Pending Iranian Sanctions Could Significantly Impact European Entities

The United States Congress is currently considering legislation that would increase the scope and application of the U.S. sanctions against Iran: The Comprehensive Iran Sanctions, Accountability and Divestment Act of 2009 (S. 2799) and the Iran Refined Petroleum Sanctions Act of 2009 (H.R. 2194). These changes could significantly impact the ability of non-U.S. companies to do business with both Iran and the United States. This article summarizes the proposals under consideration and highlights key provisions that could affect the international operations of European companies.

1. Overview

   As the United States and members of the United Nations ("UN") Security Council and the European Union ("EU") weigh proposals to increase multilateral sanctions against Iran, the House and Senate of the United States Congress are simultaneously working on separate legislation that would increase existing U.S. sanctions against Iran. The proposed legislation in the U.S. Congress seeks to limit the activities beyond the "U.S. persons" controlled under existing sanctions to include persons who contract with the United States government.

   These proposed sanctions follow increased enforcement efforts by the U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC"), the U.S. Department of Justice ("DOJ"), and New York City prosecutors, who collectively imposed fines of more than $750 million in 2009 against European entities found to have violated existing U.S. sanctions.

   Given the increasing enforcement focus on Iran and the expanded scope of sanctions under consideration in the U.S. Congress, international and European companies should be aware of how these sanctions could impact their ability to conduct business with Iran and the United States.

2. Existing Iranian Sanctions

   The United States currently enforces a comprehensive sanctions program against Iran. That program is directed primarily at U.S. companies and individuals, although certain provisions apply to non-U.S. persons when handling U.S.-origin goods, acting in the United States, or working on behalf of U.S. companies.

   The U.S. sanctions program against Iran is implemented through a number of Executive Orders and the Iranian Transaction Regulations, 31 CFR Part 560 ("ITR"), which are administered by OFAC. The statutory basis for the sanctions are section 505 of the International Security and Development Cooperation Act of 1985 ("ISDCA") and the International Emergency Economic Powers Act ("IEEPA"). The sanctions have become increasing strict through a series of Executive Orders issued during the 1990s and changes to the ITR in response to U.S. government concerns that Iran was (is) sponsoring terrorism and pursuing weapons of mass destruction. See, e.g., Executive Order 12957 (March 16, 1995); Executive Order 12959, (May 6, 1995); Executive Order 13059 (Aug...