On the (Legal) Irrelevance of Iran Sanctions Act Renewal

By Samuel Cutler
Tuesday, October 6, 2015, 9:00 AM

While the Joint Comprehensive Plan of Action (“JCPOA”) appears to have overcome the last major congressional hurdle to implementation, the latest quixotic attempt to tie sanctions relief to Iran’s payment of damages to plaintiffs in terrorism-related lawsuits notwithstanding, Congress has made it abundantly clear that legislative efforts vis-à-vis Iran will continue. Senators Mark Kirk (R-IL) and Robert Menendez (D-NJ), who both voted against the JCPOA, have made it their mission to seek a decade-long extension of the Iran Sanctions Act of 1996 (“ISA”), which is due to expire in December 2016. To that end, they have introduced S.1682, the “Iran Sanctions Relief Oversight Act of 2015” and have pressed administration officials on an ISA extension, most notably during Adam Szubin’s confirmation hearing for Undersecretary of Terrorism and Financial Intelligence. The crux of their argument in favor of extending ISA is that absent reauthorization, the United States will have nothing to “snap back” should Iran violate the nuclear deal.

This position is questionable for a number of reasons.

ISA was the first piece of secondary sanctions legislation targeting Iran passed by Congress. §5 of the statute authorizes the imposition of sanctions for a variety of activity related to Iran’s energy sector, including investment in, or provision of goods or services to, Iran’s petroleum sector and refined petroleum production capability, the sale of refined petroleum products to Iran, purchase of petrochemical products from Iran, etc. It also authorizes certain sanctions related to Iran’s nuclear capabilities and Weapons of Mass Destruction (“WMD”) proliferation. § 6 meanwhile sets out a menu of 12 sanctions from which the president can choose if he determines a violation has occurred. Possible measures include export prohibitions, loan prohibitions, foreign-exchange bans, and asset blocking, to name a few.

Mendendez and others have claimed that the Iran Sanctions Act is a vital component of the sanctions regime targeting Iran and that failure to reauthorize the legislation would deprive the administration of the legal tools necessary to re-impose sanctions should Iran fail to live up to its JCPOA commitments. In a press release issued following the introduction of S.1682, Menendez stated that ISA “authorizes a majority of the sanctions in place on Iran.” Likewise, a policy brief from the Foreign Policy Initiative warns “If the Iran Sanctions Act expires in 2016, however, there will be no legal basis to impose American sanctions.” These statements misrepresent the legal architecture that underpins U.S. sanctions on Iran and the existing legal authorities available to the Executive.

Though the various pieces of Iran sanctions legislation were certainly important components of the overall U.S. Iran sanctions strategy as implemented, the underlying legal basis for all U.S. sanctions enacted by the Executive is the International Emergency Economic Powers Act (“IEEPA”) (50 U.S.C. §§ 1701-1707). Every sanctions-related Executive Order, including those authorizing the implementation of sanctions legislation, begins with an invocation of IEEPA. Congressional action, rather than providing new authorities otherwise unavailable to the Executive, more often serves as a mandate for the administration to enact certain provisions.

Indeed, the language of IEEPA give the President a virtual carte blanche in imposing restrictions on U.S. persons’ dealings with foreign individuals or entities. Pursuant to §1702(a)(1) of IEEPA, the President may

(A) investigate, regulate, or prohibit--

  1. any transactions in foreign exchange,
  2. (ii) transfers of credit or payments between, by, through, or to any banking institution, to the extent that such transfers or payments involve any interest of any foreign country or a national thereof,
  3. (iii) the importing or exporting of currency or securities, by any person, or with respect to any property, subject to the jurisdiction of the United States;

by any person, or with respect to any property, subject to the jurisdiction of the United States

(B) investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.

Given the broad language of the statute, it’s hard to make a case that this or any future administration does not already have the authority in a snapback scenario to impose a set of sanctions identical in scope to ISA. This would not require any action from Congress.

This reading of IEEPA appears to be the interpretation of Executive sanctions authority held by the Treasury Department. During Acting Undersecretary Szubin’s confirmation hearing he was asked by Senator Menendez on the administration’s position on ISA reauthorization. To which Szubin responded, “I’m not aware of any discussions within the administration that would lead to our snapback leverage being dissipated…at any point.”

Moreover, many of ISA’s restrictions are superseded by other sanctions legislation or Executive Orders that will remain in place whether or not ISA is renewed. Szubin indirectly addressed this issue by denying that ISA was one of the “primary pressure points” impacting Iran, instead invoking the Comprehensive Iran Sanctions and Accountability Act of 2010 and the 2012 National Defense Authorization Act. It can be reasonably argued that all of the energy-related sanctions contained in §5 of ISA are also made available already, under §1245 of the Iran Freedom and Counterproliferation Act of 2013. ISA’s WMD provisions, which have never been utilized by any administration, take a back seat to the proliferation-related sanctions in Executive Order 13382.

The panoply of sanctions authority that will remain regardless of a potential ISA re-authorization thus likely would explain Szubin’s statement that “the penalties that are set out in the Iran Sanctions Act are then referenced in a lot of these other statutes I’m talking about and that penalty structure is a very meaningful one.” That penalty structure, outlined in ISA § 6, will remain regardless of whether ISA itself remains in place.

Further claims by Menendez and others that ISA reauthorization would serve as a deterrent to Iranian nuclear cheating is a topic for another article. But on the subject of ISA renewal and the legal authorities necessary for snapback, there should be no illusions that letting ISA lapse would in any way impact this or a future administration’s authority to instantly respond to any Iranian violations of the JCPOA.