Tag: Doing Business in Iran

Doing Business in Iran: Joseph R. Biden; New Path Forward

The landscape for doing business in Iran may have changed significantly with the election of Joseph R. Biden as President of the United States.

 

On July 14, 2015, the P5+1 (the United States, the United Kingdom, Germany, France, China and Russia), the European Union and Iran agreed and signed a Joint Comprehensive Plan of Action (“JCPOA”) contemplating the easing of certain Iran related sanctions. On October 18, 2015, Adoption Day, the JCPOA came into effect and signatories began embarking on the steps necessary for implementation of the JCPOA. On January 16, 2016, and after the International Atomic Energy Agency’s verification of Iran’s commitments under the JCPOA, the United Nations, the European Union and the United States ceased the application of sanctions relating to certain sectors of business activity with respect to Iran (i.e. no longer restricting non-US persons from engaging in certain activities) and doing business with Iran began again.

 

It is important to note that the US sanctions on Iran restricting US persons from dealings related to Iran (“US Primary Sanctions”) always continued in full force and were not affected by the JCPOA (as opposed to the U.S. sanctions regime concerning non-US persons’ dealings related to Iran (“US Secondary Sanctions”); it was these US Secondary Sanctions that ceased to apply as of January 16, 2016.

 

However, in 2018 the French, German and British governments had been in talks with the United States with respect to its concerns regarding the JCPOA for many months. Even though the United States had agreed to the deal in 2015, the US expressed serious concerns about certain aspects of the deal and decided to withdraw from the Iran nuclear deal (i.e. JCPOA).

 

The US government, in light of its withdrawal, reimposed certain US Secondary Sanctions with respect to Iran on August 6, 2018, with any remaining US Secondary Sanctions reimposed by November 4, 2018.

 

New Path Forward

 

However, with the election of Mr. Biden as President, there may be a new path forward with respect to Iran. Indeed Mr. Biden has stated that the US would rejoin the JCPOA if Iran returns to strict compliance with the JCPOA. If this occurs, it would usher in a new chapter in the economic and geopolitical landscape of the Middle East as well as renewed investment and business opportunities (and challenges). ■

Recent measures implemented by the UAE authorities in response to COVID-19

The UAE authorities have been dynamic in implementing measures to control the spread of COVID-19 within the UAE. Please find below a non-exhaustive list of noteworthy measures that have been implemented by various UAE authorities to date.

 

Preventive Guidelines 

 

UAE Ministry of Health and Prevention (MOH): MOH has set up guidelines on preventive measures, as well as contact centres for medical support or inquiries on the coronavirus at the Department of Health, MOH and the Dubai Health Authority (DHA).

 

Remote Working System

 

The Dubai Executive Council: On 15 March 2020, the Executive Council issued a letter to Dubai authorities on the implementation of a remote working system with effect from 17 March until further notice. This letter sets out rules (among others) on how services are to be handled or prioritized, the required percentage of employees to work remotely, the requirement for all government employees to abide by the standards and controls approved by the Dubai Electronic Security Centre and that any suspension of services must be announced publicly with prior coordination with the Government of Dubai Media Office.

 

In compliance with the letter, certain authorities have implemented the remote working system with others to follow suit shortly. The noteworthy authorities that have implemented the remote working system are:

 

1. Dubai Courts:

 

• As of 17 March 2020, the Case Management Department has closed all doors to the public. To prepare a case before the Dubai Courts, individuals must now contact the Case Management Department via a BOTIM app, phone call or email.

• Pursuant to Resolution 30 of 2020 issued by the Dubai Courts dated 17 March 2020, all court hearings before the Court of Cassation, Court of Appeal and Court of First Instance will be postponed, and issuance of certificates and personal status documents will be suspended, from 22 March 2020 to 16 April 2020. The Dubai Courts will however continue to hear temporary and urgent matters, as well as criminal cases and appeals that relate to detainees. Courts will no longer accept claims and applications unless they are submitted electronically.

 

2. DIFC Courts:

 

• The DIFC Court and Registry Offices have also closed its doors to the public from 17 March 2020 until 26 April 2020 (or pending further notice), and will operate on a (generally) completely remote basis. Inquiries, urgent queries and applications must be made by email or telephone.

• Generally, hearings before the Court of First Instance and the Small Claims Tribunal will be done via teleconference (unless agreed otherwise).

• The pro bono clinic, DIFC Court’s library and other rooms shall be temporarily closed.

• Probate appointments will be suspended until 26 April 2020 or pending further notice.

 

3. The Federal Authority for Identity and Citizenship: Smart services are set up so that certain applications can be done online (e.g., renewal of Emirates ID cards and existing UAE residence visas) to reduce the number of visitors.

