Trump Decertifies the Iran Deal, Creating Both New Uncertainties and Potentially Unexpected Clarity

October 16, 2017

On Friday, October 13, 2017, President Trump announced a significant change in U.S. policy towards Iran by declaring his intention to refuse to certify to Congress that the 2015 Iran nuclear deal was in the national security interests of the United States.[1]  For the casual and even expert observer this announcement has been the cause of confusion and concern, conflating U.S. domestic political requirements with internationally-negotiated agreements and blurring the boundaries of exactly what was agreed (and what was not) under the nuclear accord.  This alert seeks to explain what has happened, what it means, and what the likely next steps might be.

As described in detail below, there are two sets of rules implicated by President Trump’s statement.  The first, and most well-known, is the 2015 Iran nuclear deal—the Joint Comprehensive Plan of Action (the “JCPOA”).  This agreement, signed between Iran and the five permanent members of the United Nations Security Council (the United States, the United Kingdom, France, Russia, and China) and Germany (the “P5+1”) committed both sides to certain obligations related to Iran’s nuclear development.  In short, Iran committed to various limitations on its nuclear program and in return the international community (the P5+1 alongside the European Union and the United Nations) committed to relieving substantial portions of the sanctions that had been placed on Iran to address that country’s nuclear activities.

The second set of rules implicated is the much less well-known 2015 Iran Nuclear Agreement Review Act (“INARA”), a domestic, U.S. statute that governs the United States’ activities with respect to the JCPOA.[2]  Among other requirements, the INARA requires the President to publicly certify to Congress Iran’s compliance with the nuclear deal every 90 days.  While then-Candidate and current President Trump often criticized the JCPOA as “an embarrassment” and a “bad deal,” since his inauguration in January 2017, he has certified the agreement twice before.  Faced with an October 15 deadline for recertification (which marked the end of a 90 day cycle), President Trump refused to certify for a third time.

President Trump’s October 13 statement was made pursuant to requirements in place under the INARA and not under the JCPOA.  As discussed below, the requirements for the INARA go beyond those of the JCPOA—even if Iran is compliant with the agreed upon limitations on its nuclear capacities, the President can nonetheless pursuant to U.S. law “de-certify” Iran’s compliance by claiming that the sanctions relief provided by the United States is not in the United States’ interests.

While there is international debate concerning the legality of a broader, domestically-implemented law like the INARA—which is arguably inconsistent with a multilaterally-agreed upon accord like the JCPOA—the United States views the INARA as consistent with its international and domestic obligations and the Trump Administration will be enforcing the INARA regardless of international criticism.[3]

Pursuant to the INARA, Congress now has 60 calendar days to consider whether it will introduce “snap-back” legislation that would reimpose nuclear sanctions on Iran automatically in a number of circumstances or take other actions through legislation.  Meanwhile, the other signatories to the JCPOA have announced their intention to continue complying with the terms of the agreement.

Though the President’s decision jeopardizes the sanctions relief that the Obama Administration provided to Iran in exchange for Tehran’s nuclear concessions, the Trump Administration’s announcement does not result in any immediate change in U.S. nuclear sanctions relief policy.  All U.S. nuclear sanctions relief—and all licenses issued to companies pursuant to sanctions relief—remain fully in force.  Indeed, the October 13 decision could paradoxically begin to remove a cloud of uncertainty that has lingered over companies seeking to invest in Iran under the terms of the JCPOA ever since President Trump took office.

Though it remains uncertain what will transpire over the next 60 days, we assess that the most likely outcome will be one that maintains the JCPOA and nuclear-related sanctions relief; however, a combination of Congressional and Executive action will probably result in new pressures on Iranian commerce and especially on those Iranian economic actors owned or controlled by entities implicated in Iran’s other troubling behaviors, including conventional weapons development, human rights abuses, and terrorism support.  This, in turn, while perhaps creating brighter lines allowing companies to engage with Iranian entities not implicated in these activities, could exacerbate challenges faced by entities seeking to engage with Iran under the JCPOA and thus for Iran to receive the benefits of international investment and trade it believes it was granted by the JCPOA.


The JCPOA is a purposefully limited accord focusing only on Iran’s nuclear activities and the international community’s nuclear-related sanctions.  Prior to the JCPOA, the international community, including the United Nations, the European Union, and the United States imposed substantial sanctions on Iran.  The European Union had implemented an oil embargo and U.S. nuclear sanctions alone had included the “blacklisting” of more than 700 individuals and entities on the U.S. Treasury Department’s Office of Foreign Assets Control’s (“OFAC’s”) list of Specially Designated and Blocked Nationals (“SDN List”), as well as economic restrictions imposed on entities under U.S. jurisdiction (“Primary Sanctions”) and restrictions on entities outside U.S. jurisdiction (“Secondary Sanctions”).  In the United States, Secondary Sanctions threatened non-U.S. entities with limitations on their access to the U.S. market if they transacted with various Iranian entities—broadly, Secondary Sanctions forced non-U.S. entities to decide whether they were going to deal with Iran or with the United States.  They could not do both.

