On January 12th, the incumbent U.S. President granted a stay of execution, waiving for another 120 days the otherwise automatic reimposition of sanctions against Iran which were initially lifted as part of the Joint Comprehensive Plan of Action ("JCPOA" or "Nuclear Deal" or "Nuclear Accord"). Yet he has coupled his most recent sign-off with a warning that this would be the final time for any such waiver.

Issuing an ultimatum, the U.S. President has demanded that the other members of the P5+1 "fix the terrible flaws" of the deal, particularly the sunset provisions which were an essential component of the accord. He has also taken an unyielding stance on Iran's ballistic missile program, asserting that Iran’s defense technologies are in violation of United Nations Security Council ("UNSC" or "UN Security Council") Resolution 2231, and he has expressed continuing opposition to the supposed “regional aggression” by Iran. In absence of a revision to the agreement that would somehow address these issues (and that would be agreed upon by all signers to the JCPOA, including Iran), President Trump has threatened that the United States will unequivocally not renew sanction waivers and thereby abrogate the Nuclear Deal.

This follows a previous announcement, on 13 October  2017, at which time the U.S. President proclaimed his refusal to recertify Iran’s fulfillment of the terms of the Nuclear Accord, in spite of successive affirmations by the International Atomic Energy Agency ("IAEA") of Iran’s total adherence to all conditions and the avowals of Iran’s compliance by the rest of the P5+1. According to the Iran Nuclear Agreement Review Act ("INARA"), passed by U.S. Congress in conjunction with the JCPOA to impose a degree of congressional oversight on the agreement, the President must make quarterly evaluations, and concomitant certifications, that Iran is upholding its end of the bargain.

Accordingly, the refusal was followed by a 60-day window allowing Congress to introduce a bill reinstating statutory sanctions on an expedited basis, a prerogative which it chose not to exercise. Congress’s subsequent inaction (and failure to endorse the President's decertification) placed the fate of the JCPOA in the hands of the President.

For more information on this, click here to read our client alert of 23 October 2018.

JCPOA: WHAT HAPPENS NEXT?

If the U.S. President makes good on his commitment to abstain from any future waiver, the immediate effect will be an automatic reinstatement of the sanctions that were lifted as part of JCPOA. Such action does not, de jure, mean the U.S. has left the deal, but it would put America in non-compliance with its obligations under the accord and make a clear signal the U.S. intends to abrogate, unilaterally or otherwise.

The consequences which would follow such an abstention to waive are not entirely clear, since the JCPOA does not expressly authorize any party to leave the agreement or prescribe remedies or damages in the event that one party does in fact leave. It is clear enough, however, that if the U.S. were to stop signing off on sanctions-relief, this would effectively lead to U.S. abrogation, and due to the workings of the UN Security Council, there would be little hope for an alternate substitutive relief.  

This is because the U.S. President retains the power to trigger the "snapback" mechanism, envisaged in paragraphs 11-13 of the Resolution 2231 of the UN Security Council, which entails notifying the Security Council of "an issue that the [United States] believes constitutes significant non-performance of commitments under the JCPOA".  American politicians, Secretaries of State and Defense, along with the President himself, have railed against Iran’s supposed violation of the “spirit of the deal” since Mr. Trump’s election victory, and their shrill cries are reason to believe America may attempt to use this pretext as an excuse to claim non-performance as per para. 11-13.

Notification of such an issue would prompt a procedure before the Joint Commission, which is the dispute resolution mechanism specifically provided for by the Nuclear Deal. The Joint Commission procedure was created to address and help untangle issues of legitimate non-compliance by a party, whereas America’s complaint against Iran concerns matters which are outside the strict parameters of the JCPOA.  Since the IAEA, which monitors and verifies on-site the respect of Iran’s commitments under the deal, has repeatedly confirmed that Iran is in full compliance with all obligations, there is little scope for the Joint Commission to address U.S. grievances about Iran.

In effect, the difficulty is that the U.S. President's demands have created an unanticipated detonation of the deal by one of the signers, in spite of manifest compliance by all parties.

Because renegotiation of any form is not provided for in the agreement, it is difficult to understand which mechanism the U.S. President might use to pursue his accusations that Iran is violating the "spirit" of the agreement (whereby it is claimed that the preamble and Article 28 of the JCPOA establish standards of conduct which Iran has not upheld). This is all the more problematic since the other members of the P5+1 believe that neither the preamble nor Article 28 create legal obligations for any party.

Thus, what is being contemplated is a resurfacing of the philosophical discord which has long existed between Iran and the U.S., now made manifest within the context of a legally binding contract between these two nations.  In this scenario, only the UN Security Council is left as a named entity for resolving an otherwise irreconcilable impasse, and to do so, the Security Council would need to vote on a resolution as to whether to continue the lifting of UN sanctions.

Under the JCPOA, if such a resolution is not adopted within 30 days of the snapback trigger, or, by definition, if a permanent member of the UN Security Council were to veto such a resolution, all UN sanctions may be reimposed.  Because of America’s status as a permanent member of the Security Council, by definition it wields the power to kill the deal.  While it is theoretically possible that America could abstain from the vote on any resolution to continue waiving sanctions, the highly public, hawkish stance by the President, his Cabinet, and his mouthpieces, including the American Ambassador to the UN, would seem to virtually assure that the deal’s fate now hangs in the balance.

Click on the file below to read the full Client Alert.