The JCPOA
Under the terms of the JCPOA, which took effect in January 2016, the United States, the UK, Russia, Germany, France, China and the EU agreed to lift sanctions on Iran in exchange for Iran limiting its nuclear program.
In May 2018, the United States announced it was withdrawing from the JCPOA and, following wind-down periods, it fully re-imposed secondary sanctions on Iran in November 2018. Further sanctions have followed, most recently on January 10, 2020. Since the U.S. withdrawal, relations between Iran and the other parties to the JCPOA have deteriorated and in May 2019 Iran announced that it would cease meeting some of its commitments under the JCPOA.
Tensions have flared over recent weeks following the death of Qassem Soleimani on January 3, 2020 and Iran’s retaliatory missile strikes on U.S. airbases in Iraq. On January 6, 2020, Iran announced that it would no longer abide by any of the restrictions imposed under the JCPOA. Although the E3 have consistently supported the JCPOA, their joint statement yesterday noted that they have been “left with no choice… but to register today our concerns that Iran is not meeting its commitments under the JCPOA and to refer this matter to the Joint Commission under the Dispute Resolution Mechanism.” Despite what appears to be a significant step, the E3 have confirmed that they are not taking the “maximum pressure” approach advocated by the United States.
The dispute resolution mechanism
The dispute resolution mechanism set out in the JCPOA is designed to assist the parties in resolving any issues of non-compliance by referring the dispute to the Joint Commission, which consists of the E3, Iran, Russia, China and the rest of the EU, and to the Advisory Board and the Ministers of Foreign Affairs of the parties to the JCPOA. If the issues cannot be resolved, the matter could be referred to the UN Security Council to vote on the maintenance of the sanctions relief currently in place under the JCPOA. If the Security Council does not pass a resolution maintaining the lifting of sanctions on Iran within 30 days of referral, there will be an automatic sanctions “snapback.”
The process and timeline set out in the dispute resolution mechanism are as follows:
- Step 1 – The referral of an issue of non-compliance to the Joint Commission (the step taken by the E3 yesterday). The Joint Commission was established by the JCPOA and consists of individuals from each of the parties to the JCPOA. The Joint Commission has 15 days (subject to any extension) to consider and try to resolve the issue before it.
- Step 2 – If the Joint Commission cannot resolve the issue, it will be referred to the Advisory Board (and/or Ministers of Foreign Affairs). The Advisory Board (and/or Ministers of Foreign Affairs) will have 15 days to try to resolve the issue (subject to any extension) and to provide a non-binding opinion on the issue.
- Step 3 – The Joint Commission will then have five days to consider the opinion of the Advisory Board.
- Step 4 – At the end of this five day period (day 35 in total), if the issue is still unresolved, the E3 can cease to perform their obligations under the JCPOA and notify the Security Council of Iran’s non-compliance.
- Step 5 – Within 30 days of receipt of notification of non-compliance, the Security Council must vote on a resolution to continue the sanctions relief. A resolution needs nine votes to pass with no veto by a permanent member of the Security Council. If the resolution to maintain the sanctions lifting is not adopted within 30 days of referral, then the provisions of the old Security Council resolutions would be re-imposed.
Implications
For now, at least, the JCPOA remains in place. The dispute resolution mechanism is designed to facilitate the resolution of any issues of non-compliance and envisages the re-imposition of sanctions as a last resort. The joint statement issued by the E3 is consistent with that approach, stating that the dispute resolution mechanism had been triggered “in the sincere hope of finding a way to resolve the impasse through constructive diplomatic dialogue, while preserving the agreement and remaining within its framework.” It is also likely that the parties will attempt to negotiate a political solution while the dispute resolution process moves forward.
Should matters progress without resolution to the Security Council vote, however, the re-imposition of sanctions seems inevitable. The resolution to be voted on will not be whether to re-impose sanctions, but instead on whether to maintain the lifting of sanctions. The permanent members of the Security Council, including the United States, will have the ability to block that vote using their veto powers. Given recent developments and the strained relationship between the United States and Iran, it is difficult to envisage a resolution maintaining the lifting of sanctions passing within the required 30 day period. The result would be the automatic “snapback” of sanctions, which would take place without any vote and therefore not be subject to a potential veto.
Nevertheless, the dispute resolution mechanism is designed to give the parties multiple opportunities to resolve any conflict and promote the agreement reached under the JCPOA. It remains to be seen whether the threat of the re-imposition of UN and EU sanctions will be sufficient incentive to bring Iran to the negotiating table.
Client Alert 2020-013