Finalized in July 2015, the JCPOA provided for the easing of comprehensive international sanctions restricting dealings with Iran and Iranian entities.  Under the terms of the JCPOA, as Iran continued to comply with provisions of the deal—including caps on its uranium enrichment capabilities and inspections of its key nuclear facilities to ensure that no prohibited activity is occurring—the other parties agreed to relax, and continue the relaxation of, existing nuclear-related sanctions.  This relaxation included the United States’ commitment to ease certain Secondary Sanctions, thus opening up the Iranian economy for non-U.S. companies that had not wished to risk their access to the U.S. market to pursue Iranian deals.  This sanctions relief came into effect in January 2016 (on “Implementation Day”) when the IAEA determined that Iran was compliant with the initial nuclear components of the JCPOA.

There were at least two challenges built into the JCPOA that President Trump has seized upon.  First, in an effort to reach an agreement to limit Iran’s nuclear capabilities, the Obama Administration and other JCPOA parties not only provided “sunset” provisions in the accord after which certain restrictions on Iran would be lifted, but also drew a distinction between Iran’s compliance with the nuclear deal and its conduct in other areas (including its support for groups the United States deems terrorists, its repression of its citizens, it support for Syrian President Assad, and its conventional weapons development programs).  Supporters of the deal argued that addressing the immediate nuclear weapons risk was paramount—this necessitated both the sunset provisions and the absence of addressing other troubling activities.  Critics of the deal, however, including some powerful Congressional leaders and President Trump himself, derided these compromises and claimed not only that the sunset periods were too brief to be meaningful, but also that by ignoring non-nuclear issues Iran was given both a free pass to continue its bad behavior and indeed the ability to fund that bad behavior out of proceeds received from the nuclear-related sanctions relief.

The second challenge to the deal came from the fact that while the other parties to the JCPOA agreed to remove almost all of their sanctions on Iran, U.S. relief was far more surgical and reversible.  This was recognized by all parties to the JCPOA but so long as President Obama (or a successor with similar political views) was in office, it was thought to be a manageable limitation.  One of the key limits to the U.S. relief was that U.S. persons—including financial institutions and companies—have remained broadly prohibited from engaging with Iran even after Implementation Day.  Instead, the principal relief the U.S. offered was on the sanctions risks posed to non-U.S. parties pursuant to Secondary Sanctions and related measures.  As a consequence, it has remained a challenge for non-U.S. parties to fully engage with Iran due to the continued inability to leverage U.S. banks, insurance and other institutions that remain central to the bulk of cross-border finance and trade.  The continuing centrality of U.S. institutions to international commerce means that even unilateral measures by the Trump Administration could impact the ability of others to enhance their JCPOA-compliant engagement with Iran.


While the terms of the JCPOA were being finalized in the Spring of 2015, Congress passed the INARA in order to ensure that it would have the ability to review any nuclear deal and that it would have a role to play to in monitoring Iran’s compliance with the terms of that deal.  The bill, which passed with overwhelming support in the House and Senate, requires the President to certify, at least every 90 days, that Iran (i) is fully implementing the agreement; (ii) has not committed a material breach of the agreement; (iii) has not taken any action that could significantly advance its nuclear weapons program; and that (iv) suspension of sanctions against Iran is appropriate and proportionate to measures taken by Iran with respect to terminating its illicit nuclear program and vital to U.S. national security interests.  If the President does not certify compliance every 90 days, the INARA provides a 60-day window to Congress to introduce legislation on a fast track basis reinstating nuclear sanctions against Iran.

The INARA is distinct from the JCPOA—the INARA is domestic U.S. legislation and does not call for, require, or even consider the views of other parties to either the original JCPOA nor the United Nations Security Council which formally endorsed the agreement shortly after it was concluded.

Even though the IAEA has confirmed Iran’s continued compliance with the terms of the JCPOA, President Trump asserts that elements of the sanctions relief provided under the JCPOA are no longer in the United States’ national interest—as a legal matter Trump is triggering criteria (iv) under the INARA.  As the INARA is written he need not provide any evidence or assertion that criteria (i), (ii), or (iii) have also been triggered.  The President is not contending or even signaling that all sanctions relief is to be reversed; rather he is only asserting that some sanctions relief is no longer “appropriate and proportionate” and/or “vital to U.S. national security interests.”

