The War of the Laws: Coping With Helms-Burton, the Iran-Libya Sanctions and Beyond

July 31, 1996

President Clinton's solomonic decision upholding liability for trafficking in property confiscated by the Cuban Government but suspending for six months the capacity to initiate suits ushers in a period of intense negotiations with our major trading partners over trade with Cuba and, potentially, other countries regarded by the U.S. as outlaw states. The going will be tough. In the run-up to the decision on Helms-Burton,1 many of our trading partners (and, not incidentally, our closest allies) were outspoken in their determination to resist U.S. efforts to control their trade and investment policies through the imposition of secondary boycotts ("you can't trade with us, if you trade with them") and the extraterritorial application of U.S. law.2 Recently enacted legislation imposing trade and other sanctions on foreign investment in the oil industries of Iran and Libya has deepened that determination. And, new sanctions legislation on trade with Burma is under active consideration in the Congress.3 Hence, U.S. and foreign persons potentially affected by these laws are well advised to become familiar with what they provide and prepare to deal with them.

This memorandum examines the U.S. legislation at issue, reviews the initial reactions of concerned countries and offers some suggestions for managing a very difficult situation for which there is little precedent.

1. The Helms-Burton Act

As discussed in our memorandum of March 25, Helms-Burton (officially, the "Cuban Liberty and Democratic Solidarity Act of 1996" or LIBERTAD Act) provides for the imposition of sanctions on persons trafficking in property confiscated by the Cuban government. In particular, the Act (i) establishes a new civil remedy for U.S. nationals holding claims exceeding $50,000 to confiscated property and (ii) mandates the denial of visas to foreign traffickers in such property (and members of their immediate families). The President's decision means that persons who engage in trafficking after November 1, 19964 are liable (at least in theory) to U.S. nationals whose property was confiscated, but actions under Helms-Burton are stayed until February 1, 1997 (six months after the effective date of Title III of the law). Since the President has the authority to continue to extend the stay for further periods of up to six months, claimants may never have their day in court. According to the President's statement of July 16, the Administration intends in the next six months to "work to build support from the international community on a series of steps to provide democracy in Cuba," including "increasing pressures on the [Castro] regime to open up politically and economically."5 If these efforts succeed, the President, presumably, would continue to put off the day of reckoning on trafficking suits or seek repeal of the law. But, don't count on it - after all, the Cuban embargo has been in effect for more than 35 years, and none of our allies has been willing to sign up with us. The prospects for reaching agreement on a common policy toward investment in Iran and Libya are scarcely more encouraging.

As defined in the LIBERTAD Act, "trafficking" is not limited to dealing in confiscated property; recovery may be sought for merely knowingly and intentionally engaging in any "commercial activity using or otherwise benefiting from confiscated property" or participating in or profiting from the "trafficking" of others.6 Damages equal to the greater of (i) the value of the claim as certified by the Foreign Claims Settlement Commission (the "FCSC"), plus interest, (ii) the amount determined by the court (assuming no existing FCSC certification) or the fair market value (at the time taken or currently, whichever is greater).7 Treble damages are provided for traffickers receiving written notice of their liability and demand for the cessation of trafficking.8 While the number of cases likely to be brought is not predictable, the potential for a flood of litigation is real. According to the FCSC, there are more than 20,000 claims held by U.S. individuals and businesses (5,911 of which have been certified).9 It should be noted in this connection that the LIBERTAD Act recognizes two classes of claimants: (i) those whose claims have been certified by the FCSC; and (ii) all others (primarily, Cuban-Americans immigrating after 1959). Members of the latter class may not sue for trafficking violations before March, 1998 (two years after enactment of Helms-Burton).10

The ban on visas for traffickers11 went into effect upon enactment of Helms-Burton and applies to officers, principals and directors of traffickers, their families (spouses and minor children) and agents. The State Department has begun enforcement, having sent letters recently to seven top executives of Sherritt International Corp., a Canadian mining company alleged to be trafficking in property confiscated from a U.S. owner.12 It is estimated that some 100 to 200 foreign companies may be in the same position as Sherritt.13

In addition to these new sanctions, Helms-Burton codifies the comprehensive body of controls on trade and financial transactions with Cuba and intensifies the long-standing U.S. policy of isolating Cuba. It should be noted in this regard that existing trade controls mandated by the Cuban Democracy Act of 1992 have extraterritorial effect in that they apply to foreign subsidiaries (as well as branches) of U.S. entities.14

2. The Oil Sanctions -- Iran and Libya

Over the past seventeen years, the United States has sought to contain Iran's aggressive behavior, including its military build-up, development of weapons of mass destruction and support for international terrorism. This policy has been implemented by a series of measures, including Executive Order No. 12959 (issued on May 6, 1995), which imposes virtually an absolute embargo on trade with Iran. The embargo applies to all "U.S. persons," a term defined to include U.S. citizens, permanent resident aliens, entities organized under the laws of the U.S. (and their foreign branches) and persons in the U.S.15 Significantly, the order does not extend to sales by foreign subsidiaries of U.S. entities.

