CELEX: 
Language: en
Date: 2018-06-06 00:00:00
Title: COMMISSION DELEGATED REGULATION (EU) …/... amending the Annex to Council Regulation (EC) No 2271/96 of 22 November 1996 protecting against the effects of extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom

EXPLANATORY MEMORANDUM
            
            
               1.CONTEXT OF THE DELEGATED ACT
            
            
               The conclusion on 14 July 2015 of the Joint Comprehensive Plan of Action (JCPOA) by Iran with the High Representative of the Union for Foreign Affairs and Security Policy, France, Germany, the United Kingdom, the United States, Russia and China on Iran’s nuclear programme has opened the way for a renewal of the EU-Iran relations. The subsequent engagement between the Union and Iran has taken place on the basis of the full and continued implementation of the JCPOA, as endorsed by the United Nations Security Council Resolution (UNSCR) 2231(2015) and implemented by the Union in January 2016 through the lifting of numerous nuclear-related sanctions. The International Atomic Energy Agency (IAEA) regularly verifies Iran’s compliance with the JCPOA and has issued 10 reports, the last one dated 22 February 2018, confirming Iran’s compliance with its nuclear-related commitments.
            
            
               On 8 May 2018, the President of the United States announced that his country would withdraw from the JCPOA and that the United States would apply the United States legal acts currently subject to waivers in order to reactivate sanctions against Iran which were in place at the time of the conclusion of the JCPOA. In spite of the United States' decision, the Union shall continue to pursue its political and economic interests in Iran, which are based on the full and effective implementation of the JCPOA and UNSCR 2231(2015). 
            
            
               Some of the measures which the United States will reactivate against Iran have extra-territorial effects and, in so far as they unduly affect the interests of natural and legal persons established in the Union and engaging in trade and/or the movement of capital and related commercial activities between the Union and Iran, they violate international law and impede the attainment of the Union's objectives.
            
            
               In the Union, extra-territorial measures are subject to Council Regulation (EC) No 2271/96
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               , which was adopted in reaction to the adoption by the United States of America of restrictive measures concerning Cuba, Libya and Iran which negatively affected the interests of natural and legal persons in the Union engaging in business with those countries which was legitimate under European Community law. 
            
            
               Following unanimous backing on 16 May 2018 by EU Heads of State or Government for the proposals of President Juncker and High Representative/Vice-President Federica Mogherini, on 18 May 2018 the Commission launched the process to add the extra-territorial measures which the United States are going to impose against Iran to Council Regulation (EC) No 2271/96. The first step of that process was to invite Member States to designate experts which the Commission would consult on the preparation of the amendment. 
            
            
               2.CONSULTATIONS PRIOR TO THE ADOPTION OF THE ACT
            
            
               Pursuant to Article 1, second indent of the Regulation, the Commission shall be empowered to adopt delegated acts to add such measures to the Annex to the Regulation. 
            
            
               In accordance with paragraph 4 of the Common Understanding on delegated acts annexed to the Interinstitutional Agreement on Better Law-Making of 13 April 2016
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               , on 28 May 2018 the Commission met with the experts designated by Member States. The European Parliament and the Council of the European Union were invited to the meeting and took part in it. 
            
            
               The Commission has given due consideration to the comments and suggestions made by the Member States' experts. 
            
            
               3.LEGAL ELEMENTS OF THE DELEGATED ACT
            
            
               This delegated Commission Regulation amends the Annex to Regulation (EC) No 2271/96 so as to take into account the United States' restrictive measures having extra-territorial application and which are in force at the date of its adoption. The measures in question can, immediately or in the future, cause adverse effects on the interests of the Union and the interests of natural and legal persons exercising rights under the Treaty on the Functioning of the European Union. 
            
            
               The references to measures relating to Iran contained in the current Annex of Regulation 2271/96 are to a great extent outdated. In addition, since 1996 when the Annex was drafted, the United States have adopted new restrictive measures regarding Iran. Consequently, in light of the significant amendments required in the Annex, and with a view to ensuring clarity to economic operators, it is appropriate to replace the Annex as a whole.
            
