Please find set out below some recent interesting developments in EU and US sanctions legislation and international case law.

Epsilon Case - Inventory exception (re-export of goods to Iran)

On March 7, 2016, the United States District Court for the District of Columbia granted the US Government’s motion for summary judgment in Epsilon Electronics, Inc. v. United States Department of the Treasury, Office of Foreign Assets Control, upholding a USD 4,073 million civil penalty imposed by the Office of Foreign Assets Control (OFAC) on Epsilon Electronics, Inc. (“Epsilon”) for violations of Iranian economic sanctions. Epsilon had exported car audio and video equipment to Asra International Corporation LLC (“Asra”), a UAE-based corporation, despite having reason to know that these goods would be re-exported to Iran by Asra.

An interesting aspect of this case is that the District Court rejected Epsilon’s argument that the export to Asra and subsequent re-export to Iran should have been covered by the “inventory exception”, which can be found in the OFAC’s “Guidance on Transshipments to Iran of 2002”. In short, the inventory exception is an exception to the prohibition on exporting US-origin products to Iran, if those products are sold to parties in third countries which do not predominantly sell to Iran and where there is no other reason to know at the time of the export that products will end up in Iran. 

In the Epsilon case, the District Court ruled that there were relevant factors present based on which Asra should have known at the time of sale that the goods were specifically intended for Iran.

For the full text of this judgment and argumentation we refer to the following link:
https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2014cv2220-26

Iran Export Control order 2016 published by UK government

In response to aspects of the sanctions relief agreed under the Joint Comprehensive Plan of Action (JCPOA), the UK government last month published the Export Control (Iran Sanctions) Order 2016, which replaces the Export Control (Iran Sanctions) Order 2012.

The Export Control (Iran Sanctions) Order 2016, effective as of May 6, 2016, sets out the UK penalties and licensing relating to these Iran sanctions, and corrects Export Control Orders related to Russia, Crimea and Sevastopol, and the Central African Republic.

The text of the Export Control Order 2016 can be accessed via the following link:
http://www.legislation.gov.uk/uksi/2016/503/pdfs/uksi_20160503_en.pdf

Bank of Industry and Mine case – Support to Iranian government listing criterion

In this case of May 12, 2016 (case C-358/15P), the Bank of Industry and Mine appealed a General Court judgment, in which the Court ruled that the criteria pursuant to which the Bank of Industry and Mine was listed on the EU’s anti-nuclear proliferation sanctions on Iran (support to Iranian government), were too vague and infringed the principle of legal certainty.

The Court of Justice of the European Union (“CJEU”), however, upheld the finding of the General Court that the criterion of “support to the Government” did not mean all support, but only support which contributes to Iran’s nuclear activities “by its quantitative or qualitative importance”. Therefore, there is no violation of the principle of legal certainty.

For the full text of this judgment and argumentation we refer to the following link:
http://curia.europa.eu/juris/document/document.jsf?text=&docid=178163&pageIndex=0&doclang=FR&mode=lst&dir=&occ=first&part=1&cid=313531

Please note that at the time of writing of this alert, the judgment was only available in French. It is expected that it will shortly be translated into other languages.

Rosneft Oil Company – AG opinion on request for preliminary ruling from the CJEU

On May 31, 2016 Advocate General (“AG”) Wathelet rendered his opinion on the request by a UK court for a preliminary ruling from the CJEU (case C-72/15). The questions for which a preliminary ruling was requested, concern the validity and the interpretation of EU sanctions legislation on Russia (Regulation 833/2014 and Decision 2014/512).

According to the AG, this request is extremely important, as it will require the CJEU to rule on whether it has the jurisdiction to review the validity of, and to render a preliminary ruling on laws adopted by the EU in the sphere of its Common Foreign and Security Policy (CSFP).

The AG’s conclusions are:

  • The CJEU has the jurisdiction to render a preliminary ruling.
  • The provisions of Regulation 833/2014 and Council Decision 2014/512, are – with the exception of Article 3(5) of Regulation 833/2014 – valid. The latter allows EU Member States to authorize certain transactions arising out of contracts concluded before August 1, 2014.
  • The principles of legal certainty and nulla poena sine lege certa do not preclude a Member State from imposing criminal penalties pursuant to Article 8 of Regulation 833/2014.
  • The term “financial assistance” as used in Article 4(3) of Regulation 833/2014 includes the processing by a bank or other financial institution of payments relating to an underlying transaction covered by Article 3(1) of Regulation 833/2014.
  • Article 5(2) of Regulation 833/2014 prohibits the issuing of global depository receipts in respect of Rosneft shares, regardless of the date on which those shares were issued.
  • The measurement of “waters deeper than 150 meters”, as referred to in Articles 3(3) and 3a (1) (a) of Regulation 833/2014 is to be taken vertically from the point of drilling.

The full text of this Opinion can be accessed via the following link.
http://curia.europa.eu/juris/document/document.jsf?text=&docid=179042&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=385674

We will inform you in more detail as soon as the CJEU has ruled in this case.

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