K.20. Must U.S. persons employed by or serving on the Board of Directors of a U.S.-owned or -controlled foreign entity be recused or "walled off" from all Iran- related business of that entity? Can U.S. person employees simply abstain from voting on Iran-related matters?
In general, unless authorized by OFAC, U.S. persons employed by or serving on the board of directors of a U.S.-owned or -controlled foreign entity (or any other foreign entity) must be recused or "walled off" from all Iran-related business of that entity, except for certain limited activities with respect to Iran that are authorized under section of that GL (see FAQs K.8 and K.9).
U.S. persons are authorized under GL H to allow for such a recusal through the establishment or alteration of policies and procedures of their owned or controlled foreign entities. U.S.-owned or -controlled foreign entities (and other foreign entities) should consider instituting a blanket recusal policy (as opposed to case-by-case abstentions, which, depending on the facts and circumstances, could be considered a prohibited facilitation and/or export of services under the ITSR) for U.S. person directors, managers, and other employees with respect to Iran-related matters (see FAQ C.16). [06-08-2016]
1) Superseded/archived; Iran General License (No. H) revoked pursuant to JCPOA withdrawal. See generally comments to General License H and 560.215.
2) Through its explanation of what U.S. persons are licensed to do by General License H vis-à-vis their non-U.S. subsidiaries, OFAC impliedly makes statements about the scope of the general prohibition on facilitation (560.208, as interpreted by 560.417, see parallel provisions in Syria regulations at 542.210 and 542.413) that it has not made in any other context. This is because, but for GL H, the activities permitted would “facilitate” activities U.S. persons cannot themselves engage in. Such statements therefore have presumptive cross-programmatic relevance.
Here, GL H has expired, but OFAC offers notable statements of cross-programmatic relevance concerning U.S.-person directors (and other similar committee members) of non-U.S. person companies that do "non-prohibited" business that would be prohibited if engaged in by a U.S.-person company. Presumably, the statement that "case-by-case abstentions...could be considered a prohibited facilitation and/or export of services under the ITSR [depending on the facts and circumstances]" reflects the possibility that taking a decision to abstain from a vote can alter the outcome of a vote. If, for example, a five-person board has two U.S. persons, there is a 2-1 vote in favor of sanctions related activity, and the two U.S. persons abstain, those abstentions might as well be votes in favor of the sanctions related activity. If a choice is taken by a U.S. person that has the result of approving sanctions related activity, OFAC is likely to consider it facilitation. See also JCPOA Implementation FAQ C-16 - Financial and Banking Measures.
3) See generally General Note on U.S. Person Employees Working for Non-U.S. Person Companies With Sanctions-Implicating Business (System Ed. Note).