Insights

Key Parameters Set for Joint Comprehensive Plan of Action Regarding Iran's Nuclear Program, but Critical Implementation Steps Remain Subject to Agreement

Key Parameters Set for Joint Comprehensive Plan of Action Regarding Iran's Nuclear Program, but Critical Implementation Steps Remain Subject to Agreement

On April 2, 2015, the United States, United Kingdom, China, France, Germany, the Russian Federation, the European Union, and the Islamic Republic of Iran reached an agreement on the key parameters of a Joint Comprehensive Plan of Action ("JCPOA") that was described as "a comprehensive resolution that will ensure the exclusively peaceful nature of the Iranian nuclear programme and the comprehensive lifting of all sanctions."[1]

For the near future, however, the JCPOA announcement will not change the existing sanctions programs with respect to Iran, which remain fully in effect. Moreover, while the announced parameters contain significant detail about the intended effect of the JCPOA, critical implementation and technical details remain to be agreed upon.

The stated aim of negotiators is to reach a final agreement on the text and annexes of the JCPOA by July 1, 2015.

Key Elements of the Announced JCPOA

Under the announced JCPOA, Iran has agreed to reduce, suspend, and/or cease certain uranium enrichment and nuclear-capability development activities and has agreed to certain international monitoring procedures. Of note, Iran has agreed as follows:

  • Iran has agreed to reduce its installed centrifuges capable of enriching uranium by approximately two-thirds. Any future enrichment research and development will be subject to an agreed-upon development plan submitted to the International Atomic Energy Agency ("IAEA").
  • Iran will reduce its stockpile of low-enriched uranium (which can be converted into weapons-grade material) to 300 kilograms for the next 15 years.
  • An international joint venture will assist Iran in redesigning and rebuilding a modernized heavy water research reactor in Arak (which previously would have produced significant quantities of weapons-grade plutonium). No other heavy-water reactor will be built in Iran for 15 years.
  • Iran will give the IAEA regular access to all sites and to Iran's nuclear supply chain, and it will allow the use of advanced monitoring techniques.
  • A dedicated procurement channel will be established to monitor and approve the supply, sale, or transfer to Iran of nuclear-related and dual-use materials and technologies.
  • In return for Iran's commitments under the announced JCPOA, the Members of the United Nations Security Council, U.S., and EU have agreed to take the following steps with respect to the international sanctions regime against Iran.
  • The U.N. Security Council will enact a new resolution to endorse the JCPOA, terminate all previous U.N. nuclear-related resolutions, and incorporate the agreed restrictive measures on Iran for a mutually agreed period of time; and
  • The EU will terminate the implementation of all nuclear-related sanctions, and the U.S. will cease the application of all nuclear-related sanctions upon verification by the IAEA that Iran has implemented its key nuclear commitments.

Considerations for Businesses

The announcement of the JCPOA does not immediately change, suspend, or relieve the existing international sanctions framework against Iran. Until a final agreement on the JCPOA is concluded, "all U.S. sanctions programs remain in place and will continue to be vigorously enforced,"[2] and it is expected that EU regulators will take a similar approach.

Further, since the announcement of the JCPOA, certain potential differences of interpretation as to the implementation of the agreed-upon deal have become apparent. All parties have stated that UN Security Council resolutions with respect to Iran will be lifted. The European Union has acknowledged the wording of the JCPOA that it will terminate the implementation of its nuclear-related sanctions. The United States has, however, stated that its nuclear-related sanctions will be suspended only in a phased approach and could "snap-back" into place if Iran violates the final agreement.[3] Media reports indicate that the Iranian Foreign Minister appears to dispute that interpretation and refer instead to an agreement that all key sanctions will be lifted.

As these varying interpretations indicate, the terms of the final JCPOA (including the detailed plan for implementation) are still under negotiation. Indeed, until July 1, 2015, the final shape of the agreement remains subject to many variables, including pending legislation before the U.S. Congress that would require President Barack Obama to submit the final agreement to Congress for review and approval. A vote on that legislation is scheduled for April 14, 2015, and the impact of the legislation, if passed, on the ongoing negotiations is unclear.

Regardless, even if a final form agreement on the JCPOA is concluded, significant sanctions will remain in place, including, notably, those relating to terrorism and human rights abuses. Sanctions regulators (particularly in the U.S.) will, as a result, likely face significant practical hurdles in implementing any agreed-upon sanctions relief while retaining all other sanctions programs and the existing sanction architecture. Businesses, in turn, will face interpretative obstacles as they consider how to navigate a new regulatory and commercial environment for Iran.

Any international sanctions relief is not expected take effect for six to 12 months after the final agreement of the JCPOA.[4] In the interim, businesses should take great care with any planning or exploratory activities with respect to Iran, even after the JCPOA is implemented, to avoid violating existing and continuing sanctions. In particular, businesses should exercise caution before entering any agreements that might be contingent on the lifting or suspension of sanctions, to ensure such agreements are not themselves prohibited.

Finally, if the JCPOA is agreed and implemented, businesses will still need to take account of any contractual commitments they have made to third parties with respect to Iran. Over the past few years, financial agreements and/or government contracts involving U.S. and EU entities have increasingly required confirmations that the businesses will not have any dealings with Iran. Notwithstanding final agreement of the JCPOA, such agreements may continue to foreclose businesses from dealing with Iran, and thus, such terms may need to be amended or waivers obtained on a case-by-case basis.

Lawyer Contacts

For further information, please contact your principal Firm representative or one of the lawyers listed below. General email messages may be sent using our "Contact Us" form, which can be found at www.jonesday.com.

Michael P. Gurdak
Washington
+1.202.879.3646
lfraedrich@jonesday.com

Harriet Territt
London
+44.20.7039.5709
hterritt@jonesday.com

Renato Antonini
Brussels
+32.2.645.14.19
rantonini@jonesday.com

Laura Fraedrich
Washington
+1.202.879.3646
lfraedrich@jonesday.com

Fahad A. Habib
San Francisco
+1.415.875.5761
fahabib@jonesday.com

Henry Klehm III
New York
+1.212.326.3706
hklehm@jonesday.com

Elizabeth A. Robertson
London
+44.20.7039.5204
erobertson@jonesday.com

D. Grayson Yeargin
Washington
+1.202.879.3634
gyeargin@jonesday.com

Sean T. Boyce
Dubai
+971.4.709.8416
sboyce@jonesday.com

Chad O. Dorr
Washington
+1.202.879.3795
cdorr@jonesday.com

Paul C. Hines
San Francisco
+1.415.875.5786
phines@jonesday.com

Chase D. Kaniecki
Washington
+1.202.879.3734
ckaniecki@jonesday.com

Eva Monard
Brussels
+32.2.645.15.10
emonard@jonesday.com

Lindsey M. Nelson
Washington
+1.202.879.3735
lmnelson@jonesday.com

Jones Day publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our "Contact Us" form, which can be found on our web site at www.jonesday.com. The mailing of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.

We use cookies to deliver our online services. Details of the cookies and other tracking technologies we use and instructions on how to disable them are set out in our Cookies Policy. By using this website you consent to our use of cookies.