The Sanctions imposed by Iran against Israeli persons and products

The Sanctions imposed by Iran against Israeli persons and products

This article has been prepared by Iran Best Lawyer in order for you to become familiar with the sanctions imposed by Iran against Israeli persons and products.

 

Policy to cut off any relationships with Israel

Since the 1979 Revolution in Iran, I.R. Iran Government has promulgated a number of laws and regulations to enforce its public policy to cut off any relationships with Israel (Iranian government does not recognize the state of Israeli under international law). This article consists of three parts. Section (a) addresses three main current legislations imposing sanctions against Israeli persons and products, together with a number of travel bans prohibiting commute to Occupied Territories.

Section (b) examines prohibited transactions and products, and the persons to whom the sanctions are applicable and finally, the relevant fines and penalties are explained in the Section (c).

For the purpose of this article the terms set below shall have the following definitions:

• Sanctions Legislation: main Iranian legislation providing for sanctions against Israeli persons and products;
• Israeli Persons: any natural or legal persons enumerated as such pursuant to Sanctions Legislation;
• Restricted Activities: any transactions of any kind with Israeli Persons by Restricted Persons;
• Restricted Persons: any Iranian natural or legal persons, persons having residence in Iran, and foreign companies having presence in Iran;
• Applicable Penalties: civil and criminal liabilities arising out of breach of Sanctions Legislation;
• IMFA: Iran Ministry of Foreign Affairs.

 

Regulatory framework imposing sanctions against Israeli persons and products

Iran currently has three main legislations imposing sanctions against Israeli persons and products (“Sanctions Legislation”). This section also provides an introduction to other relevant laws and regulations.

 

Act on Support of Islamic Revolution of Palestinian People (1990)

This Act makes it mandatory for the government of Islamic Republic of Iran “to support Palestinian people to fulfil their legitimate rights in any manner”.^[1]  To this intention, the Act prohibits “making any economic, commercial and cultural relationship with Israeli companies and institutions around the world”.^[2]  The Act does not define what constitute such “relationship” and the very broad language suggest the prohibition will include any such contacts regardless of their size, price or significance.

Moreover, IMFA is required to prepare, to the extent possible, a list of Israeli companies around the world and submit it to the Parliament.^[3]  Nevertheless, as publicly available data indicate, the IMFA has never prepared such list in practice.

In short, the Act does not provide for any civil or criminal liability for breach of the prohibition.

 

Act on Unified Islamic Law on Israeli Boycott (1992)

This Act was passed pursuant to resolutions adopted by Islamic Conference Organization banning any commercial relationship with Israeli state, companies and individuals, as well as any transaction on Israeli products. It is more detailed compared to previous legislation, and provides for an extensive boycott against its targets. You will find below an analysis of the Act along with answering to questions.

 

Act on Mandatory Commitment of I.R. Government to All-inclusive Support for Palestinian People (2009)

This Act prohibits “any importation of products made/manufactured by companies the main shareholders of which are Israeli, or conclusion of any agreements with such companies”.[4]   The boycott against Israeli products is just a repetition of previous sanctions, but the criterion of ‘main shareholder’ needs more elaboration which is dealt with in Section (b).

 

Criminal Code (1996 and 2013 amendments), and the Amendment to Passport Act (2011)

There are a number of criminal laws which set a range of punishments for any acts which implies any form of cooperation with ‘hostile countries’. Any for The Amendment to Passport Act also provides for criminal penalties for any Iranian national who travels to Occupied Territories. These will be elaborated on in subsequent sections.

 

 

STRUCTURE OF IRAN SANCTIONS AGAINST ISRAEL

a) Israeli Persons

Engaging in any transaction or commercial activity (“Restricted Activities”) with the following persons by Restricted Persons is prohibited and is subject to Applicable Penalties. As per Sanctions Legislation, the following are considered Israeli Persons:

1. Any resident of Israel;
2. Any Israeli individual nationals;
3. Any company or institution incorporated in Israel;
4. Any company the ‘main shareholders’ of which are Israeli individuals or companies, and
5. Any person who is employed by or works for the benefit of Israel, regardless of their place of residence.^[5]

Two issues need elaboration regarding qualification as an Israeli Person:

First, Sanctions Legislation does not suggest any standard for being ‘main shareholders’ and it might NOT be limited to having title to more than 50 percent of shares in a subsidiary company. It means, for instance, that Restricted Person are prohibited to enter into agreements with a Swiss company the main (even minority) shareholders of which are Israeli Persons.