After issuing the Executive Order, the Administration sought to convince our allies to take similar action. This campaign met with no success. To the contrary, on July 13, 1995, despite vigorous U.S. protests, a French oil company reached an agreement to develop Iranian oil fields off the coast of Sirri Island. Adding injury to insult, the French company succeeded to the position of a U.S. oil company, Conoco, Inc., disqualified by the Executive Order.16 Largely in response to this action, legislation providing for sanctions on foreign companies that assist the development of the Iranian oil industry or violate the UN ban on certain exports to Libya was introduced in the House and Senate.

One version passed the Senate last year. A different bill was approved by the House in June of 1996 and, after being amended to provide for mandatory sanctions on investment in Libya paralleling those prescribed for Iran, was adopted by the Senate. The House passed the bill as amended by the Senate, and the President is expected soon to sign it into law.

The Iran and Libya Sanctions Act of 1996 requires the President to impose two or more of the following sanctions, if he determines that a person (US or foreign), with actual knowledge, has made an investment of $40 million or more17 that "directly and significantly contributed to the enhancement" of either country's ability to develop its petroleum resources:

denial of Export-Import Bank support (guarantees, insurance or extension of credit) in connection with the export of goods or services to any sanctioned person;

a ban on any specific license, permission or authority to export goods or technology to a sanctioned person;

the prohibition of loans or credit (except for the purpose of relieving suffering) from U.S. financial institutions in an amount greater than $10 million to any sanctioned person;

denial of designation as a primary dealer in U.S. government debt instruments or service as a repository of government funds;

prohibition on U.S. Government procurement of goods or services from the sanctioned person; and

an embargo on imports from a sanctioned person.18

Many of these sanctions will not be relevant to foreign companies with investments in the oil industries of Iran or Libya. Most of the potentially sanctioned companies are not likely importers in Eximbank-financed transactions, so denial of trade finance will not have much impact. And, the ban on designation as a primary dealer in government securities will apply only to a relatively small number of financial institutions. On the other hand, prohibiting imports from sanctioned persons, banning loans and debarment from government procurement are powerful penalties with potentially broad application.

In addition to sanctioning investments in the petroleum industry, the Iran and Libya Sanctions Act enforces the UN resolutions on certain trade with Libya. The President is required to impose two or more of the six sanctions on any person providing goods, services or technology to Libya prohibited by either of two resolutions of the Security Council of the United Nations. Resolutions 748, adopted March 31, 1992 and 883, adopted November 11, 1993 ban trade in weapons, aviation equipment and oil equipment important to the refinery industry. The legislation would enforce compliance with the Security Council Resolutions where the effect is to contribute, significantly and materially, to Libya's ability to (i) acquire weapons of mass destruction; (ii) develop its petroleum resources, or (iii) maintain its aviation capabilities.

The Iran and Libya Sanctions Act calls upon the President to consult with governments with "primary jurisdiction" over foreign persons engaged in sanctioned activity and allows the President to delay, by 90 days, the imposition of sanctions pending such consultations.19 The President may waive sanctions but only upon a finding that doing so is important to the national interest.20 Sanctions have a duration of at least two years, unless the President determines that the offending activity has stopped and will not resume,21 in which case the sanctions may be terminated after only one year. Finally, the law includes a five year sunset provision.22

3. The Response

Helms-Burton and the Iran and Libya Sanctions Act have provoked a firestorm of opposition from a number of countries. At the heart of the objections to these U.S. laws is the issue of who decides. The countries opposing Helms-Burton, Iran-Libya and the like maintain that, as a matter of sovereignty and international law, it is their right to decide whether individuals and entities residing within their borders invest in or trade with any country except, of course, for decisions made by the UN in accordance with its Charter. They take vigorous exception, further, to U.S. efforts to "influence" those decisions by conditioning access to the U.S. market on compliance with U.S. trade policy - a secondary boycott (which the U.S. opposes in the context of the Arab Boycott of Israel).23 The U.S., on the other hand, asserts that it has the right to impose sanctions in order to maintain national security and otherwise protect interests important to this country (including the protection of property of U.S. nationals against confiscation by foreign governments).24 It is beyond the scope of this memorandum to examine the merits of these contentions, which ultimately may be resolved by the dispute resolution mechanisms of the World Trade Organization (the "WTO") and the North American Free Trade Agreement ("NAFTA"). The EU already has requested consultations in the WTO, and Canada and Mexico have taken similar action under the NAFTA.

As an initial response, Canada, Mexico, the UK and the EU are preparing to retaliate. Canada and the UK already have in place blocking legislation designed to frustrate the application of U.S. law to their trade and investment; efforts are underway to strengthen these laws to deal with the trafficking liability provisions of Helms-Burton. The European Parliament passed a resolution calling for the EU's executive commission to propose binding rules banning compliance with these U.S. laws. Active consideration is being given to such retaliatory measures as reciprocal restrictions on entry by U.S. nationals suing, under Helms-Burton, entities organized under the laws of an EU country, freezing the assets of successful U.S. litigants, suits to "claw back" damages recovered in a Helms-Burton trafficking case and further blocking laws banning compliance with U.S. laws having extraterritorial application.

