Congress Passes Legislation Subjecting U.S. Foreign Affiliates to U.S. Sanctions against Iran

2012/09/04

By: Stanley J. Marcuss, Esq. sjmarcuss@bryancave.com, 202-508-6074; Bryan Cave LLP;  George F. Murphy, Esq. george.murphy@bryancave.com, 202-508-8124, Bryan Cave LLP. Reprinted by permission.

Congress has passed, as predicted, the legislation imposing new sanctions against Iran.  The legislation passed the House by an overwhelming 421-6 vote and passed the Senate by voice vote.  The President is expected to sign the legislation.

As we reported in our July 31, 2012 memorandum entitled “Congress Set to Pass Legislation Increasing U.S. Sanctions Against Iran,” the principal feature is a provision subjecting foreign affiliates owned or controlled by a U.S. company to the same prohibitions as their U.S. parent.  The legislation requires that the President make the prohibitions effective against foreign affiliates within 60 days of its enactment.

The legislation would also make a U.S. parent company subject to civil penalties for its foreign affiliate’s transactions with Iran that violate, attempt to violate, conspire to violate or cause a violation of regulations or orders issued pursuant to the new legislation.  The legislation would allow a U.S. company to avoid penalties if it divests or terminates its business with the foreign affiliate within 180 days of enactment.

The legislation includes an array of other sanctions against Iran involving Iran’s energy sector and proliferation of weapons of mass destruction as well as sanctions addressing human rights abuses in Iran and Syria.  Subjecting foreign affiliates to the same prohibitions as their U.S. parent, however, will make U.S. foreign affiliate business with Iran impermissible after such business had been permissible under U.S. law for decades.

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