 

Distance Learning

 

Knowledge and Human Development Authority (KHDA): Pursuant to a Circular issued by the KHDA dated 8 March 2020, no students are permitted on the school premises from 8 March 2020 to 4 April 2020. Schools are required to implement distance learning from 22 March 2020.

 

Restrictions or Temporary Suspension on Businesses 

 

Dubai Municipality (DM):

 

• The DM issued multiple circulars on 11 March 2020 requiring various businesses to increase the frequency of cleaning and disinfection, to ensure the availability of hand sanitizers and hand soap and to document all cleaning and disinfection operations and to list the disinfectants used. Such businesses include (among others): schools, salons, residential buildings, hotels, malls, gyms. Since then, the DM has issued further circulars specifically addressing salons, restaurants and food delivery service providers with restrictions on operations, such as permanently closing the waiting areas of salons and restaurants, and requiring food delivery service providers to register their food delivery and transportation with DM’s FOODWATCH platform.

• In conjunction with the Dubai Department of Economic Development (DDED), the DM imposed a shisha ban on cafes. As of 17 March 2020, DM has closed nine cafes for violating this ban.

 

DDED:

 

• Pursuant to a circular posted on a social media site of the Government of Dubai Media Office, the DDED temporarily suspended all cinemas, theme parks, game centres, massage parlours and spas until the end of March 2020.

• The DDED Consumer Protection Department has directed retailers to ensure that retailers sell detergent products and sanitizers at normal prices. To date, it has inspected 203 commercial outlets, issued 35 warnings and nine violation notices to shops that were found to have increased prices for these products.

 

Dubai Culture and Arts Authority: Operations at museums, historical sites and public libraries are temporarily suspended until the end of March.

 

Department of Tourism and Commerce Marketing: Operations at

entertainment venues, hospitality establishments, wedding halls, theme parks, sea cruises, desert camps, tours (safaris) and floating restaurants are temporarily suspended until the end of March.

 

Abu Dhabi Department of Economic Development (ADDED): Pursuant to circulars issued by the ADDED, operations at entertainment game halls and cinemas are temporarily suspended. Similar to the DDED, shishas are also temporarily suspended from being served at restaurants and coffee shops. The Government of Abu Dhabi Media Office further provides that the main touristic attractions, theme parks and cultural destinations (such as the Louvre and the Presidential Palace) shall also be temporarily closed until the end of March.

 

Abu Dhabi Ports: As of 14 March 2020, cruise operations are suspended for all ships at Abu Dhabi Cruise Terminal in Zayed Port and Sir Bani Yas Cruise Beach until further notice.

 

Abu Dhabi Department of Culture and Tourism: Pursuant to a circular dated 13 March 2020, all events and operation of night clubs are temporarily suspended until the end of March.

 

Restriction on Travel / Transportation

 

UAE Ministry of Foreign Affairs and International Cooperation (MOFA):

 

There is currently:

 

• a travel ban on Iran, Thailand, Qatar and Karabakh Mountainous Region; and

• travel warnings with respect to China, Lebanon, Madagascar, Congo, Yemen and South Sudan.

 

Federal Transport Authority (FTA):

 

• Ferry services to and from Iran are suspended until further notice.

• Ship masters must: (i) send health declarations, along with an undertaking that no crew member is suffering from COVID-19, to UAE port authorities 72 hours prior to arriving in the UAE irrespective of the last port of call, and (ii) report any suspected cases on the vessel (whether during the vessel stay or anchorage at the berth) to the FTA and the relevant UAE health authority.

 

Dubai and Abu Dhabi International Airports:

 

Effective as of 17 March 2020 (until further notice), the issuance of UAE entry visas is temporarily suspended. This suspension however does not apply to individuals with diplomatic passports or passports from visa-exempt countries that are entitled to visas on arrival. Flights to and from certain countries (e.g., Saudi Arabia, Bahrain, Lebanon, Syria and Turkey) have been temporarily suspended.

 

As per the Dubai International Airport’s recent alert, all passengers will be required to go through a non-intrusive thermal screening process. Passengers from any of the following countries will undergo both thermal screening and a nasal swab carried out by the DHA’s medical team based at the airport: Egypt, Italy (Rome only), China (Beijing only) and Thailand. As per a video tutorial prepared by the Government of Dubai Media Office, passengers with a high body temperature will be sent to hospitals (and a medical swab will be taken for a lab test). If a passenger tests positive for COVID-19, the passenger will be required to stay at the quarantine facility until the passenger tests negative for COVID-19. This quarantine period is likely to take a few weeks. The DHA will also arrange for individuals that have been in contact with the affected person to be screened (and if required, quarantined) as well.