The approach likely soon to be adopted by the European Commission for application by all EU member states is foreshadowed by legislation already in effect in the UK and Canada. The UK Protection of Trading Interests Act of 1980, empowers the Secretary of State to "give to any person in the United Kingdom who carries on business there such directions for prohibiting compliance" with laws of another country which regulate or control international trade in a manner damaging to the trading interests of the United Kingdom. The Act also restricts the enforceability of judgments for multiple damages. Amendments to "claw back" trafficking awards are likely. Canada's Foreign Extraterritorial Measures Act of 1985 entrusts the Attorney General with powers similar to those of the Secretary of State of the UK. The Attorney General is authorized to issue orders prohibiting compliance with extraterritorial measures deemed to infringe the sovereignty of Canada. Like the UK, Canada is considering amendments which would enable a Canadian company to recover damages awarded a U.S. claimant under Helms-Burton, as well as court costs incurred in both the U.S. and Canada.

4. Coping with Contradictory Commands

As is evident from the foregoing, the U.S. trade and investment controls reflected in Helms-Burton and Iran-Libya are on a collision course with the laws of some of our most important trading partners.25 And, these are not the only U.S. laws with extraterritorial application. Other such regimes include the anti-boycott regulations,26 the Foreign Corrupt Practices Act,27 the Export Administration Act,28 the Foreign Assets Control Regulations (which govern transactions with particular countries)29, as well as the anti-trust and securities laws. The extraterritorial effect given U.S. discovery rules has also been the subject of much controversy and retaliatory blocking laws.30 Business people caught up in the resulting chaos, therefore, will be hard-pressed to fashion a course of conduct which avoids exposure to (potentially substantial) liability31 in one or more countries - whatever action they take or refrain from taking.

For example, a Canadian company with investments in Cuba may find itself the object of an order of the Attorney General of that country banning compliance with Helms-Burton's directive to cease trafficking - a concept so broad as to encompass a range of otherwise innocuous commercial activity. Complying with that order could expose the company to U.S. sanctions. Or, a UK company directed to ignore the Iran and Libya Sanctions Act could be banned from trading with the U.S. Worse, a foreign subsidiary of a U.S. company could be ordered by its home government to do what U.S. law bars it from doing e.g., trading with Cuba. Substantial penalties could attach whatever it does.

There is clearly no fail-safe means of dealing with such a situation. Companies within the exposure zone, however, may want to consider four prophylactic or remedial measures:

1.Formulate and disseminate written policy guidance on the relevant U.S. laws. A U.S. company (organized or present in this country) must be in a position to demonstrate its policy of complying with U.S. law. Given the extraterritorial sweep of some of these laws, this may well implicate the activities of non-US subsidiaries. In such instances, the parent will want to show that it went the last mile to assure compliance. It should be recognized that this notice may trigger a reporting requirement under the laws of one or more countries. Advice should be sought in that regard.

2.Conduct an exposure audit. There is nothing to be gained by being caught unaware. Companies engaged in any activity which is the subject of one or more U.S. trade or investment restrictions should find out what they are doing, or planning, that could implicate one or more of these laws. For a large multinational, this will call for a targeted inquiry. The audit will produce information about trading, investment and related activity, which should be evaluated in terms of risk of offending U.S. regulations, the competing consideration of foreign law and value to the company. A thorough analysis of the relevant laws, U.S. and foreign, well be essential in this connection.

3.Develop a compliance program. If the audit identifies trading or investment activity which the company would like to retain, the company will want to examine whether the applicable regulations provide or allow for an exemption. For example, many regulations allow for the performance of contracts existing on the effective date. Licenses or waivers may be permitted. Medical or other goods needed for humanitarian reasons may be exempt. Where there is no exemption, license, waiver or other defense, consideration should be given to divestiture or cessation of trading. This may implicate the laws of the host country, as we have seen. In addition to complying with the U.S. regulations, therefore, the program will need to take account of local law. Since many of the U.S. laws in question apply to U.S. nationals, the parent will want to consider whether such individuals should continue on the boards or in a prominent executive capacity in relation to the subsidiary.

4.Manage conflict. A company which is the subject of conflicting commands will have little choice other than to manage the crisis. This will call for advice from U.S. and foreign counsel. From the U.S. standpoint, the best defense would appear to be "foreign state compulsion." This doctrine, which is recognized in the Restatement of Foreign Relations Law, has not been considered by the Supreme Court but has been upheld by the lower federal courts and enjoys wide support in the academic community.32 As articulated in the Restatement, the doctrine gives preference in the event of a conflict between the laws of two or more states asserting jurisdiction over the same conduct to the law of the state in whose territory the act takes place.33 However, the case law makes clear that the defense must be asserted in good faith. This means, among other things, that (i) the foreign party must be in jeopardy of serious prejudice from the enforcement of foreign law (as distinguished from administrative or political guidance), (ii) the prospect of such prejudice must be genuine and not the result of self-serving action by the party seeking to assert the defense and (iii) efforts should be made to claim whatever exemption or waiver the foreign law allows.

