UAE companies fear US sanctions bite: Baker McKenzie Insights

Dubai, UAE – With the re-imposition of the second set of United States (US) sanctions against Iran looming in November 2018, companies in the United Arab Emirates (UAE) are very concerned about unwittingly breaching the US sanctions regime and incurring penalties for doing business with Iran. This is according to a survey of participants conducted at seminars in Abu Dhabi and Dubai hosted by global law firm Baker McKenzie in October 2018.

The UAE seminars were part of Baker McKenzie's global Sanctions Roadshow, which is being conducted in cities around the world, focusing on the implications of US and European Union (EU) sanctions on the Middle East.

The interactive discussions were led by senior Baker McKenzie lawyers from the US and UAE and centred around how companies operating in the UAE and Middle East can navigate the complexities of these sanctions regimes and mitigate their compliance risks in the context of their overall business model in relation to Iran and the US. Nearly 200 executives from leading corporates, financial institutions and government entities joined in discussions about:

• the implications for Middle East trade and finance of the US withdrawal from the Iran nuclear deal (the 2016 Joint Comprehensive Plan of Action (JCPOA)), and the future of the JCPOA;
• the impact of both primary sanctions (applying to all transactions and activities with a US nexus/connection), as well as secondary sanctions with extraterritorial reach that target activities sanctioned by the US Government;
• restrictions on banking, flow of funds and payments to and from Iran;
• contractual and third party relationship issues;
• EU blocking measures against US sanctions compliance; and
• updates on the political and economic boycott of Qatar.

"With the constantly-evolving international sanctions regimes, companies in the Middle East are balancing the risks and rewards of doing business with Iran, sometimes facing an irreconcilable dilemma around which sanctions regime to comply with," said Borys Dackiw, UAE Head of Compliance at Baker McKenzie Habib Al Mulla. "Although there is no outright prohibition in the UAE of trading with Iran, it is evident that UAE companies are taking a more conservative approach. Accordingly, companies will need to frame a risk assessment of their entire business model and consider the potential compliance and sanctions-related risks."

Kerry Contini, a Baker McKenzie International Trade Partner based in Washington, D.C., commented, "The impact of US primary sanctions can be felt all the way here in the UAE and the Middle East, with a lot of US companies having foreign subsidiaries and branches in this region. UAE and GCC companies are particularly concerned about their exposure under secondary sanctions and the resulting contractual and third party relationship issues, especially if they may be barred from doing business with the US down the line. Examining contracts with US suppliers, customers and intermediaries closely will be key and can help protect companies from sanctions-related risks."

"The re-imposition of US sanctions and the increased vigilance of UAE authorities have significantly impacted the flow of funds to and from Iran, making it very challenging to do business with Iran," added Matt Shanahan, a Financial Services Regulatory Partner at Baker McKenzie Habib Al Mulla based in Dubai. "Banks are generally reluctant to get involved in potentially sanctioned transactions as well as legitimate Iran-related transactions that are not subject to sanctions."

The seminar panellists comprised International Commercial & Trade partners Borys Dackiw (UAE) and Kerry Contini (US), associate Inessa Owens (US), as well as Financial Services Regulatory partner Matthew Shanahan (UAE).

Further information and an up-to-date sanctions blog are available at: 
http://sanctionsnews.bakermckenzie.com/  
www.internationaltradecomplianceupdate.com  

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Baker McKenzie's International Commercial & Trade lawyers help clients keep up with rapidly changing, often conflicting import, export and trade regulations that impact cross-border trade transactions and activities. Our areas of expertise include export controls, export clearance provisions, anti-boycott controls, outbound trade compliance, VAT/indirect taxes, product safety, strategic sourcing, supply chain security and trade remedies.

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© Press Release 2018