On 31 January 2019, France, Germany and the United Kingdom (the E3), following the commitment to preserve the Joint Comprehensive Plan of Action (JCPOA) which was endorsed through resolution 2231 (United Nations (UN)), announced the creation of the Instrument for Supporting Trade Exchanges (INSTEX), a special purpose vehicle designed with the intention of facilitating legitimate trade between the European Union and the Islamic Republic of Iran (Iran). A copy of the announcement is available here.
The key points in relation to the commitment are that:
- Iran will have to fully implement its nuclear-related commitments, including full and timely cooperation within the International Atomic Energy Agency;
- INSTEX will focus initially on the sectors that are considered to be the most essential to the Iranian population eg pharmaceuticals, medical devices and agriculture;
- INSTEX’s long term objective is to be open to economic operators from third countries who may wish to do business with Iran, this is still being explored by the E3;
- a phased approach will be adopted ie:
- the E3 with INSTEX will continue to work on concrete and operational details to define the way INSTEX will operate; and
- E3 will work with Iran to create an effective and transparent corresponding entity that is required to be able to operationalise INSTEX;
- INSTEX will operate under high international standards in relation to anti-money laundering (AML) and countering terrorist financing (CTF) standards as well as applicable European Union (EU) and UN sanctions policies and procedures;
- Iran is expected to quickly implement all elements of the plan of action set by the Financial Action Task Force, the information can be found here; and
- the E3 underscored its commitment to pursue INSTEX with other interested EU countries.
The United Kingdom has indicated that the registration of INSTEX is a “big step” and there is still more work to be done. In the interim, the E3 are working closely to address all the technical and legal aspects required to make INSTEX operational, which will include working with Iran to establish necessary equivalent structures.
To recap, there remains no outright prohibition on entities and individuals in Anguilla, Bermuda, the British Virgin Islands or the Cayman Islands (together the Overseas Territories) dealing with Iranian persons (corporate or natural). In addition, EU nationals must consider their obligations under the EU’s so-called “Blocking Regulation” (for more on this see: Cypriot authorities issue advisory on Iran).
However, following the appropriate sanctions, domestic AML/CTF regimes and necessary safe-guards and procedures remains of the utmost importance and should be assessed on a risk sensitive basis.
If you have any questions, please contact Mirza Manraj or your usual Harneys contact.