            
               COMMISSION DELEGATED REGULATION (EU) …/...
            
            
               of 6.6.2018
            
            
               amending the Annex to Council Regulation (EC) No 2271/96 of 22 November 1996 protecting against the effects of extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom
            
            
               THE EUROPEAN COMMISSION,
            
            
               Having regard to the Treaty on the Functioning of the European Union,
            
         
         
            
               Having regard to Council Regulation (EC) No 2271/96 of 22 November 1996 
               
                  protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom
               
               
                  3
               , and in particular the second paragraph of Article 1 thereof,
            
            
               Whereas:
            
            
               (1)Regulation (EC) No 2271/96 counteracts the effects of the extra-territorial application of laws, including regulations and other legislative instruments adopted by third countries, and of actions based thereon or resulting therefrom, where such application affects the interests of natural and legal persons in the Union engaging in international trade and/or the movement of capital and related commercial activities between the Union and third countries.  
            
            
               (2)The Regulation acknowledges that by their extra-territorial application, such instruments violate international law. 
            
            
               (3)The third-country instruments to which Regulation (EC) No 2271/96 applies are specified in the Annex to that Regulation. 
            
            
               (4)On 8 May 2018, the United States announced they will no longer waive their national restrictive measures relating to Iran. Some of those measures have extra-territorial application and cause adverse effects on the interests of the Union and the interests of natural and legal persons exercising rights under the Treaty on the Functioning of the European Union. 
            
            
               (5)The Annex to the Regulation should therefore be amended to include those restrictive measures. 
            
            
               HAS ADOPTED THIS REGULATION:
            
            
               Article 1
            
            
               The Annex to Regulation (EC) No 2271/96 is replaced by the Annex to this Regulation. 
            
            
               Article 2
            
            
               This Regulation shall enter into force on the day of its publication in the Official Journal of the European Union.
            
            
               This Regulation shall be binding in its entirety and directly applicable in all Member States.
            
            
               Done at Brussels, 6.6.2018
            
            
               
                     For the Commission
               
               
                     The President
                     Jean-Claude JUNCKER
               
            
         
         
            
                  
                     (1)
                  
                        Council Regulation (EC) No 2271/96 of 22 November 1996 
                  protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom
                  . OJ L 309, 29.11.1996, p. 1.
               
               
                  
                     (2)
                  
                        OJ L 123. 12.5.2016, p. 1. 
               
               
                  
                     (3)
                  
                        OJ L 309, 29.11.1996, p. 1. 
               
            
      
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               ANNEX 
                  LAWS, REGULATIONS AND OTHER LEGISLATIVE INSTRUMENTS 
            
            
               Note: The main provisions of the instruments contained in this Annex are summarised only for information purposes. The full overview of provisions and their exact content can be found in the relevant instruments.   
            
            
               COUNTRY: UNITED STATES OF AMERICA
            
            
               ACTS
            
            
               1.‘National Defense Authorization Act for Fiscal Year 1993’, Title XVII ‘Cuban Democracy Act 1992’, sections 1704 and 1706 
            
            
               Required compliance:
            
            
               The requirements are consolidated in Title I of the ‘Cuban Liberty and Democratic Solidarity Act of 1996’, see below.
            
            
               Possible damages to EU interests:
            
            
               The liabilities incurred are now incorporated within the ‘Cuban Liberty and Democratic Solidarity Act of 1996’, see below.
            
            
               2.‘Cuban Liberty and Democratic Solidarity Act of 1996’ 
            
            
               Title I
            
            
               Required compliance:
            
            
               To comply with the economic and financial embargo concerning Cuba by the USA, by, inter alia, not exporting to the USA any goods or services of Cuban origin or containing materials or goods originating in Cuba either directly or through third countries, dealing in merchandise that is or has been located in or transported from or through Cuba, re-exporting to the USA sugar originating in Cuba without notification by the competent national authority of the exporter or importing into the USA sugar products without assurance that those products are not products of Cuba, freezing Cuban assets, and financial dealings with Cuba.
            