5. Summary

Helms-Burton, the Iran and Libya Sanctions Act and the substantial body of other U.S. laws with extraterritorial effect make it probable that U.S. and foreign law will come into conflict. The only complete solution - an agreed set of principles or code of conduct among the major trading nations - will be long in coming, if so felicitous a result ever can be achieved. Less comprehensive solutions (such as President Clinton's six month suspension of Helms-Burton suits) may avoid, or at least postpone, some of the conflict.

In the meantime, however, multinational companies will stand at risk of being casualties in the looming war of the laws - a war which, by definition, must be fought on multiple fronts. To avoid becoming a casualty, the best course of action for now is to prepare for all contingencies by the means described above.

--H.R.3107--

H.R.3107

One Hundred Fourth Congress
of the
United States of America

AT THE SECOND SESSION

Begun and held at the City of Washington on Wednesday, the third day of January, one thousand nine hundred and ninety-six

An Act

To impose sanctions on persons making certain investments directly and significantly contributing to the enhancement of the ability of Iran or Libya to develop its petroleum resources, and on persons exporting certain items that enhance Libya's weapons or aviation capabilities or enhance Libya's ability to develop its petroleum resources, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Iran and Libya Sanctions Act of 1996'.

SEC. 2. FINDINGS.

The Congress makes the following findings:

(1) The efforts of the Government of Iran to acquire weapons of mass destruction and the means to deliver them and its support of acts of international terrorism endanger the national security and foreign policy interests of the United States and those countries with which the United States shares common strategic and foreign policy objectives.

(2) The objective of preventing the proliferation of weapons of mass destruction and acts of international terrorism through existing multilateral and bilateral initiatives requires additional efforts to deny Iran the financial means to sustain its nuclear, chemical, biological, and missile weapons programs.

(3) The Government of Iran uses its diplomatic facilities and quasi-governmental institutions outside of Iran to promote acts of international terrorism and assist its nuclear, chemical, biological, and missile weapons programs.

(4) The failure of the Government of Libya to comply with Resolutions 731, 748, and 883 of the Security Council of the United Nations, its support of international terrorism, and its efforts to acquire weapons of mass destruction constitute a threat to international peace and security that endangers the national security and foreign policy interests of the United States and those countries with which it shares common strategic and foreign policy objectives.

SEC. 3. DECLARATION OF POLICY.

(a) POLICY WITH RESPECT TO IRAN- The Congress declares that it is the policy of the United States to deny Iran the ability to support acts of international terrorism and to fund the development and acquisition of weapons of mass destruction and the means to deliver them by limiting the development of Iran's ability to explore for, extract, refine, or transport by pipeline petroleum resources of Iran.

(b) POLICY WITH RESPECT TO LIBYA- The Congress further declares that it is the policy of the United States to seek full compliance by Libya with its obligations under Resolutions 731, 748, and 883 of the Security Council of the United Nations, including ending all support for acts of international terrorism and efforts to develop or acquire weapons of mass destruction.

SEC. 4. MULTILATERAL REGIME.

(a) MULTILATERAL NEGOTIATIONS- In order to further the objectives of section 3, the Congress urges the President to commence immediately diplomatic efforts, both in appropriate international fora such as the United Nations, and bilaterally with allies of the United States, to establish a multilateral sanctions regime against Iran, including provisions limiting the development of petroleum resources, that will inhibit Iran's efforts to carry out activities described in section 2.

(b) REPORTS TO CONGRESS- The President shall report to the appropriate congressional committees, not later than 1 year after the date of the enactment of this Act, and periodically thereafter, on the extent that diplomatic efforts described in subsection (a) have been successful.

Each report shall include--

(1) the countries that have agreed to undertake measures to further the objectives of section 3 with respect to Iran, and a description of those measures; and

(2) the countries that have not agreed to measures described in paragraph (1), and, with respect to those countries, other measures (in addition to that provided in subsection (d)) the President recommends that the United States take to further the objectives of section 3 with respect to Iran.

(c) WAIVER- The President may waive the application of section 5(a) with respect to nationals of a country if--

(1) that country has agreed to undertake substantial measures, including economic sanctions, that will inhibit Iran's efforts to carry out activities described in section 2 and information required by subsection (b)(1) has been included in a report submitted under subsection (b); and

(2) the President, at least 30 days before the waiver takes effect, notifies the appropriate congressional committees of his intention to exercise the waiver.

(d) ENHANCED SANCTION-

(1) SANCTION- With respect to nationals of countries except those with respect to which the President has exercised the waiver authority of subsection (c), at any time after the first report is required to be submitted under subsection (b), section 5(a) shall be applied by substituting `$20,000,000' for `$40,000,000' each place it appears, and by substituting `$5,000,000' for `$10,000,000'.

(2) REPORT TO CONGRESS- The President shall report to the appropriate congressional committees any country with respect to which paragraph (1) applies.

