As European business gears up for a post-sanctions environment and the strengthening of relationships in an economically significant emerging market, many clients continue to face mixed messages with regards to what they can and cannot do under the existing sanctions framework and how to prepare for substantial new trade and investment opportunities in Iran.
Relevant competent authorities, including HM Treasury in the United Kingdom ("UK"), have confirmed that existing sanctions will continue to be rigorously and robustly administered and enforced. Nonetheless, available guidance reiterates that the recent nuclear deal has the potential to be of significant benefit to both the EU and Iranian economies.
Against this backdrop, the UK Foreign Secretary has made a clear commitment to supporting British businesses who wish to engage with Iran in his statement to the House of Commons on 15 July 2015, stating that "As that economic re-engagement materialises, we will, of course, seek to assist UK businesses to take advantage of the opportunities that will arise."
In addition, the German, French and Italian Governments have recently sent economic delegations to Iran and the UK Government has launched its survey to assess business interest in the Iranian market and the additional support companies may require to do business there.
As a significant and diverse emerging market increased trade and investment with Iran - the Middle East's third largest economy - undoubtedly presents substantial opportunities for European business. Many European companies are already doing business in Iran. Others are well advanced in their business development planning and risk management strategies.
- Companies engaged in the oil and gas sector have begun to revise their business plans in order to take advantage of opportunities generated by increased access to Iran's oil and gas sector, including potential contracts to assist with exploration, development, production and trading activities.
- Manufacturing companies, especially those in the automotive, aerospace, technology and industrial sectors are eyeing up how to take advantage of the potential opening up of trade and investment opportunities, currently held back by a decade of sanctions measures.
- Retail and consumer goods suppliers and those engaged in the food and drink sector are either already reengaged, or are taking advantage of a perceived thawing of the general business environment, or are well advanced in their preparations for tapping into the sophisticated consumer market in Iran.
- Financial institutions and wider financial services companies are also considering how to take advantage of expectant new opportunities, not least in trade financing and investment and asset management opportunities on the under-developed Tehran Stock Exchange.
DLA Piper is currently advising a number of clients, across a range of sectors, who are interested in assessing both the current and future legal framework with regards to the possibility of engaging in the Iranian market. Any company considering existing and potential new opportunities afforded by the implementation of the recent Joint Comprehensive Plan of Action is well advised to start preparing now for the wider potential opportunities that will be delivered as sanctions are lifted.
Numerous international companies are already considering the legal implications of Iranian related business development activities such as: conducting substantial research; visiting Tehran as part of trade delegations or independently; and are considering the merits of entering into binding or non-binding memoranda of understanding and other pre-contractual statements of intent with Iranian counterparts, with a view to relationship building and being in a position to quickly take advantage as opportunities develop.
It is important to note that, although clients are either already engaged in Iran or well advanced in their planning for re-engagement in a post-financial and economic sanctions Iran, wide ranging restrictive measures remain in place and will continue to be rigorously enforced.
Any easing of sanctions on Iran will only happen once a number of specified steps have been taken in relation to Iran's nuclear capabilities, and the International Atomic Energy Agency has verified Iran's compliance with its commitments.
Whilst this could take several months, the general "chilling effect" on the overall trade and investment environment with respect to non-prohibited, legitimate and permissible Iranian related activities and the appetite of business, regulators and financial institutions to undertake permitted activities, to issue authorisations for restricted activities and to finance non-prohibited trade has already shown some limited signs of easing.
Provided that the Iranian regime adheres to its commitment and sanctions are gradually phased out, EU Governments appear committed to assisting business and the financial sector to promote trade and investment.
As indicated above, as part of this UK Trade and Investment ("UKTI"), a non-ministerial government department co-managed by the Department for Business, Innovation and Skills and the Foreign and Commonwealth Office, is making efforts to support British business. UKTI is currently conducting a Business Survey in order to understand the extent of UK business interest in the Iranian market and what kinds of support companies might require to do business there, in the event of financial and economic sanctions relief. The deadline for submitting responses to the Business Survey is 11 August 2015.
DLA Piper will continue to provide updates as Iran and the internal community begin to fulfil their respective obligations under the JCPOA.