856. How will transactions related to Iran’s participation in legal proceedings, including administrative, judicial, arbitral proceedings, and proceedings before international courts and tribunals, be treated for purposes of secondary sanctions to the extent that Iranian financial institutions or the Iranian financial sector sanctioned under Executive Order (E.O.) 13902 are involved?
Transactions and activities involving Iranian financial institutions blocked under E.O. 13902 remain authorized under General License (GL) L to the extent they are authorized, exempt, or otherwise not prohibited by the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). This authorization includes certain transactions and activities relating to the initiation and conduct of legal proceedings authorized or otherwise permitted pursuant to section 560.510 or 560.525 of the ITSR, such as transactions or activities related to the defense of individuals in legal proceedings in Iran brought by the Government of Iran, including any arrest, investigation, prosecution, or detention. Such permissible transactions and activities may include reasonable and customary payments for the provision of legal services, bail and/or bond payments, judicial costs and fees, costs for the production of documents and appearances of witnesses, and payment of experts.
In addition, for purposes of secondary sanctions, as described in FAQ 844, non-U.S. persons are not exposed to sanctions for engaging in transactions and activities involving the Iranian financial sector or an Iranian FI blocked pursuant to E.O. 13902 that would be authorized for U.S. persons under GL L.
Please note that, unless permitted by GL L and FAQ 844, payments made to Iran involving blocked Iranian persons — including the Government of Iran, including any political subdivision, agency, or instrumentality thereof — in connection with awards, orders, decisions, or settlement of claims may be subject to sanctions. OFAC will assess such transactions on a case-by-case basis.
Please also note that guidance above applies only with respect to transactions or activities involving Iranian FIs sanctioned solely pursuant to E.O. 13599 and E.O. 13902 or the Iranian financial sector. These transactions and activities should not involve persons designated on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List) in connection with Iran’s support for international terrorism or proliferation of weapons of mass destruction (WMD) unless exempt or otherwise permitted.
Date Released
December 7, 2020
1) See comment to FAQ # 844 concerning the relationship between the ITSR, Iran GL L and the secondary sanctions provisions at EO 13902.
OFAC's statement concerning "payments made to Iran involving blocked Iranian persons [] in connection with awards, orders, decisions, or settlement of claims" is not unique to this FAQ. It is, rather, consistent with OFAC's longstanding interpretation of the ITSR GLs concerning litigation involving Iran. Compare e.g. Case No. IA-2013-300347-1. For a U.S. person involved in Iran-related litigation outside of the U.S. pursuant to 560.510 of the ITSR, the collection and/or payment of funds resulting from judgments is not generally licensed as "ordinarily incident" to the conduct of the underlying litigation. This is true even when a payment is owed to or from a non-blocked person that is "in" or "ordinarily resident in" Iran.
2) For classification purposes, we treat the above as an implied interpretation of the term "significant transaction," as it appears in EO 13902.
3) This FAQ provides novel interpretive guidance on the scope of 560.510 and 560.525 of the ITSR. The FAQ says that the scope of 560.510 and 560.525 includes:
"transactions or activities related to the defense of individuals in legal proceedings in Iran brought by the Government of Iran, including any arrest, investigation, prosecution, or detention. Such permissible transactions and activities may include reasonable and customary payments for the provision of legal services, bail and/or bond payments, judicial costs and fees, costs for the production of documents and appearances of witnesses, and payment of experts."
Many modern general licenses for the provision of legal services specify that “U.S. persons who provide services authorized by [the GL] do not need to obtain specific authorization to contract for related services that are ordinarily incident to the provision of those legal services, such as those provided by private investigators or expert witnesses, or to pay for such services.” (See e.g. 520.506).
This FAQ suggests that “costs for the production of documents”—to which no explicit reference is made in the legal services general licenses—would be included within the scope of transactions ordinarily incident to the provision of legal services. The authorization for "bail and/or bond payments" is also notable as included in the FAQ but absent from the text of the relevant GLs.
4) Refer generally to General Note on "Counterfactual Secondary Sanctions and Derivative Designation Safe Harbors" in Certain OFAC Guidance and FAQs (System Ed. Note).