The next steps under the INARA are uncertain because the law has no mandatory provisions and does not require Congress to take any action.  The law solely provides that Congress “may” act to reimpose sanctions—an authority Congress already possessed even if the specific fast-track provisions under the INARA could speed up the reimposition.  The Trump Administration has not yet requested that Congress reimpose nuclear-related sanctions.  Indeed, Secretary of State Rex Tillerson indicated that the Administration has been quietly lobbying lawmakers to preserve nuclear-related  sanctions relief in the short term, but to signal the potential that tough new sanctions could be imposed.

Reports indicate that the Administration has asked Congress to amend the INARA to provide for the automatic snap-back of nuclear sanctions at some future time if certain, as-yet-unarticulated circumstances come to pass.  This would allow the reimposition of sanctions even if Iran continues to remain in compliance with the deal (which, once again, is limited to nuclear-related requirements).

What Happens Next?

As we go to press, leading Republican Senators (including both more conservative and more moderate members on the Iran issue) are purportedly crafting a legislative proposal based on the Trump Administration’s “automatic snap-back” proposal.  Such legislation would presumably reimpose nuclear sanctions automatically at several trigger points:  (1) when the JCPOA “sunset” periods would be reached, i.e., at 10, 15, 20, or 25 year marks depending upon the measure covered by the JCPOA (unless Iran continued performing those commitments even after it is no longer required to do so under the JCPOA); and (2) in the event of unspecified, non-nuclear activities, such as the continued development of Iran’s ballistic missile program.[4]  The ballistic missile program is of central concern to President Trump and he emphasized that issue in noting the “flaws” in the JCPOA during his October 13 remarks.

In light of public criticism by leading Democrats in both the Senate and the House of the President’s move to decertify Iran’s JCPOA compliance it is not yet known whether this legislation will receive adequate backing in both chambers.  However, given the long history of bipartisan support for tough Iran legislation, the recent past in which many of these same Democrats publicly rejected the JCPOA, and the potential for Trump to act unilaterally under Executive authority to further impede sanctions relief if Congress does not pass adequate legislation, we think it highly likely that a strong bill will be passed out of Congress and sent to the President for his signature.

On Friday, immediately after the President’s remarks, the leaders of France, Germany and the United Kingdom issued an unusual joint statement of concern regarding President Trump’s decision, noting that they “stand committed to the JCPOA and its full implementation by all sides.”[5]  The statement reiterated that the JCPOA was the culmination of 13 years of diplomacy.  However, they did acknowledge shared “concerns about Iran’s ballistic missile program and regional activities that also affect our European security interests,” and offered to “stand ready to take further appropriate measures to address these issues in close cooperation with the US and all relevant partners.”  Despite this pledge to cooperate with the United States, the Trump Administration has indicated its clear willingness to act on its own with uncertain implications for trans-Atlantic unity on this issue.

New Designations and Potential New Clarity on Iran-Related Transactions for Non-U.S. Companies

As the policy implications of the Trump Administration’s approach play out in the coming months, there will be numerous implications.  At this early stage two have already become apparent: first, new designations could bring needed clarity to certain Iran-related transactions for non-U.S. companies; and, second, OFAC may be able to resume its licensing activities with clearer direction on the Trump Administration’s policy goals.

First, Treasury Secretary Steve Mnuchin accompanied President’s Trump’s announcement on the JCPOA de-certification with several designations.  The most important of these was the first step towards President Trump’s pledge that he would be imposing “tough sanctions on Iran’s Islamic Revolutionary Guard Corps.”  The IRGC has been under U.S. sanctions for some time and the organization has a large role in the Iranian economy.  Even under the sanctions relief provided by the JCPOA, Secondary Sanctions risks have attached to any entity that has transacted with the IRGC.  However, critics of the Obama Administration strategy noted that there are relatively few entities (less than 40 by some counts) officially sanctioned by OFAC as IRGC affiliates.  The President’s order could see that number expand significantly as most experts contend that there are hundreds of entities in Iran affiliated with the IRGC.

The shadowy nature of the IRGC and the lack of clarity regarding the organizations over which the IRGC exercises control has been a primary reason that many non-U.S. entities have shied away from legally entering the Iranian market.  Such companies did not want to risk U.S. Secondary Sanctions by engaging with an entity that turned out to be owned or controlled by the IRGC.  The unintended consequence of expanding the list of known IRGC affiliates may be to provide greater clarity for those who want to engage with Iran but who do not want to transact with the IRGC.  If the U.S. is committed to a full detailing of the IRGC’s affiliates it could become clearer which entities are outside the IRGC’s control and thus which entities are more suitable and less risky for JCPOA-compliant engagement.

