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P5+1 Agreement with Iran on Nuclear Program Reaches Adoption Day

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On October 18, 2015, the parties to the Joint Comprehensive Plan of Action (“JCPOA”), the recent international agreement designed to curb Iran’s nuclear program, marked the arrival of Adoption Day. An early benchmark established by the JCPOA, Adoption Day signaled 90 days since the U.N. Security Council endorsed the JCPOA, at which point the JCPOA and the parties’ associated commitments came into effect.

While Adoption Day began a period of required disclosures and inspections in Iran in order to fulfill its nuclear-related commitments under the JCPOA, its arrival in the U.S. triggered preparatory requirements that have no immediate, functional effect on the U.S. sanctions regime. Specifically, the President issued a memorandum directing the Secretaries of State, the Treasury, Commerce, and Energy to plan for the termination of certain sanctions and the licensing of limited U.S.-person activities with Iran. The Secretary of State also issued time-limited waivers of the nuclear-related sanctions affecting the civil aviation, banking, and energy industries. However, these waivers will not take effect until verification of Iranian compliance with the JCPOA’s nuclear-related measures (i.e., Implementation Day).

Until Implementation Day, all U.S. sanctions against Iran remain in effect, with the exception of the limited relief provided for in the Joint Plan of Action of November 24, 2013, as extended. Importantly, until Implementation Day, the entry by non-U.S. persons into contracts involving Iran or its government may continue to be sanctionable, including “executory” contracts that are contingent on the implementation of sanctions relief under the JCPOA, such as contracts involving individuals or entities on the Office of Foreign Assets Control’s (“OFAC”) Specially Designated Nationals and Blocked Persons List (the “SDN List”). Until Implementation Day, OFAC will continue to vigorously enforce the sanctions that remain in effect.

Even after Implementation Day, U.S. persons (including U.S.-owned or –controlled foreign subsidiaries) will continue to be broadly prohibited from engaging in transactions or dealings involving Iran, including the Government of Iran, with the exception of a few additional categories of transactions that OFAC will authorize pursuant to the JCPOA. OFAC plans to publish detailed guidance and information on the implementation of U.S. sanctions relief afforded under the JCPOA prior to Implementation Day.

The Obama Administration and many observers predict Implementation Day will not arrive for approximately six to nine months (i.e., April to July 2016), though Iran anticipates a shorter timeline.

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