By: Sam Cutler
On October 13, 2017, President Trump designated the Iranian Revolutionary Guard Corps (IRGC) as a Specially Designated Global Terrorist (SDGT) organization pursuant to Executive Order 13224. E.O. 13224, signed in the aftermath of September 11th, authorizes the State and Treasury departments to designate individuals and entities involved in acts of international terrorism, thereby blocking all property interests subject to U.S. jurisdiction. In announcing the designation, President Trump called the move “a long overdue step of imposing tough sanctions” on the IRGC. The reality is much more pedestrian. From a legal standpoint, imposing E.O. 13224 sanctions is almost entirely meaningless.
As tensions over Iran’s disputed nuclear program grew over the past decade, Congress increasingly turned to so-called “secondary” sanctions to increase pressure on Tehran. Secondary sanctions—known pejoratively as extraterritorial sanctions—allow the designation of non-U.S. persons for engaging in specific significant material or financial transactions with Iran that occurs entirely outside of U.S. jurisdiction.
The secondary sanctions campaign against the IRGC began in earnest with the passage of the Comprehensive Iran Sanctions Accountability and Divestment Act of 2010 (CISADA). Under CISADA § 104(c)(2)(E)(i), the Secretary of the Treasury, through the Office of Foreign Assets Control (OFAC), is authorized to designate a foreign financial institution for facilitating a significant transaction with the IRGC and any of its agents or affiliates. It expanded with the passage of the Iran Freedom and Counterproliferation Act of 2012 (IFCA). § 1244(c)(2)(C)(iii) of IFAC mandates that the President block all property and prohibit transactions with non-U.S. persons who provide significant financial, material, technological, or other support to any designated Iranian person.
The reason that the IRGC terrorism designation will have so little impact from a legal perspective is that the IRGC is already one of the most sanctioned entities in the world. It was first designated in 2007 pursuant to E.O. 13382 for its involvement in the proliferation of weapons of mass destruction. Since then, it has been designated under E.O. 13553 (human rights abuses) and E.O. 13606 (human rights abuses via information technology). The impact on the IRGC of each of these designations is the same: the blocking of property. Moreover, both CISADA and IFCA-related secondary sanctions are triggered by the prior sanctions placed on the IRGC. Therefore, the impact on non-U.S. persons considering doing business with the IRGC is also the same, at least since the passage of IFCA: the threat of designation.
The new E.O. 13224 designation adds no new compliance responsibilities for non-U.S. persons and only a relatively minor new restriction on U.S. persons. E.O. 13224 was promulgated in accordance with authorities granted by Congress pursuant to the International Emergency Economic Powers Act (IEEPA) and the United Nations Participation Act of 1945 (UNPA). The vast majority of U.S. sanctions programs are implemented solely pursuant to IEEPA. Under the so-called Berman Amendment, transactions related to personal communication, humanitarian donations, information or informational materials, and travel are exempted from the prohibitions of IEEPA. However, § 5 of UNPA allows the president to prohibit communication and travel with target persons or nations in order to give effect to U.N. Security Council (UNSC) decisions issued pursuant to Article 41. OFAC interprets this additional foundational authority as granting the power to regulate transactions that would be exempt under a purely IEEPA-based program.
However, even these relatively limited new prohibitions on communications and travel are of questionable legal validity. When E.O. 13224 was issued on September 23, 2001, it listed a number of UNSC resolutions as predicate authority, all of which related to al-Qaeda, the Taliban, and the situation in Afghanistan more generally. These resolutions direct member states to freeze assets of the Taliban, al-Qaeda, and through later resolutions successor organizations. However, at no point do they call for prohibitions on all communications with designated entities. Given the congressional intent behind the Berman Amendment and the lack of textual basis in the UNSC resolutions that underpin E.O. 13224 for a prohibition on communications, it’s an open question as to whether OFAC’s interpretation would hold up in court. Indeed, in a recent Twitter exchange, former senior OFAC official Brian O’Toole noted that the agency is cautious regarding enforcement that touches upon the Berman Amendment.
The IRGC terrorism designation was mandated by Congress pursuant to § 105 of the Countering America’s Adversaries Through Sanctions Act (CAASTA). Designating the IRGC for its links to terrorism been considered at least as far back as 2007 as a way to signal a tougher line on Tehran. In 2017, signaling is the only effect that the designation will have. A non-U.S. company that was comfortable doing business with an IRGC-owned or controlled firm when the Guards were “only” proliferators of weapons of mass destruction is unlikely to change its mind now that the IRGC is also designated for terrorism. An E.O. 13224 designation is entirely redundant for sanctions compliance purposes. If the administration is hoping that this action is going to put significant pressure on the IRGC’s finances, it should think again.