 

As per the Abu Dhabi International Airport’s recent alert, all passengers would be required to go through an advance polymerase chain reaction (PCR) testing at the airport, then self-isolate for four days. Following the four-day isolation period, the passengers will then be required to undertake another PCR test.

 

Economic Stimulus

 

The Dubai Crown Prince and Executive Council Chairman has launched an AED 1.5 billion stimulus package to support Dubai’s business sector over the next three months. This stimulus is anticipated to result in the following (among others):

 

• freezing the market fees levied on facilities operating in Dubai;

• reduction of license renewal fees or by permitting onshore entities to renew their licenses without renewing their lease contracts;

• reduction of municipality fees imposed on sales at hotels;

• exemption of charges incurred from the cancellation or postponement of events; and

• reduction of the water and electricity bill by 10% for Dubai residents for the next three months.

 

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As stated above, new measures have been, and are expected to continue to be, introduced and implemented in very short notice. Afridi & Angell has been following and will continue to follow official sources for further updates and notices. ■

 

 

Sanctions on the Rise

Now, more than ever, sanctions lists are growing daily, and therefore navigating the challenges related to compliance is becoming more complex. In the region, prominent US sanctions already exist with respect to Iran, Syria and Yemen. There has been talk of US sanctions against Iraq and Turkey.

 

A prime example of prominent sanctions are those that the United States on November 5, 2018 fully re-imposed on Iran. These sanctions had been previously lifted or waived under the Joint Comprehensive Plan of Action (or ‘Iran deal’). Given the recent tensions between the US and Iran, the US is aggressively continuing its campaign of maximum financial pressure on the Iranian regime and intends to strenuously enforce the sanctions that have come back into effect as well as newly announced sanctions.

 

While historically enforcement actions have been more prevalent in the financial services sector, regulatory bodies are increasingly turning their attention to other industries which have recently been subjected to significant fines.  The US Department of the Treasury has issued 22 enforcement actions along with a record of USD1.3 billion in total penalties in 2019 alone.

 

Consequently, sanctions and compliance continue to remain critical factors for businesses across all sectors.

 

While not exhaustive, the following are some proactive measures which should be taken by companies to mitigate the risk of violating sanctions:

 

  • Understanding international sanctions regimes: Companies should obtain an appropriate level of understanding of international sanctions regimes, seek information from professionals to the extent necessary, and conduct research to make a determination as to the legality of their transactions under the relevant sanctions’ laws. Entities should check with their regulators regarding  the  suitability of specific programs to their unique situations. For example, the US Office of Foreign Assets Control (OFAC) issues public advisories on important issues related to sanctions, and while  these  documents  may focus on specific industries and activities, they should be reviewed by any party interested in OFAC compliance.

 

  • Due diligence: It is important for companies to conduct continuous due diligence on their entire supply chain, including customers and clients (and their respective partners and affiliates) to ensure the continued sanctions compliance of all stakeholders so that none of them become subject to sanctions or penalties. All stakeholders should be subject to periodic KYC checks.

 

  • Risk assessment: The assessment may include risks posed by clients, customers, products, services, supply chain, intermediaries, counterparties, transactions, and geographic locations. For example, an anti-bribery/anti-corruption risk assessment, may be a good foundation for a sanctions risk assessment.

 

  • Sanctions compliance officer:  Companies should designate an individual with the primary responsibility for integrating the company’s policies and procedures into the daily operations of the company or a dedicated “sanctions compliance officer”. The sanctions compliance officer should be charged with assisting in the development of a compliance program and to monitoring and verifying that procedures are being followed.

 

  • Formulate a sanctions compliance program: Companies should develop and implement a sanctions compliance program and policy manual in order to understand what actions can and cannot be taken. There is no single compliance program suitable for every company. It is further recommended that the sanctions compliance program be subject to regular review and, when necessary, routinely updated.

 

  • Internal controls: The purpose of internal controls is to clarify expectations, define procedures and processes pertaining to sanctions compliance (including reporting and escalation chains), and minimize the risks identified by the company’s risk assessment. Policies and procedures outlining the sanctions compliance program should be easy to follow, capture the organization’s day-to-day operations, and designed to prevent employees from engaging in misconduct.

 

  • Training: The training program on the company’s sanctions compliance program should be provided to all appropriate employees and personnel (and, in particular, business units operating in high-risk areas) on a periodic basis, and at a minimum, annually.

 

  • Use of Technology: Invest in software or update sanctions screening software to comply with sanction regulations.

