Iranian sanctions: operations, reputation and ethics Alexander Juengling, Chief Compliance Officer, Danone Jason Hungerford, Partner, Mayer Brown Mont Blanc Circle November 2018

Practical compliance: Iranian sanctions Legal framework Agenda Practical compliance: Iranian sanctions Legal framework Corporate practice Operations Reputation Ethics

US secondary sanctions reimposition Legal framework 1995 2010 2012 2016 2018 2018 2018 US embargo CISADA EU sanctions JCPOA US withdrawal EU blocking statute US secondary sanctions reimposition

Legal framework Generally apply to: US Persons EU applicability: EU nationals EU companies EU flagged vessels/registered aircraft Business conducted in whole or in part within EU member state Lack of extraterritorial application Non-EU subsidiaries of EU parents? “Nexus” US applicability: US Persons US citizens/permanent residents All persons physically located in the United States Entities registered in the US The non-US branches of US entities All transactions in or through the United States must also comply with OFAC regulations Non-US Persons…

Legal framework Primary sanctions Implications Near-total prohibition for US Persons or transactions with a US nexus Exceptions are few, such as agricultural/medical items Few EU sanctions remain Implications Facilitation Banking and finance US individuals Indirect dealing and predominance

Operation of secondary sanctions Secondary sanctions Legal framework Operation of secondary sanctions “material support”, “significant transaction”, “knowingly” Discretionary, political Question of legality Secondary sanctions Automotive Metals/minerals Banking Shipping Designated persons 13,599 List migration

EU moves since the US withdrawal Clash of US/EU policies Legal framework EU moves since the US withdrawal Encouragement from member state governments to engage with Iran continues Creation of the EU Iran SPV, banking arrangements outside of US jurisdiction Blocking statute Clash of US/EU policies “Transatlantic rift” Brexit dynamic “Disturbed and deeply disappointed” “One of the most counterproductive measures imaginable for regional and global peace and security”

Legal framework Blocking statute Prohibition on “compliance” with listed US sanctions Creation of civil right of action Reporting requirement Licensing mechanism “We do not intend to allow our sanctions to be evaded by Europe or anyone else” Does it really matter? Uncertainty of provisions No affect on secondary sanctions risk EU guidance Criminal enforcement Civil claims Mamancochet Mining Ltd v Aegis Managing Agency Ltd & Others Rotenberg case, Finland

Legal framework Breach of Secondary sanctions Breach of Primary sanctions Civil penalties: An amount equal to the greater of US $295,141 or twice the amount of the underlying transaction, per violation. (In practice, OFAC will typically allege a range of violations on the basis of a given set of facts, meaning that the overall fine often significantly exceeds these amounts); Criminal penalties: An amount up to US$1,000,000 per violation, if the violations were enforced as criminal violations; and Imprisonment: Individuals may be imprisoned for up to 20 years. Breach of Secondary sanctions Financial/banking restrictions, including: prohibitions on certain loans from US banks prohibitions on foreign exchange & other transactions ban on investment by US Persons; Prohibition on certain property transactions & ownership. Export sanctions (e.g., denial of export licences; prevention of US exports to the Company).   Prohibition on US Government contracts. Sanctions on executive officers, including exclusion from the United States. Designation of company itself as a sanctioned party (with whom US Persons are prohibited from dealing)

Legal framework Enforcement Guidance What is the real risk? Secondary sanctions? Multiple regulators? AML? Guidance When should it be sought? Are there risks? Should I voluntarily disclose? How do I prepare?

Corporate practice Sanctions law and regulations affect corporate practice beyond purely legal considerations Operational impairment Reputational risk Ethical considerations

Operational impairment Corporate practice Operational impairment Financiers Insurance Critical suppliers Distributors Business support

Operational impairment Reputational risk Corporate practice Operational impairment Reputational risk NGOs Media Customers

Operational impairment Reputational risk Ethical considerations Corporate practice Operational impairment Reputational risk Ethical considerations Relating to the business itself Relating to the customer base Relating to the policies on which the sanctions are based