INTERNATIONAL ARBITRATION 1/3LY
INVEST ING IN IRAN
Iran has attracted considerable interest in recent months following implementation of the Joint Comprehensive Plan of Action (JCPoA) in January 2016. The effect is a substantial (but by no means absolute) abolition of EU sanctions, together with a significant reduction in US secondary sanctions. Of course, US primary sanctions remain in place. Investors and those intending to trade with Iran directly or indirectly are still faced with compliance issues, notably avoiding involvement with so-called “designated” or “specially designated nationals”. There are also practical problems in arranging finance, handling payments and obtaining effective insurance. The subject of this brief article is the issue of the governing law and forum for dispute resolution with Iranian counterparties. The importance of these aspects will depend upon the size of the transaction, its intended life and the methods by which payments are to be made. We consider mainly one scenario where a foreign/ EU counterparty is seeking to invest in Iran in a long-term project. MEMORANDUM OF UNDERSTANDING: IS IT BINDING? Following negotiations, it is often suggested by the Iranian counterparty, that the key aspects of the proposed contract are reduced to aMemorandumof Understanding (MOU). Invariably theMOU will contain a lawand dispute resolution clause intended to cover the terms of theMOU and the final contract. There is a difference between some investors as to how they viewaMOU. Some see it as giving rise to binding obligations, subject to fulfilment of various conditions. However, many see it as a staging post (without binding obligations) to reflect the parties’ willingness to enter into a transaction proposedwhichwill allow formal documents to be drafted and appropriate permissions to be obtained. It is also often seen as a precursor to extensive due diligence, both financial and legal, being undertaken. In the MOU context there are two key questions. 1. To what extent is it necessary to do due diligence prior to signing theMOU? It would be unwise to engage in aMOUwithout some degree of due diligence on the counterparty concerned. This is because the regulatory regime still prevents the passing of “funds” or “economic resources” to a designated person or entity. The words “funds” and “economic resources” are broadly defined. Accordingly, at this stage, due diligence is recommended on the counterparty. TheMOU shouldmake clear that any formalisation of the contract or position is dependent on the investor being satisfied that no sanctions violationwould occur in any applicable law or jurisdiction. TheMOU should, where practical, foresee the type of due diligence to be undertaken.
BY JOHN WHIT TAKER AND ANOUSHEH BROMFIELD, PARTNER AND A SSOCIATE AT CLYDE & CO
Made with FlippingBook Annual report