under the JCPOA´s ”snap-back mechanism” - and there are currently
some political risks that should be considered in relevant commercial contracts:
“My number one priority is
to dismantle the
disastrous deal with Iran.”
“We should double up
and triple up the
sanctions.”
“Iran is still violating UN
Security Council
resolutions… which
should be met with new
sanctions designations
and firm resolve.”
“The administration has
gotten it backwards and it
is time to reverse course
before any further
damage is done.”
"We condemn ballistic
missile tests and, if
necessary, sanctions will
be reenacted."
SIDE 8
Customers, agents, partners,
suppliers etc. and their owners
can still be subject to specific
sanctions (SDNs), in pursuance
of which a transaction with
them would violate the EU or
US sanction regimes
Such entities or persons can
also be included on the ”black
lists” later during the actual
validity period of the
contract/cooperation
›
Export, import or transport of
some kinds of products and
services are still completely
banned
Export of dual-use products to
Iran always require an
authorisation from the Danish
Business Authority
Export of products with US
content is generally still
prohibited
How?
Know your customer!
What?
Who?
GENERAL TRANSACTION RISKS TO CONSIDER
Transactions in US Dollars are
still banned
Some Iranian banks are still
subject to specific sanctions
(SDNs)
Almost all Europeans banks do
currently not provide financial
services related to Iran
Any type of US links should be
completely avoided including
involvement of any US
company, employee etc.
›
SIDE 9
INTERNATIONAL TRADE TEAM
Jakob Hans Johansen
Partner
Luise Kromann Pedersen
Attorney-at-law
Simon Fasterkjær Kjeldsen
Assistant Attorney
+45 61 61 30 32
+45 38 77 44 20
[email protected]
+45 61 61 30 19
+45 38 77 22 36
[email protected]
+45 20 19 74 53
+45 38 77 44 29
[email protected]
SIDE 10