Second, in addition to the potential clarity of detailing the IRGC’s control over Iran’s economy, the Trump Administration’s actions may also make it easier for companies seeking to engage in Iran-related transactions with U.S. persons, or U.S.-origin goods, technology, and services that would trigger U.S. licensing requirements from OFAC.  While the Iran policy review has been pending, OFAC has essentially been in a holding pattern with respect to action on Iran-related license applications.  This is logical given that licenses are a tool of foreign policy and while the Administration was considering next steps there was uncertainty as to the direction of that policy.  Indeed, some thought it was possible that the result of the policy review would be for the President to revoke existing licenses or mandate a more significant departure from the Obama strategy.

However, at least for now, it appears that the Trump Administration has opted to broadly stay the course regarding the JCPOA and has decided not to modify some longstanding licenses and exemptions that were issued to allow certain transactions related to telecommunications, health and agriculture, civil aviation, and those involving foreign subsidiaries of U.S. companies.  Moreover, it is also possible that OFAC licensing officers and their State Department colleagues have now been given the policy direction they need to make decisions, one way or another, to clear a backlog of pending license applications and to consider new ones.  While President Trump indicated that the JCPOA “is under continuous review, and our participation can be cancelled by me, as President, at any time,” as of today the United States remains party to the agreement—which requires certain aspects of sanctions relief.  The President’s statement about the long-suffering Iranian people and his desire for a “better deal” for both the international community and Iranian citizens provide some guidance as to the types of licenses that may receive positive consideration.

Conclusion – Congressional Action and a Potentially Limited Iranian Response?     

As the legislative year draws to a close, it is possible that Congress will decide that the United States’ continued adherence to the terms of the JCPOA remains in the U.S. national interest and that it lacks bipartisan support for legislation that would impose additional measures on Iran sufficient to unravel the deal.  Moreover, it is possible that President Trump will also be convinced to remain inside the JCPOA complete with the provision of sanctions relief.  Regardless, initial signals from the other, non-Iran JCPOA parties are that the U.S. is on its own.  The rest of the P5+1 remain committed to complying with the agreement provided Iran continues to meet its terms.  This continued commitment by the European Union and others to compliance will likely limit the range and severity of Iran’s responses to President Trump’s statements and the eventual outcomes of his policy.  After all, even if Iran argues that the United States will breach its JCPOA commitments, if Iran responds by resuming work on its nuclear weapons program or greatly enhancing its other “troubling behaviors” it could risk the commitment of the European Union to Brussels’ own sanctions relief efforts.  A resumption of EU sanctions—let alone enhanced U.S. measures—would place billions of dollars of potential investment and trade at risk.  As such, a resumption by Tehran of any activities that could lead the EU to question its own sanctions relief would appear to significantly hem in Iran’s options to meaningfully react to the U.S. moves by substantially altering its own course and commitments under the JCPOA.

We will be closely following the fast-moving political and policy debates as they unfold in the United States, the European Union, and elsewhere and will update you as the situation evolves.

   [1]   Press Release, The White House, Remarks by President Trump on Iran Strategy (Oct. 13, 2017), available at

   [2]   Pub.L. 114–17 (May 2015).

   [3]   While the broader debate is outside the confines of this alert, a primary reason that a broader INARA is permitted is that the JCPOA is not a treaty which would have required approval by the U.S. Senate.  Had the JCPOA been a treaty, and had it been self-executing, it would have had legally-mandated enforceability across administrations as a matter of domestic law.  Instead, the U.S. views the JCPOA as an “Executive Agreement,” and as such it remains the purview of the Executive (namely the President) to determine whether, as a legal matter, the United States will comply or otherwise.   Such an agreement is politically (and perhaps diplomatically) binding but can be overturned by U.S. law.

   [4]   Office of U.S. Senator Bob Corker, Corker Statement on Legislative Strategy to Address Flaws in Iran Nuclear Deal (including fact sheet), (Oct. 13, 2017), available at

   [5]   U.K. Prime Minister’s Office, Joint statement from Prime Minister Theresa May, Chancellor Angela Merkel and President Emmanuel Macron following President Trump’s statement on the US’ Iran Strategy (Oct. 13, 2017), available at

The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam Smith, Caroline Krass, Mark Handley, Christopher Timura and Stephanie Connor.

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