(e) INTERIM REPORT ON MULTILATERAL SANCTIONS; MONITORING- The President, not later than 90 days after the date of the enactment of this Act, shall report to the appropriate congressional committees on--

(1) whether the member states of the European Union, the Republic of Korea, Australia, Israel, or Japan have legislative or administrative standards providing for the imposition of trade sanctions on persons or their affiliates doing business or having investments in Iran or Libya;

(2) the extent and duration of each instance of the application of such sanctions; and

(3) the disposition of any decision with respect to such sanctions by the World Trade Organization or its predecessor organization.

SEC. 5. IMPOSITION OF SANCTIONS.

(a) SANCTIONS WITH RESPECT TO IRAN- Except as provided in subsection (f), the President shall impose 2 or more of the sanctions described in paragraphs (1) through (6) of section 6 if the President determines that a person has, with actual knowledge, on or after the date of the enactment of this Act, made an investment of $40,000,000 or more (or any combination of investments of at least $10,000,000 each, which in the aggregate equals or exceeds $40,000,000 in any 12-month period), that directly and significantly contributed to the enhancement of Iran's ability to develop petroleum resources of Iran.

(b) MANDATORY SANCTIONS WITH RESPECT TO LIBYA-

(1) VIOLATIONS OF PROHIBITED TRANSACTIONS- Except as provided in subsection (f), the President shall impose 2 or more of the sanctions described in paragraphs (1) through (6) of section 6 if the President determines that a person has, with actual knowledge, on or after the date of the enactment of this Act, exported, transferred, or otherwise provided to Libya any goods, services, technology, or other items the provision of which is prohibited under paragraph 4(b) or 5 of Resolution 748 of the Security Council of the United Nations, adopted March 31, 1992, or under paragraph 5 or 6 of Resolution 883 of the Security Council of the United Nations, adopted November 11, 1993, if the provision of such items significantly and materially--

(A) contributed to Libya's ability to acquire chemical, biological, or nuclear weapons or destabilizing numbers and types of advanced conventional weapons or enhanced Libya's military or paramilitary capabilities;

(B) contributed to Libya's ability to develop its petroleum resources; or

(C) contributed to Libya's ability to maintain its aviation capabilities.

(2) INVESTMENTS THAT CONTRIBUTE TO THE DEVELOPMENT OF

PETROLEUM RESOURCES- Except as provided in subsection (f), the President shall impose 2 or more of the sanctions described in paragraphs (1) through (6) of section 6 if the President determines that a person has, with actual knowledge, on or after the date of the enactment of this Act, made an investment of $40,000,000 or more (or any combination of investments of at least $10,000,000 each, which in the aggregate equals or exceeds $40,000,000 in any 12-month period), that directly and significantly contributed to the enhancement of Libya's ability to develop its petroleum resources.

(c) PERSONS AGAINST WHICH THE SANCTIONS ARE TO BE IMPOSED- The sanctions described in subsections (a) and (b) shall be imposed on--

(1) any person the President determines has carried out the activities described in subsection (a) or (b); and

(2) any person the President determines--

(A) is a successor entity to the person referred to in paragraph (1);

(B) is a parent or subsidiary of the person referred to in paragraph (1) if that parent or subsidiary, with actual knowledge, engaged in the activities referred to in paragraph (1); or

(C) is an affiliate of the person referred to in paragraph (1) if that affiliate, with actual knowledge, engaged in the activities referred to in paragraph (1) and if that affiliate is controlled in fact by the person referred to in paragraph (1). For purposes of this Act, any person or entity described in this subsection shall be referred to as a `sanctioned person'.

(d) PUBLICATION IN FEDERAL REGISTER- The President shall cause to be published in the Federal Register a current list of persons and entities on whom sanctions have been imposed under this Act. The removal of persons or entities from, and the addition of persons and entities to, the list, shall also be so published.

(e) PUBLICATION OF PROJECTS- The President shall cause to be published in the Federal Register a list of all significant projects which have been publicly tendered in the oil and gas sector in Iran.

(f) EXCEPTIONS- The President shall not be required to apply or maintain the sanctions under subsection (a) or (b)--

(1) in the case of procurement of defense articles or defense services--

(A) under existing contracts or subcontracts, including the exercise of options for production quantities to satisfy requirements essential to the national security of the United States;

(B) if the President determines in writing that the person to which the sanctions would otherwise be applied is a sole source supplier of the defense articles or services, that the defense articles or services are essential, and that alternative sources are not readily or reasonably available; or

(C) if the President determines in writing that such articles or services are essential to the national security under defense coproduction agreements;

(2) in the case of procurement, to eligible products, as defined in section 308(4) of the Trade Agreements Act of 1979 (19 U.S.C. 2518(4)), of any foreign country or instrumentality designated under section 301(b)(1) of that Act (19 U.S.C. 2511(b)(1));

(3) to products, technology, or services provided under contracts entered into before the date on which the President publishes in the Federal Register the name of the person on whom the sanctions are to be imposed;

(4) to--

(A) spare parts which are essential to United States products or production;

(B) component parts, but not finished products, essential to United States products or production; or

(C) routine servicing and maintenance of products, to the extent that alternative sources are not readily or reasonably available;

(6) to information and technology essential to United States products or production; or

(7) to medicines, medical supplies, or other humanitarian items.

