Legal Implications of the U.S. Withdrawal from the JCPOA and Re-imposition of Secondary Sanctions under International Litigation and Arbitration Proceedings

An acronym for the Joint Comprehensive Plan of Action, the “JCPOA” paved the way for multinational as well as major and small foreign companies to invest in different potential areas in the Iranian market and infrastructure right after the United Nations, the European Union and the United States have lifted sanctions. However, these were temporary and the U.S. Administration withdrew from the nuclear deal and re-imposed its secondary sanctions against Iran. Immediately after the re-imposition of U.S. sanctions, foreign companies have terminated or suspended their contractual obligations without considering the legal consequences. Since then, the situation for Iranian companies is quite different; foreign companies are prohibited from working with Iran, and banking transactions are halted by foreign banks owing to U.S. sanctions. In fact, they cannot evade their responsibility under the withdrawal of the U.S. from the JCPOA and the re-imposition of sanctions. Contractual commitments of the parties to a contract with Iranian entities must be respected and enforced; otherwise, they must compensate all losses and damages. The Defense of force majeure cannot be invoked, particularly for European companies, since U.S. sanctions were foreseeable. European Union’s Blocking Statute, lack of good faith, and the due diligence for the fulfillment of their obligations as to humanitarian exemptions and exceptions indicating force majeure could not be upheld here too. Therefore, Iranian companies shall raise their claims based on dispute settlement clauses stipulated in their contracts with foreign parties and other legal mechanisms in order to establish a concrete procedure to deal with on-going and future situations regarding secondary sanctions.