 

  • Reporting: Companies should put appropriate procedures in place to identify, escalate, and report transactions that are in violation of sanctions regulations (voluntary self-disclosure).

 

  • Contractual safeguards: Companies should include contractual exit rights in all agreements with their counterparties whereby, should enforcement action be taken against a counterparty, the company has the right to remove itself from the transaction.

 

  • Snap-back safeguards: Measures taken by companies should include specific sanctions-related force majeure provisions and sanction termination and wind-down provisions which can provide contractual protection in the event that sanctions are re-imposed in the case of snap-back.

 

  • Documenting: It is imperative for corporates to document and report all sanctions compliance efforts (for example, keep a written record of their screening policy and be able to justify the timescales and frequency of screenings). Their systems and checks should ensure a documented trail of all actions taken in such matters.

 

* * *

 

A company in noncompliance may be opening itself to adverse publicity, fines, and even criminal penalties (if violations are other than inadvertent). Taking preemptive actions would enable a company to show that it has proactively taken steps to structure its operations to ensure that it is compliant with sanctions in an open and transparent manner. Such preventative measures would significantly reduce the potential risks of costly sanctions violations and provide a company with a competitive advantage of being in a better position to navigate sanctions. ■

 

 

The end of the Iran deal?

The French, German and British governments have been in talks with the United States with respect to the Iran nuclear deal (Joint Comprehensive Plan of Action or JCPOA) for many months. Even though the United States agreed to the deal in 2015, the new administration in Washington has expressed serious concerns about certain aspects of the deal and has decided to withdraw from the Iran nuclear deal.

 

US Secondary Sanctions

 

The US government has stated, in light of its withdrawal, that it will reimpose certain US secondary sanctions with respect to Iran on August 6, 2018, with any remaining US secondary sanctions to be reimposed by November 4, 2018 (secondary sanctions are sanctions applicable to non-US persons).

 

No United Nations Sanctions

 

Such withdrawal by the US is a repudiation of the JCPOA. The US could have followed another course of action that would impose United Nations sanctions under the JCPOA without repudiating it. The JCPOA contains “snap-back” provisions that would allow signatories to reimpose United Nations sanctions against Iran. However, in this regard, the JCPOA requires that the International Atomic Energy Agency (IAEA) certify that Iran is not in compliance with its obligations, but the IAEA has repeatedly confirmed that Iran is in compliance. Nevertheless, the US could have elected to continue to waive US secondary sanctions (hence continuing to comply with the US’s obligations under the JCPOA) and instead invoked the Dispute Resolution Mechanism under the JCPOA if the US believed that Iran was not meeting its commitments under the JCPOA. The Dispute Resolution Mechanism would ultimately culminate in a UN Security Council vote to continue to waive UN sanctions. If such vote is not unanimous (i.e. the US does not vote in favour), then UN sanctions would be reimposed. Unlike the unilateral US sanctions, the UN sanctions would be global in applicability.

 

However, the US chose not to follow such path. As a result, US secondary sanctions will snap back on the dates discussed above and not the United Nations sanctions.

 

Consequences

 

The effect of such US secondary sanctions will be a further significant chilling of foreign business with and foreign direct investment in Iran. This will be in addition to the already existing reluctance/avoidance by international banks and most regional banks to facilitate Iran business. This is primarily due to US sanctions laws and the increased internal compliance scrutiny that a bank may be subject to if it facilitates Iran business.

 

Path Forward?

 

Given all of these impediments, the path to doing business in Iran may look like a dead-end. However, when US secondary sanctions are unilaterally reimposed by the US, regional banks with no exposure to the US market might still decide to continue to offer Iran related services. Also, companies with no presence or business in the United States might continue to pursue Iran business. Nevertheless, it is still a daunting business proposition: business in Iran will result in blacklisting of companies from doing business in or with the US or its banking system.

 

Indeed, reports suggest that the European Union, Russian and Chinese governments have prepared contingency plans to support companies. For example, there is consideration of extending non-dollar lines of credit and credit guarantees to preserve as much of the deal as possible. Also, the European Union is being asked to pass laws to protect European firms from US secondary sanctions. However, the reality is that no country can completely shield businesses and investments in Iran given the US pullout.■

A Guide to Doing Business in Iran

This is a general guide to certain laws applicable to doing business in Iran. The information contained in this publication is given by way of general reference only, is not intended to provide legal advice, and is not to be relied upon in any factual situation as it does not cover all laws or regulations that may be applicable in all circumstances. No responsibility will be accepted by the authors or publishers for any inaccuracy or omission or statement that might prove to be misleading. You are advised to seek your own professional advice before proceeding to invest or do business in Iran.