SEC. 6. DESCRIPTION OF SANCTIONS.

The sanctions to be imposed on a sanctioned person under section 5 are as follows:

(1) EXPORT-IMPORT BANK ASSISTANCE FOR EXPORTS TO SANCTIONED PERSONS- The President may direct the Export-Import Bank of the United States not to give approval to the issuance of any guarantee, insurance, extension of credit, or participation in the extension of credit in connection with the export of any goods or services to any sanctioned person.

(2) EXPORT SANCTION- The President may order the United States Government not to issue any specific license and not to grant any other specific permission or authority to export any goods or technology to a sanctioned person under--

(i) the Export Administration Act of 1979;

(ii) the Arms Export Control Act;

(iii) the Atomic Energy Act of 1954; or

(iv) any other statute that requires the prior review and approval of the United States Government as a condition for the export or reexport of goods or services.

(3) LOANS FROM UNITED STATES FINANCIAL INSTITUTIONS- The United States Government may prohibit any United States financial institution from making loans or providing credits to any sanctioned person totaling more than $10,000,000 in any 12-month period unless such person is engaged in activities to relieve human suffering and the loans or credits are provided for such activities.

(4) PROHIBITIONS ON FINANCIAL INSTITUTIONS- The following prohibitions may be imposed against a sanctioned person that is a financial institution:

(A) PROHIBITION ON DESIGNATION AS PRIMARY DEALER- Neither the Board of Governors of the Federal Reserve System nor the Federal Reserve Bank of New York may designate, or permit the continuation of any prior designation of, such financial institution as a primary dealer in United States Government debt instruments.

(B) PROHIBITION ON SERVICE AS A REPOSITORY OF GOVERNMENT FUNDS- Such financial institution may not serve as agent of the United States Government or serve as repository for United States Government funds. The imposition of either sanction under subparagraph (A) or (B) shall be treated as 1 sanction for purposes of section 5, and the imposition of both such sanctions shall be treated as 2 sanctions for purposes of section 5.

(5) PROCUREMENT SANCTION- The United States Government may not procure, or enter into any contract for the procurement of, any goods or services from a sanctioned person.

(6) ADDITIONAL SANCTIONS- The President may impose sanctions, as appropriate, to restrict imports with respect to a sanctioned person, in accordance with the International Emergency Economic Powers Act (50 U.S.C. 1701 and following).

SEC. 7. ADVISORY OPINIONS.

The Secretary of State may, upon the request of any person, issue an advisory opinion to that person as to whether a proposed activity by that person would subject that person to sanctions under this Act. Any person who relies in good faith on such an advisory opinion which states that the proposed activity would not subject a person to such sanctions, and any person who thereafter engages in such activity, will not be made subject to such sanctions on account of such activity.

SEC. 8. TERMINATION OF SANCTIONS.

(a) IRAN- The requirement under section 5(a) to impose sanctions shall no longer have force or effect with respect to Iran if the President determines and certifies to the appropriate congressional committees that Iran--

(1) has ceased its efforts to design, develop, manufacture, or acquire--

(A) a nuclear explosive device or related materials and technology;

(B) chemical and biological weapons; and

(C) ballistic missiles and ballistic missile launch technology; and

(2) has been removed from the list of countries the governments of which have been determined, for purposes of section 6(j) of the Export Administration Act of 1979, to have repeatedly provided support for acts of international terrorism.

(b) LIBYA- The requirement under section 5(b) to impose sanctions shall no longer have force or effect with respect to Libya if the President determines and certifies to the appropriate congressional committees that Libya has fulfilled the requirements of United Nations Security Council Resolution 731, adopted January 21, 1992, United Nations Security Council Resolution 748, adopted March 31, 1992, and United Nations Security Council Resolution 883, adopted November 11, 1993.

SEC. 9. DURATION OF SANCTIONS; PRESIDENTIAL WAIVER.

(a) Delay of Sanctions-

(1) CONSULTATIONS- If the President makes a determination described in section 5(a) or 5(b) with respect to a foreign person, the Congress urges the President to initiate consultations immediately with the government with primary jurisdiction over that foreign person with respect to the imposition of sanctions under this Act.

(2) ACTIONS BY GOVERNMENT OF JURISDICTION- In order to pursue consultations under paragraph (1) with the government concerned, the President may delay imposition of sanctions under this Act for up to 90 days. Following such consultations, the President shall immediately impose sanctions unless the President determines and certifies to the Congress that the government has taken specific and effective actions, including, as appropriate, the imposition of appropriate penalties, to terminate the involvement of the foreign person in the activities that resulted in the determination by the President under section 5(a) or 5(b) concerning such person.

