Risky Business: Iran’s “Revenge” Bill Underscores Regime’s Severe Hostility Toward Foreign Companies

(New York, N.Y.) — In January, ahead of the anniversary of Islamic Revolutionary Guard Corps (IRGC) Quds Force Commander Qassem Soleimani’s assassination, lawmakers in the Iranian parliament introduced “revenge” legislation that was reported to include a provision requiring the regime to, among other things, take steps to destroy Israel by 2041. Previously unreported, however, was an additional provision within the legislation that raises the ante for any foreign company wishing to do business in Iran. Specifically, Article 10 of the bill, which is expected to become law, states (emphasis added):

Companies [i.e., foreign companies] that violate their contract due to sanctions against Iran, if they wish to return to cooperate with Iran in any contract, are required to comply with the following conditions: The guarantee of termination of the contract by a foreign party must be set at least twice as much as similar cases. The cost of equipment and production lines must be borne by the outside party until the final product is reached. The foreign party is subject to tax in the amount of twice the same cases. In tenders on equal terms, these companies are given lower priority. In case of violation of mentioning these cases in the agreement, the offender will be sentenced to 1 to 5 years in prison.

Article 10 imposes onerous business terms on foreign companies operating in Iran, including prison sentences. Should the bill become law as anticipated, it will make an already perilous business environment even more hostile to foreign companies.

“Iran’s revenge bill is a major warning to any corporate entity that wishes to re-enter the Iranian market in the future. Although there will certainly be an understandable desire to recover assets previously lost in Iran, the potential consequences are not worth the risk,” said United Against Nuclear Iran (UANI) Executive Director David Ibsen. “Sanctions relief against Iran is a long way away. And besides the already significant financial and reputational risks, the possibility of your employees being arrested and tortured in Evin Prison – or otherwise held in Iran’s cruel judiciary system – should be a major cause for concern for any company.”

UANI's Iran Corporate Penalties Tracker documents corporate violations and penalties specifically relating to Iran. It covers more than 500 civil and criminal cases settled by the U.S. Department of Justice and federal agencies. Since 1997, the total monetary amount paid out in fines by companies for Iran violations exceeds $19 billion. The most recent case was settled on March 15, 2021, when Cleveland-based UniControl, Inc. agreed with the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) to pay a $216,464 fine for the company’s failure to stop 19 shipments of goods to Iran, despite the company having “reason to know” of its final destination.

UANI’s Iran Business Risk Matrix resource outlines the dangers and risks of conducting business operations with the Iranian government and Iranian entities. There remain serious legal, political, financial, reputational, and indeed, physical risks associated with doing business in Iran, particularly in sectors of the Iranian economy dominated by the IRGC, which remains sanctioned by the U.S. and the international community as a terrorist organization. In light of such risks, it should be clear to all responsible companies that Iran is not even close to being “open for business” – nor should it be.