Risky Business: Contract Enforcement Guarantees Would Subject Employees To Iranian Criminal Penalties

(New York, N.Y.) – Speaking to reporters at the Munich Security Conference earlier this year, Iranian Minister of Foreign Affairs Hossein Amir-Abdollahian told reporters, as Patrick Wintour of The Guardian recalled on “The Iran Podcast”, that if Iran were to agree to restore the Joint Comprehensive Plan of Action (JCPOA) then Tehran would need a legal guarantee that any business agreements with an Iranian company formed after implementation of the deal would be, as Wintour said, ‘sacrosanct’ and shielded from sanctions.

Such a demand, if made at the Vienna nuclear negotiations, would align with a provision in Tehran’s so-called ‘Revenge Act’ of 2021. That bill not only requires punitive financial penalties on companies that comply with sanctions requirements set forth by the United States and other governments, but also creates a criminal penalty for doing so, specifying a mandatory prison sentence. Article 10 of that legislation explicitly states (emphasis added): 

Companies that violate their contract due to sanctions against Iran, if they wish to return to cooperate in a new contract with an Iranian entity again are required to comply with the following conditions: The termination payment agreed by the foreign party in the new contract must be set at least twice as high as in comparable contracts. The foreign party in the contract must bear all the cost of the equipment and production lines until the final product is reached. The foreign party will be subject to twice the amount of taxes as would be the case in comparable contracts. If the foreign party has submitted a tender that is equal to other competitors, the tender of the foreign entity will be treated with a lower priority. In case of violation of any of these conditions in the agreement, the offender will be sentenced to a sentence between 1 to 5 years in prison. 

As United Against Nuclear Iran (UANI) warned one year ago, the ‘Revenge Act’ imposes onerous business terms on foreign companies operating in Iran. It makes an already perilous business environment even more hostile to foreign companies. Both the bill and Amir-Abdollahian’s statement provide a clear insight into how the terrorist regime works and should serve as a warning to all businesses. 

“The absurdity and impossibility of the Iranian regime’s contract enforcement demands should tell businesses all that they need to know about the risks of entering the Iranian market. It would be incredibly irresponsible for the U.S. and its allies to accede to or even entertain such demands. An agreement that would purport to make contracts ‘sacrosanct’ would severely handicap the ability to penalize Tehran for its malign behavior, which accelerates year after year and shows no signs of slowing down. It would legitimize Iran’s novel criminal penalty for violations of civil contracts under its laws. Most critically, it would also further incentivize Iran’s appalling practice of “hostage-diplomacy,” in which it arrests and ultimately detains foreign visitors including business travelers on the most spurious of charges. This would be a dangerous precedent and one that Iranian allies like Russia and China may well adopt,” said UANI Research Director Daniel Roth. 

UANI’s Iran Business Risk Matrix resource explains that businesses engaging in the Iranian market expose their officers, employees, and contractors to a high risk of harassment, arrest, prosecution, and incarceration without due process of law, without the right to legal counsel, and without an effective and independent judicial system to protect basic legal rights. Individuals born in Iran or who are (or were) Iranian citizens are particularly at risk of arrest, prosecution, imprisonment, torture, and even capital execution without due process of law.