(3) ADDITIONAL DELAY IN IMPOSITION OF SANCTIONS- The President may delay the imposition of sanctions for up to an additional 90 days if the President determines and certifies to the Congress that the government with primary jurisdiction over the person concerned is in the process of taking the actions described in paragraph (2).

(4) REPORT TO CONGRESS- Not later than 90 days after making a determination under section 5(a) or 5(b), the President shall submit to the appropriate congressional committees a report on the status of consultations with the appropriate foreign government under this subsection, and the basis for any determination under paragraph (3).

(b) DURATION OF SANCTIONS- A sanction imposed under section 5 shall remain in effect--

(1) for a period of not less than 2 years from the date on which it is imposed; or

(2) until such time as the President determines and certifies to the Congress that the person whose activities were the basis for imposing the sanction is no longer engaging in such activities and that the President has received reliable assurances that such person will not knowingly engage in such activities in the future, except that such sanction shall remain in effect for a period of at least 1 year.

(c) Presidential Waiver-

(1) AUTHORITY- The President may waive the requirement in section 5 to impose a sanction or sanctions on a person described in section 5(c), and may waive the continued imposition of a sanction or sanctions under subsection (b) of this section, 30 days or more after the President determines and so reports to the appropriate congressional committees that it is important to the national interest of the United States to exercise such waiver authority.

(2) CONTENTS OF REPORT- Any report under paragraph (1) shall provide a specific and detailed rationale for the determination under paragraph (1), including--

(A) a description of the conduct that resulted in the determination under section 5(a) or (b), as the case may be;

(B) in the case of a foreign person, an explanation of the efforts to secure the cooperation of the government with primary jurisdiction over the sanctioned person to terminate or, as appropriate, penalize the activities that resulted in the determination under section 5(a) or (b), as the case may be;

(C) an estimate as to the significance--

(i) of the provision of the items described in section 5(a) to Iran's ability to develop its petroleum resources, or

(ii) of the provision of the items described in section 5(b)(1) to the abilities of Libya described in subparagraph (A), (B), or (C) of section 5(b)(1), or of the investment described in section 5(b)(2) on Libya's ability to develop its petroleum resources, as the case may be; and

(D) a statement as to the response of the United States in the event that the person concerned engages in other activities that would be subject to section 5(a) or (b).

(3) EFFECT OF REPORT ON WAIVER- If the President makes a report under paragraph (1) with respect to a waiver of sanctions on a person described in section 5(c), sanctions need not be imposed under section 5(a) or (b) on that person during the 30-day period referred to in paragraph (1).

SEC. 10. REPORTS REQUIRED.

(a) REPORT ON CERTAIN INTERNATIONAL INITIATIVES- Not later than 6 months after the date of the enactment of this Act, and every 6 months thereafter, the President shall transmit a report to the appropriate congressional committees describing--

(1) the efforts of the President to mount a multilateral campaign to persuade all countries to pressure Iran to cease its nuclear, chemical, biological, and missile weapons programs and its support of acts of international terrorism;

(2) the efforts of the President to persuade other governments to ask Iran to reduce the presence of Iranian diplomats and representatives of other government and military or quasi-governmental institutions of Iran and to withdraw any such diplomats or representatives who participated in the takeover of the United States embassy in Tehran on November 4, 1979, or the subsequent holding of United States hostages for 444 days;

(3) the extent to which the International Atomic Energy Agency has established regular inspections of all nuclear facilities in Iran, including those presently under construction; and

(4) Iran's use of Iranian diplomats and representatives of other government and military or quasi-governmental institutions of Iran to promote acts of international terrorism or to develop or sustain Iran's nuclear, chemical, biological, and missile weapons programs.

(b) OTHER REPORTS- The President shall ensure the continued transmittal to the Congress of reports describing--

(1) the nuclear and other military capabilities of Iran, as required by section 601(a) of the Nuclear Non-Proliferation Act of 1978 and section 1607 of the National Defense Authorization Act for Fiscal Year 1993; and

(2) the support provided by Iran for acts of international terrorism, as part of the Department of State's annual report on international terrorism.

SEC. 11. DETERMINATIONS NOT REVIEWABLE.

A determination to impose sanctions under this Act shall not be reviewable in any court.

SEC. 12. EXCLUSION OF CERTAIN ACTIVITIES.

Nothing in this Act shall apply to any activities subject to the reporting requirements of title V of the National Security Act of 1947.

SEC. 13. EFFECTIVE DATE; SUNSET.

(a) EFFECTIVE DATE- This Act shall take effect on the date of the enactment of this Act.

(b) SUNSET- This Act shall cease to be effective on the date that is 5 years after the date of the enactment of this Act.

SEC. 14. DEFINITIONS.

As used in this Act:

(1) ACT OF INTERNATIONAL TERRORISM- The term `act of international terrorism' means an act--

(A) which is violent or dangerous to human life and that is a violation of the criminal laws of the United States or of any State or that would be a criminal violation if committed within the jurisdiction of the United States or any State; and

(B) which appears to be intended--

(i) to intimidate or coerce a civilian population;

(ii) to influence the policy of a government by intimidation or coercion; or

(iii) to affect the conduct of a government by assassination or kidnapping.

