UN steps up sanctions on Iran

On 9 June 2010, the UN Security Council voted in favour of fresh sanctions against Iran over its nuclear programme which will have practical implications for many corporate entities. In the light of these new sanctions, companies must exercise extreme vigilance if and when conducting business with Iranian entities. The regime also has wider repercussions for financial institutions and companies with an interest in weapons technology.

Background

UN Security Council resolution 1929 (2010) constitutes the fourth round of sanctions imposed on Iran by the UN since 2006. Iran's nuclear programme has been a matter of international concern since the discovery in 2003 that Iran had concealed its nuclear activities for 18 years, in breach of its obligations under the Nuclear Non-Proliferation Treaty (the "NPT"). Although Iranian officials have stated that its nuclear programme is entirely for peaceful purposes, other States contend that military objectives lie at the heart of this activity.

Whilst 12 members of the UN Security Council voted in favour of the resolution, it was opposed by Turkey and Brazil, who had earlier brokered a deal with Iran on uranium enrichment. Lebanon was the only member to abstain.

The sanctions

The sanctions regime intensifies the pressure on Iran by providing that:

• Iran cannot acquire an interest in any commercial activity in another State that involves uranium mining, production or nuclear materials and technology. Furthermore, all States must prohibit such investment by Iran, its nationals and entities, or by persons or entities acting on their behalf or at their direction, or owned or controlled by them. 
• All States are prevented from both supplying Iran with heavy weapons and transferring to Iran technology or technical assistance related to ballistic missiles capable of delivering nuclear weapons. 
• All States must take the necessary measures to prevent certain named individuals from entry into, or transit through, their territories. 
• The list of entities subject to asset-freezing measures under resolution 1737 (2006) is extended. 
• A UN panel of experts shall be created to help monitor and enforce the implementation of the sanctions and there is a new framework of cargo inspections intended to detect any illicit activity.

What happens next?

The resolution requests the Director General of the International Atomic Energy Agency to report on Iran's response to these sanctions within 90 days. It affirms that sanctions will be suspended if, as shown by the report, Iran has suspended all enrichment-related and reprocessing activities to allow for good-faith negotiations. Conversely, if the report shows that Iran has defied the resolution – as well as the pre-existing sanctions regime – further measures are promised.

Other jurisdictions such as the US and the EU have their own measures in place against Iran, traditionally imposing stricter sanctions than under the UN regime. An EU Council Decision on 17 June 2010 confirmed the EU's intention to implement the new UN regime, as well as "accompanying measures" focusing on trade, the financial and transport sectors and the oil and gas industry, at the Foreign Affairs council on 26 July 2010.

Effect

In most jurisdictions UN sanctions do not take effect automatically, and they must be implemented by the individual Member States. The effect of previous legislation in the UK is to impose criminal penalties for infringement of the UN restrictions. Therefore, in view of the latest sanctions and prospective UK and EU implementing legislation, it is vital that all companies who have any involvement with investments in, or the provision of services to, Iran, familiarise themselves with the restrictions imposed by the new sanctions, and the practical effect that these may have on their current practices.

For advice on issues arising in relation to the UN sanctions regime against Iran (and other sanctions regimes), please do not hesitate to contact a member of our sanctions team.