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Iran’s President Hassan Rouhani is scheduled for his first trip to Europe next week since taking over the office in June 2013. The big stop on the trip will be France, where – besides discussion of the regional crises enveloping the Middle East — President Rouhani is expected to enter into agreements with the French regarding a wide range of fields, including health, agriculture, aviation, and broader economic cooperation. The idea is that the trip will serve to kick-start Iran-France bilateral trade relations, allowing the French to make-up for the hard line taken in the nuclear negotiations and giving them a one-up over some of their peer competitors in Europe in the race to Tehran.

Nonetheless, the French, like others in Europe, remain concerned over the ultimate fate of U.S. sanctions targeting Iran. Yesterday, France’s Foreign Minister, Laurent Fabius, publicly declared that the United States was obligated to “deliver concrete guarantees that European firms [including the French] will not be penalized for trading with Iran should sanctions on Tehran be re-imposed.” According to Fabius, “We [the French] want [the U.S.’s cooperation on the sanctions issue] to be turned into something concrete so that the same thing [U.S. penalties on French firms engaged in trade-related dealings with Iran] doesn’t happen again.”

Based on the above comments, France’s Foreign Minister seems to be concerned that the U.S. will retroactively impose sanctions and penalize French firms for trade that was (or, at least, seemed to be) perfectly legal at the time. It is good to remember that the French felt burned last year when BNP Paribas, a large French multinational bank, received a fine of close to $9 billion from U.S. sanctions authorities for violations that largely occurred in the pre-2009 period. Explaining the Foreign Minister’s remarks, the French are keen on avoiding any replay of that incident.

But the French fear is unwarranted in this case. First, the nuclear agreement between the U.S., other major world powers, and Iran – also known as the Joint Comprehensive Plan of Action (“JCPOA”) – clearly addresses how sanctions would be re-imposed should the Iranians be perceived to be in breach of their obligations. Under § 37 of the Main Text of the JCPOA, it is clear that re-imposed sanctions will not have retroactive effect for foreign companies that engaged in transactions with Iran that were lawful at the time. As § 37 of the Main Text states:

In such event [as the reimposition of sanctions], these provisions would not apply with retroactive effect to contracts signed between any party and Iran or Iranian individuals and entities prior to the date of application, provided that the activities contemplated under and execution of such contracts are consistent with this JCPOA and the previous and current UN Security Council resolutions.

Second, France’s concern that it could see a replay of BNP Paribas scandal should sanctions be re-imposed fails to appreciate the precise reasons for why BNP Paribas was penalized in the first place. While BNP Paribas (like other banks) can credibly claim that most global financial institutions were wire-stripping payment messages being sent through New York of any identifiers that would signal the involvement of Iranian parties to those transactions, the fact remains that such activities were both contrary to the text and the spirit of then-existing U.S. sanctions regulations. That is why BNP Paribas and other major global banks have faced severe penalties from U.S. authorities: they knew what they were doing was contrary to existing U.S. laws, but they did it regardless.

Should sanctions be re-imposed for whatever reason, though, France will stand on firm legal footing when it states that its firms should not be penalized for engaging in trade-related dealings with Iran in the period following the initial sanctions-lift and before the re-imposition of sanctions, so long as such dealings were permissible at the time. France may seek further assuredness from the United States as to this, but the JCPOA – to which the United States is a party and which is effectively incorporated into United Nations Security Council Resolution 2231 – is crystal-clear on this issue (despite what the nuclear deal’s critics might otherwise contend).

Will the United States heed the French Foreign Minister’s call and provide concrete guarantees to European firms that they will not penalized for engaging in permissible transactions with Iran? Possibly, but the need is not there, unless France is looking for something above and beyond what is laid forth in the JCPOA.

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