(2) APPROPRIATE CONGRESSIONAL COMMITTEES- The term `appropriate congressional committees' means the Committee on Finance, the Committee on Banking, Housing, and Urban Affairs, and the Committee on Foreign Relations of the Senate and the Committee on Ways and Means, the Committee on Banking and Financial Services, and the Committee on International Relations of the House of Representatives.

(3) COMPONENT PART- The term `component part' has the meaning given that term in section 11A(e)(1) of the Export Administration Act of 1979 (50 U.S.C. App. 2410a(e)(1)).

(4) DEVELOP AND DEVELOPMENT- To `develop', or the `development' of, petroleum resources means the exploration for, or the extraction, refining, or transportation by pipeline of, petroleum resources.

(5) FINANCIAL INSTITUTION- The term `financial institution' includes--

(A) a depository institution (as defined in section 3(c)(1) of the Federal Deposit Insurance Act), including a branch or agency of a foreign bank (as defined in section 1(b)(7) of the International Banking Act of 1978);

(B) a credit union;

(C) a securities firm, including a broker or dealer;

(D) an insurance company, including an agency or underwriter; and

(E) any other company that provides financial services.

(6) FINISHED PRODUCT- The term `finished product' has the meaning given that term in section 11A(e)(2) of the Export Administration Act of 1979 (50 U.S.C. App. 2410a(e)(2)).

(7) FOREIGN PERSON- The term `foreign person' means--

(A) an individual who is not a United States person or an alien lawfully admitted for permanent residence into the United States; or

(B) a corporation, partnership, or other nongovernmental entity which is not a United States person.

(8) GOODS AND TECHNOLOGY- The terms `goods' and `technology' have the meanings given those terms in section 16 of the Export Administration Act of 1979 (50 U.S.C. App. 2415).

(9) INVESTMENT- The term `investment' means any of the following activities if such activity is undertaken pursuant to an agreement, or pursuant to the exercise of rights under such an agreement, that is entered into with the Government of Iran or a nongovenmental entity in Iran, or with the Government of Libya or a nongovernmental entity in Libya, on or after the date of the enactment of this Act:

(A) The entry into a contract that includes responsibility for the development of petroleum resources located in Iran or Libya (as the case may be), or the entry into a contract providing for the general supervision and guarantee of another person's performance of such a contract.

(B) The purchase of a share of ownership, including an equity interest, in that development.

(C) The entry into a contract providing for the participation in royalties, earnings, or profits in that development, without regard to the form of the participation. The term `investment' does not include the entry into, performance, or financing of a contract to sell or purchase goods, services, or technology.

(10) IRAN- The term `Iran' includes any agency or instrumentality of Iran.

(11) IRANIAN DIPLOMATS AND REPRESENTATIVES OF OTHER GOVERNMENT AND MILITARY OR QUASI-GOVERNMENTAL INSTITUTIONS OF IRAN- The term `Iranian diplomats and representatives of other government and military or quasi-governmental institutions of Iran' includes employees, representatives, or affiliates of Iran's--

(A) Foreign Ministry;

(B) Ministry of Intelligence and Security;

(C) Revolutionary Guard Corps;

(D) Crusade for Reconstruction;

(E) Qods (Jerusalem) Forces;

(F) Interior Ministry;

(G) Foundation for the Oppressed and Disabled;

(H) Prophet's Foundation;

(I) June 5th Foundation;

(J) Martyr's Foundation;

(K) Islamic Propagation Organization; and

(L) Ministry of Islamic Guidance.

(12) LIBYA- The term `Libya' includes any agency or instrumentality of Libya.

(13) NUCLEAR EXPLOSIVE DEVICE- The term `nuclear explosive device' means any device, whether assembled or disassembled, that is designed to produce an instantaneous release of an amount of nuclear energy from special nuclear material (as defined in section 11(aa) of the Atomic Energy Act of 1954) that is greater than the amount of energy that would be released from the detonation of one pound of trinitrotoluene (TNT).

(14) PERSON- The term `person' means--

(A) a natural person;

(B) a corporation, business association, partnership, society, trust, any other nongovernmental entity, organization, or group, and any governmental entity operating as a business enterprise; and

(C) any successor to any entity described in subparagraph (B).

(15) PETROLEUM RESOURCES- The term `petroleum resources' includes petroleum and natural gas resources.

(16) UNITED STATES OR STATE- The term `United States' or `State' means the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, the United States Virgin Islands, and any other territory or possession of the United States.

(17) UNITED STATES PERSON- The term `United States person' means--

(A) a natural person who is a citizen of the United States or who owes permanent allegiance to the United States; and

(B) a corporation or other legal entity which is organized under the laws of the United States, any State or territory thereof, or the District of Columbia, if natural persons described in subparagraph (A) own, directly or indirectly, more than 50 percent of the outstanding capital stock or other beneficial interest in such legal entity.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.