            
               Possible damages to EU interests:
            
            
               Prohibition to load or unload freight from a vessel in any place in the USA or to enter a USA port; refusal to import any goods or services originating in Cuba and to import into Cuba goods or services originating in the USA, blocking of financial dealings involving Cuba.
            
            
               Title III and Title IV:
            
            
               Required compliance:
            
            
               To terminate ‘trafficking’ in property, formerly owned by US persons (including Cubans who have obtained US citizenship) and expropriated by the Cuban regime. (Trafficking includes: use, sale, transfer, control, management and other activities to the benefit of a person).
            
            
               Possible damages to EU interests:
            
         
         
            
               Legal proceedings in the USA, based upon liability already accruing, against EU citizens or companies involved in trafficking, leading to judgments/decisions to pay (multiple) compensation to the USA party. Refusal of entry into the USA for persons involved in trafficking, including the spouses, minor children and agents thereof.
            
            
               3.‘Iran Sanctions Act of 1996’ 
            
            
               Required compliance:
            
            
               Not to knowingly:
            
            
               (i)  invest in Iran at least USD 20 million during a period of 12 months that directly and significantly contributes to the enhancement of the Iranian ability to develop their petroleum resources; 
            
            
               (ii) provide to Iran goods, services or other types of support any of which is worth USD 1 million or more, or of aggregate value of USD 5 million or more over a period of 12 months, that could directly and significantly facilitate the maintenance or expansion of Iran's domestic production of refined petroleum products or its ability to develop petroleum resources located in Iran;
            
            
               (iii) provide to Iran goods, services or other types of support any of which is worth USD 250 000 or more, or of aggregate value of USD 1 million or more over a period of 12 months, that could directly and significantly contribute to the maintenance or expansion of Iran’s domestic production of petrochemical products;
            
            
               (iv) provide to Iran  (a) refined petroleum products or (b) goods, services or other types of support which could directly and significantly contribute to the enhancement of Iran's ability to import refined petroleum products, any of which is worth USD 1 million or more, or of aggregate value of USD 5 million or more over a period of 12 months;
            
            
               (v) participate in a joint venture for  the development of petroleum resources outside of Iran established on or after 1 January 2002 and in which Iran or its Government has particular interests; 
            
            
               (vi) be involved in the transport of crude oil from Iran or conceal the Iranian origin of cargo consisting in crude oil and refined petroleum products; 
            
            
               Possible damages to EU interests:
            
            
               Measures to limit imports into USA or procurement to USA, prohibition of designation as primary dealer or as repository of US Government funds, denial of access to loans from US financial institutions or transfers through such institutions, prohibition of transactions in foreign exchange subject to the jurisdiction of the USA, export restrictions by USA, prohibition of property transactions subject to the jurisdiction of the USA, or refusal of assistance by EXIM-Bank, landing and port-calling restrictions for vessels.
            
            
               4.'Iran Freedom and Counter-Proliferation Act of 2012'
            
            
               Required compliance:
            
            
               Not to knowingly:
            
            
               (i) provide significant support, including by facilitating significant financial transactions, or goods or services, to or on behalf of certain persons operating in the ports, energy, shipping, or shipbuilding sectors in Iran, or any Iranian person included in the list of specially designated nationals and blocked persons;
            
            
               (ii) trade with Iran in significant goods and services used in connection with the energy, shipping or shipbuilding sectors of Iran; 
            
            
               (iii) purchase petroleum and petroleum products from Iran and conduct financial transactions related with them, in specific circumstances;   
            
            
               (iv) conduct or facilitate transactions for the trade in natural gas to or from Iran (applies to foreign financial institutions);
            
            
               (v) trade with Iran in precious metals, graphite, raw or semi-finished metals, or software that may be used in specific sectors or involve certain persons; nor facilitate a significant financial transaction in connection with such trade;    
            
         
         
            
               (vi) provide underwriting services, insurance and reinsurance related to specific activities, including but not limited to those under points (i) and (ii) above, or to specific categories of persons;  
            
            
               Certain exceptions apply depending on the nature of the trade or transaction and the level of due diligence applied. 
            
