Greta Lichtenbaum, partner with O'Melveny & Myers. Courtesy photo.

President Donald Trump announced on Tuesday that the United States would withdraw from the Iran nuclear deal and renew trade sanctions that were eased during the Obama administration after years of negotiations.

China, the European Union, France, Germany, Russia and the United Kingdom also were parties to the agreement that Iran adopted in 2015, which is formally known as the Joint Comprehensive Plan of Action (JCPOA), and had agreed to lift some economic sanctions provided that Iran stopped certain aspects of its nuclear program. These other parties haven't indicated they will join the United States in withdrawing from the JCPOA.

Greta Lichtenbaum, a partner at O'Melveny & Myers based in Washington, D.C., who specializes in international trade and U.S. regulatory compliance and writes and speaks often on the subject, said the reimposition of trade sanctions is expected to have a “significant impact” on multinational companies with business interests in both the United States and Iran.

As she explained in a contributed article for Corporate Counsel in 2016, when the economic sanctions against Iran were loosened, sanctions are on two levels: There are primary sanctions, which broadly prohibit U.S. companies from directly engaging in nearly all business with Iran; and secondary sanctions that deny foreign entities access to U.S. markets if they engage in certain business in Iran particularly around energy, financial services transactions and transportation.

Here Lichtenbaum answers five questions about what compliance lawyers and others engaged in international commerce involving Iran need to know about the reimposed sanctions. The interview has been edited for clarity and length.

National Law Journal: Who is most affected by the renewed U.S. trade sanctions on Iran?

Greta Lichtenbaum: U.S. companies with foreign subsidiaries that have been conducting business in Iran under the general licenses that were issued after the JCPOA are very affected, because they will have to wind it down between now and early November. And non-U.S. companies that conduct business in Iran that have U.S. ties also can be affected, because some of their activity will be potentially sanctionable under so-called secondary sanctions based in U.S. law. Obviously, Iranian companies are affected.

Also, there are many European companies and multinational companies based outside the U.S. that have very significant operations here, so they need to pay attention to U.S. restrictions. Any energy sector, oil and gas petrochemical company has to look carefully at these changes, and the banking and insurance industry, and the automotive industry as well. Those are some of the sectors most affected. Certainly, Airbus [and Boeing] because now they are no longer going to be able to sell aircraft[s] to Iran with U.S. content.

What are some of the major changes from the immediate past?

By way of context, the U.S. has maintained broad economic sanctions against Iran since 1995. U.S. companies cannot do business there, except in very limited circumstances. Then, between 2010 and 2015, the U.S. broadened the secondary sanctions, which apply to non-U.S. companies. Under secondary sanctions, if you conduct certain activity in Iran you may lose access to some benefits of the U.S. market.

Then, under the JCPOA, the president waived secondary sanctions associated with Iran's nuclear program. But now all of those are going back in place. The practical effect is 1) U.S. foreign subsidiaries were able to do business in Iran and now they can't; and 2) multinational non-U.S. companies have to be worried about those secondary sanctions. That is the change.

When do the renewed sanctions take effect?

Companies currently engaging in activities that will now be subject to sanctions because of the United States' withdrawal from the JCPOA have been given time to wind down their activities, in some cases three months—August—and in other cases six months—November.

Why should companies and their compliance officers care?

They should care because if they don't pay attention, U.S. companies can pay very significant fines and penalties in the hundreds of millions of dollars. This also can apply to non-U.S. companies if they are acting in the U.S. There have been fines in the high hundreds of millions involving non-U.S. banks using U.S. banks to clear their transactions involving sanctioned countries. If you run afoul of primary sanctions, they can pay fines into hundreds of millions and individuals can be imprisoned for willful violations.

And for non-U.S. companies that engage in activity subject to secondary sanctions, it can drastically affect their ability to do business in the United States. They can face significant sanctions that will make it very difficult to do business in the U.S. or to have access to the U.S. market.

How should compliance officers respond?

The response should be to assess how these reimposed measures will affect their existing business and take steps to address the changes, either through ceasing certain activity, or putting in place procedures to make sure transactions subject to sanctions don't occur. For example, if your foreign subsidiary in Dubai is doing business in Iran—as they are now allowed to do—make sure they are taking steps to wind down the business within the time frame that is required.

Another thing that companies need to be aware of with this change in the law, is that they need to be very careful about their counterparties who are non-U.S. firms who may still be doing business in Iran. You could find yourself in a position where you are facilitating a non-U.S. business in Iran. That is a risk.