President Obama Expected to Sign 10-Year Extension of Iran Sanctions Act

On December 1, 2016, the Senate unanimously passed a bill to extend the Iran Sanctions Act of 1996 (the "ISA") for 10 years by a 99-0 vote, after it had passed the House of Representatives by a similarly wide margin of 419-1. President Obama is expected to sign the bill into law, despite his administration's easing of sanctions against Iran under the Joint Comprehensive Plan of Action ("JCPOA"), the recent nuclear-related agreement between Iran and the P5+1 nations. President-elect Donald J. Trump, who will assume office in January 2017, has criticized the JCPOA and suggested that he may seek to alter or renegotiate its terms.

The ISA provides an additional basis for the federal government to impose sanctions on foreign entities who, inter alia, make major investments in Iran's energy sector. Importantly, Section 4(c) of the ISA provides that the President of the United States "may, on a case by case basis, waive" sanctions otherwise authorized under the act for a period of up to 12 months, subject to renewal.

On January 1, 2016, known as "Implementation Day", the JCPOA came into effect. The Obama administration has since waived ISA's provisions to the extent deemed necessary to implement the US sanctions relief contemplated by the JCPOA. More information about the JCPOA is available in prior Herbert Smith Freehills briefings here and here.

The ISA is set to expire on December 31, 2016. Assuming the president signs the extension act into law, the ISA will be extended for ten years, through December 31, 2026. Since the waiver of sanctions under Section 4(c) of the ISA is within the President's discretion, as a matter of US domestic law, Mr. Trump would be entitled to undo the Obama administration's ISA waivers. ISA's provisions, however, provide only one of several statutory bases which are available to Mr. Trump should he wish to tighten US Iran sanctions. The President is also vested with such authority under the International Emergency Economic Powers Act.

Through the remainder of President Obama's term, the status quo will remain in effect, but it will be important to note further developments as Mr. Trump's policy direction with regard to Iran sanctions becomes clearer in the lead up to, and after, Inauguration Day.