            
               Possible damages to EU interests:
            
            
               Measures to limit imports into USA or procurement to USA, prohibition of designation as primary dealer or as repository of US Government funds, denial of access to loans from US financial institutions or transfers through such institutions, prohibition of transactions in foreign exchange subject to the jurisdiction of the USA, export restrictions by USA, prohibition of property transactions subject to the jurisdiction of the USA, or refusal of assistance by EXIM-Bank, prohibitions and limitations to the opening and maintenance of correspondent accounts in the USA.
            
            
               5.'National Defense Authorization Act for Fiscal Year 2012'
            
            
               Required compliance:
            
            
               Not to knowingly conduct or facilitate any significant financial transaction with the Central Bank of Iran or another designated Iranian financial institution (applies to foreign financial institutions). 
            
            
               Exceptions for food and medicine-related transactions and for petroleum-related transactions under specific circumstances.  
            
            
               Possible damages to EU interests:
            
            
               Civil and criminal penalties; prohibitions and limitations to the opening and maintenance of correspondent accounts in the USA.
            
            
               6.'Iran Threat Reduction and Syria Human Rights Act of 2012'
            
            
               Required compliance:
            
            
               Not to knowingly:
            
            
               (i) provide underwriting services, insurance or reinsurance to certain Iranian persons;
            
            
               (ii) facilitate the issuance of Iranian sovereign debt, or of debt of entities controlled by the latter; 
            
            
               (iii) engage in any transaction directly or indirectly with the Government of Iran or any person subject to the jurisdiction of the Government of Iran prohibited by US law (applies to foreign subsidiaries owned or controlled by US persons);
            
            
               (iv)  provide specialized financial messaging services to, or enable or facilitate direct or indirect access to such messaging services for the Central Bank of Iran or a financial institution whose interests in property are blocked in connection to Iran's proliferation activities. 
            
            
               With regard to (i), there are exceptions for humanitarian assistance, food and medical products supply, and depending on the level of due diligence applied. 
            
            
               Possible damages to EU interests:
            
            
               Measures to limit imports into USA or procurement to USA, prohibition of designation as primary dealer or as repository of US Government funds, denial of access to loans from US financial institutions or transfers through such institutions, prohibition of transactions in foreign exchange subject to the jurisdiction of the USA, export restrictions by USA, prohibition of property transactions subject to the jurisdiction of the USA, or refusal of assistance by EXIM-Bank, prohibitions and limitations to the opening and maintenance of correspondent accounts in the USA 
            
         
         
            
               REGULATIONS
            
            
               'Iranian Transactions and Sanctions Regulations'
            
            
               Required compliance:
            
            
               Not to reexport any goods, technology, or services that (a) have been exported from the USA and (b) are subject to export control rules in the USA, if the export is made knowing or having reason to know that it is specifically intended for Iran or its Government. 
            
            
               Goods substantially transformed into a foreign-made product outside the USA, and goods incorporated into such a product and representing less than 10 % of its value are not subject to the prohibition.  
            
            
               Possible damages to EU interests:
            
            
               Imposition of civil penalties, fines and imprisonment. 
            
            
               ►C1  1.   31 CFR ◄  (Code of Federal Regulations) Ch. V (7-1-95 edition) Part 515 — Cuban Assets Control Regulations, subpart B (Prohibitions), E (Licenses, Authorizations and Statements of Licensing Policy) and G (Penalties) 
            
            
               Required compliance:
            
            
               The prohibitions are consolidated in Title I of the ‘Cuban Liberty and Democratic Solidarity Act of 1996’, see above. Furthermore, requires the obtaining of licences and/or authorizations in respect of economic activities concerning Cuba.
            
            
               Possible damages to EU interests:
            
            
               Fines, forfeiture, imprisonment in cases of violation.