Second, the term ‘benefit’ is broadly incorporated, and might have the effect that even paying taxes to the Israeli state may be regarded as rendering benefits to the latter by an Iranian court. In addition, the type and nature of the transaction is not a matter of concern; any contract or transaction to be entered into with the above persons is prohibited.

Moreover, please note that IMFA has never formally enlisted any Israeli company under its sanctions list. However, on March 26, 2017, IMFA enlisted, in its sanctions list, fifteen American companies which Iran purports are involved in allegedly breaching international humanitarian and human rights law through cooperation with Israeli state. Iran claims that these companies have participated in alleged international crimes or terrorist activities committed by Israel, or abetted and assisted any commission thereof. Such activities include constructions in alleged Occupied Territories of Palestine.

The IMFA declaration imposing sanctions on American entities contains a single provision stipulating that “… any transaction with listed entities is prohibited, their property will be subject to seizure and will be blocked in the jurisdiction of I.R. Iran, and issuance of entry visa to Iran for individuals having title, position, directorship, or any kind of relation/ affiliation with the listed entities will be refused…”.

 

b) Restricted Activities

In accordance with the Sanctions Legislation, “any importation of Israeli goods and products into Iran, transaction on, or any commercial activities the subject of which are such products, as well as importation of any Israeli paper currency, or any other transferrable Israeli assets into the territory of I.R. Iran shall be prohibited.”^[6] The ban includes both direct and indirect importation of products from Israeli. Any other form of transaction, including sale, purchase, donation etc. is subject to the prohibition (altogether “Restricted Activities”)^[7].  For this purpose, ‘Israeli product’ shall mean any goods and products:

• Any component(s) or part(s) of which are made or prepared in Israel, regardless of their type, usage and significance;
• Manufactured outside Israel to be sold or exported in the benefit of Israeli Persons, and
• Any goods and products loaded on vessels from Israeli ports.^[8]

 

c) Restricted Persons

Sanctions Legislation provides that “all natural or legal persons” shall refrain from any Restricted Activities with Israeli Person. This means that any Iranian individual national and any Iranian incorporated company must not engage in transactions with such persons.

Moreover, since there is no specific criteria on how “all natural or legal persons” is to be defined, the wording of Sanctions Legislation implies that (i) any resident of Iran, regardless of their nationality, and (ii) Iranian companies’ subsidiaries are considered as Restricted Persons. As stated earlier, the IMFA does not provide any implementation procedure, or guideline on the criteria based on which Sanctions Legislation will be applied and whether the sanctions are only applicable to the listed entities or the IMFA will dig through the corporate veil to subject the subsidiaries to sanctions. Accordingly, the risk of enforcing sanctions against such persons is always of relevance.

Finally and in addition to Iranian and Israeli persons, “any foreign company having branch, representative office or any benefits in Israel” are expressly brought under Sanctions Legislation’s umbrella. It means that any such foreign company which has any presence in Iran (i.e. branch, representative office or subsidiary company) might be subject to fines and penalties for breach of the sanctions. Please note, however, that the wording of the Sanctions Legislation is vague with regards to such foreign companies, and political considerations will play a major role in making any decision on enforcement of sanctions against them.

The territorial reach of Sanctions Legislation includes Iranian main territory, its free trade zones and special economic zones. Further, no Israeli goods can be exported from or transited within (to the extent allowed by international conventions) these territories.^[9]

 

 

APPLICABLE PENALTIES

a) The Act on Unified Islamic Law on Israeli Boycott (1992)

The Act on Unified Islamic Law on Israeli Boycott (1992) does not set forth direct punishment for breaches of boycotts, but provides for the confiscation in favour of the government of any goods or products involved in transactions with Restricted Persons or such items involved in Restricted Activities. In addition, the vehicles used in the transaction will also be confiscated after the owner of the vehicle has been identified as a Restricted Person. This Act requires the Iranian government to criminalize such activities, but there is no provision under Iranian law specifically criminalizing transactions with Israel. Therefore, confiscation of property is the only applicable sanction provided in this Act.

