In response to the US exit from the Iran Nuclear Agreement, and to their refusal to adopt the measures requested by the EU last June, yesterday the EU published important reforms to the EU legislation to counteract the effects of the re-imposition of US sanctions on Iran. Because of the relevance of these modifications we have prepared an alert, which we will expand on in a newsletter to ensure that our clients are duly informed of these important legislative changes.
INCLUSION OF NEW REGULATIONS TO PROTECT THE ANTIDOTE REGULATIONS
On the one hand, the EU has amended Council Regulation (EC) 2271/96 of the 22nd November 1996 protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom (the “Antidote Regulation”, also known as the blocking statute). This regulation seeks to protect EU operators, including natural and legal persons, but in its 22 years of history its application has, in practice, been almost non-existent.
Now, the Annex of the Antidote Regulation (which protects against US sanctions legislation on Cuba, Iran and Libya – whose extraterritorial effects are considered illegal) has been modified. The modification includes a set of US sanction rules which were re-imposed after the US exit from the Nuclear Agreement with Iran. They came into effect yesterday, on the 6th August 2018. The standards included with this modification are the following:
— «Iran Sanctions Act of 1996» (in its current version);
— «Iran Freedom and Counter-Proliferation Act of 2012»;
— «National Defense Authorization Act for Fiscal Year 2012»;
— «Iran Threat Reduction and Syria Human Rights Act of 2012»; and
— «Iran Transactions and Sanctions Regulations».
PROCEDURE FOR REQUESTING EXCEPTIONS TO COMPLY WITH THE “ANTIDOTE” REGULATIONS
On the other hand, a new Implementing Regulation 2018/1101 has been issued, which establishes the criteria for the application of the second paragraph of Article 5 of the Antidote Regulation. Said paragraph allows European operators to request authorisation from the Commission in order to comply with foreign sanction laws which have extraterritorial effects and whose breaching would seriously harm their interests or those of the Union.
In the extensive experience of the International Operations team of Lupicinio International Law Firm regarding international sanctions, the effectiveness of the protection provided by the Antidote Regulation has been tremendously limited in practice. We hope that this Implementing Regulation, establishes a system for the granting of authorisations for European operators to comply with the extraterritorial effects of US sanctions, leads European operators subject to it to only disobey the mandate of the Antidote Regulation when they have express authorisation to do so. It will also make it easier for operators, on whom illegal extraterritorial measures have been imposed through contract provision, to challenge, presumably as null, the clauses that make such imposition effective.
In addition, while the modification of Regulation 2271/1996 mainly affects our clients with operations in or with Iran, the modification of this Regulation also extends the protection to all our clients that operate or wish to operate in or with Cuba. This has prompted a new era in the relationship between the EU and the US regarding sanctions that will undoubtedly have relevant practical effects on the management of foreign trade and the investments of EU companies in the countries affected by the Antidote Regulation.
HOW DOES IT AFFECT MY COMPANY IN PRACTICE?
It is expected that the European Commission´s decisions regarding authorisation requests to breach the Antidote Regulation will lead to an active application of this, which will apply in practice to the member states (who must also transfer this regulation to their legal systems).
These changes will require EU operators to review their operations and to take action to ensure that they are not contributing to the extraterritorial effects of sanctions in the EU without the authorisation of the Commission (the final decision corresponding to the Committee on Extraterritorial Legislation). This obligation affects not only those operators with investments in or who trade with sanctioned countries, but also all those who in their relations with suppliers or customers have included contractual clauses that limit the operation in or with such countries. In addition, it is the responsibility of the managers to request authorisation to breach the Antidote Regulation, and the mere request does not place the obligations of such regulation on hold until the decision on the authorisation.
In addition, the regulation reinforces the position of EU operators to demand damages from other operators whose contribution to the extraterritorial effects of sanctions (without authorisation from the Commission) damages them. The guidance note published by the European Commission points out that the scope of the damages that can be granted in these cases is very broad.
The International Operations Team will remain attentive to the translation into practice of these legislative changes, and we remain available to all our clients to ensure that they benefit from the protection that the EU is providing to companies, and that they comply with the obligations imposed by the Antidote Regulation.
With our kindest regards,
International Operations Team
LUPICINIO INTERNATIONAL LAW FIRM
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