The court convictions rendered for breach of this Act shall be published at the expense of the perpetrator and such convictions will be installed on the premises of the perpetrator’s companies, factories and shops for three months.  If the perpetrator tries to change his location or hide or dispose such display, they will be sentenced to imprisonment up to three months or payment of 100 gold coins or its equivalent, or both as the case may be.

 

b) Criminal Laws

Article 2 of the “Act on Intensifying the Punishment of Perpetrators of Bribery, Embezzlement and Fraud” provides that “in case any person obtains money or any property by ways which are not legally legitimate is guilty, and in addition to retrieval of the principle of property, will be sentenced to three to two years of imprisonment and/or a fine equivalent to twice the value of property received.” Therefore, obtaining any benefits from engaging in Restricted Activities will be subject to this punishments. Please note that in accordance with the wording of the Act, the judge is of the discretion to sentence both imprisonment and fine altogether.

Moreover, Article 508 of the Criminal Code of Iran (2013) provides that “any person or group of persons, who cooperate with hostile countries against the I.R. Iran, will be sentenced to one to ten years imprisonment.” It does not indicate what constitute ‘enemy countries’ or ‘cooperation’. International Legal Affairs Department of IMFA has stated in an opinion dated October 2016 that “Except for the Occupier Israeli Regime, Iran is not in hostility status with any country”.

However, there is still doubt as to what ‘cooperation’ means. It appears that the term is intently incorporated to include any form of possible contact. Please note, however, that the Code limits the cooperation to include only those conducted with hostile ‘countries’. Therefore, as we understand, the punishments provided for under this Article become applicable only when an Israeli state department, state agency, or at most an Israeli state company is involved. There is doubt, therefore, that cooperation with private Israeli persons is subject to this provision. Nevertheless, an Iranian court might consider the latter type of cooperation as subject to the punishment, especially because of political sensitivities involved in such matters.

Please be advised that any of the above penalties for breach of Iran sanctions against Israel might also be applicable to legal persons (i.e. company, incorporated association etc.) as well. In fact, in addition to natural persons, legal persons might be subject to criminal liability under Iranian law. A legal person incurs criminal liability, if its legal representative (i.e. board members, managing director etc.) commits a crime in the name, or in the interests of the legal person.^[10] Further, the criminal liability of legal persons does not impede the liability of natural persons.

Accordingly, if a legal person is found to have criminal liability, depending on the severity of the crime and its harmful consequences, the judge will have the discretion to convict such person to one or two of the following:

• Dissolution of the legal person;
• Confiscation of all of company’s property;
• Prohibition of one or more activities permanently or for a maximum of five years;
• Prohibition of a public call to increase the capital of company permanently or for a maximum of five years;
• Prohibition of marketing of some commercial documents for a maximum period of five years;
• Fine, and
• Publication of the sentence by the media.

 

c) Travel Ban

Finally, breach of the prohibition of travel to Israel. The Amendment to the Passport Act passed in 2011 provides that Iranian passport is valid for travelling abroad except to the Occupied Palestine or countries where the Government of Iran puts, as the case may be, prohibitions or restrictions for travelling to them.”

Any Iranian, who violates the provisions of this Act, will be sentenced to two to five years of imprisonment and will be deprived of having passport for three to five years.

 

 

[1]. Article 1, Act on Support of Islamic Revolution of Palestinian People (1990)

[2]. Article 8, Ibid

[3]. Article 8(1), Ibid

[4]. Article 1, Act on Mandatory Commitment of I.R. Government to All-inclusive Support for Palestinian People (2009)

[5]. Article 1, Act on Unified Islamic Law on Israeli Boycotts (1992)

[6]. Article 2, Ibid

[7]. Article 6, Ibid

[8]. Ibid

[9]. Article 5, Ibid

[10]. Article 143, Criminal Code