Pulling the Iran Deal: Treading On Treaties and Trade
Vol. 39 Guest Editor
On May 8, 2018, President Donald J. Trump declared that the United States would withdraw from the Joint Comprehensive Plan of Action (“JCPOA”), the international agreement restricting Iran’s nuclear program. The Iran deal set limits on Iran’s nuclear programs in exchange for releasing economic sanctions against Iran. While President Trump made no efforts to hide his disdain for the deal, calling it “the worst deal ever negotiated,” it was only on May 8 that he finally announced the U.S. withdrawal. The withdrawal will re-impose economic sanctions on Iran, but the withdrawal itself is very likely illegal under both treaty and trade law, providing a broader warning against such actions. JCPOA JCPOA, commonly known as the Iran nuclear deal, was negotiated by the Obama Administration and came into effect in early 2016. In exchange for Iran implementing its nuclear commitments under JCPOA, the United Nations, the United States, and the European Union removed certain previously imposed economic sanctions. The United States agreed to lift economic sanctions, including ceasing efforts to reduce Iranian crude oil sales, allowing Iranian banks to reconnect to other global banking systems, and permitting third parties to trade with Iran in the automotive, shipping, insurance, and gold and precious metals markets. The European Union agreed to similar economic allowances with Iran. The UN Security Council then unanimously adopted JCPOA in Resolution 2231. U.S. Withdrawal and Effects on Trade Following the announcement of the withdrawal from JCPOA, President Trump released a National Security Presidential Memorandum (“NSPM”) directing the Department of State and the Department of the Treasury to re-impose sanctions on Iran, with a subset of sanctions coming into effect on August 6, 2018 and the remainder coming into effect on November 4, 2018. These 90 and 180-day transition periods are supposed to allow persons who entered the transactions to adjust to the re-imposed economic sanctions. However, the U.S. sanctions don’t just affect U.S. citizens and their companies. After August 6, 2018, non-U.S. citizens will also face secondary sanctions from the U.S. government if they engage in certain proscribed conduct, including the acquisition of U.S. banknotes by the Iranian government, deals involving the Iranian automotive industry, and the transfer of certain metals and software to or from Iran. Therefore the sanctions will have a negative impact on Iranian trade even if other countries do not withdraw from JCPOA like the U.S. Withdrawal Illegal Under Treaty Law Although popular rhetoric by world leaders may make it seem as though breaking a treaty is a simple process, the Vienna Convention on the Law of Treaties says otherwise. Breaking treaties without complying with the terms of withdrawal undermines trust in the withdrawing country, harms the remaining states parties, and signals the weakness of international law. President Trump unilaterally withdrew from JCPOA, which is an affront to customary international law. This unilateral withdraw is in violation of the seminal guide on treaties, the Vienna Convention on the Law of Treaties. Although the United States is not a signatory of the Vienna Convention, it still has accepted many parts of it as binding common law and the Vienna Convention functions as customary international law. The Vienna Convention stipulates that a party should only withdraw from a treaty in compliance with the treaty’s exit provisions. JCPOA provided for an exit: under UN Security Council Resolution 2231, a member of the Security Council could lodge a noncompliance complaint under the snapback provision and reject a new resolution, automatically restoring previous Security Council sanctions. However, the Trump Administration had already admitted that Iran was in compliance with the terms of JCPOA. So at the very least, President Trump could not have withdrawn in compliance with JCPOA in good faith. Good faith is required in treaty performance under the Vienna Convention and was specifically stated in JCPOA as well. So there was no legal way for President Trump to withdraw from JCPOA, at least without a later determination that Iran was not in compliance with the terms of JCPOA. Although the U.S. has attempted to justify its withdrawal under domestic and international law, the action undoubtedly breaches the spirit if not the text of international law. The withdrawal was also a violation of UN Security Council Resolution 2231 itself, which bound all parties to respect the deal. Beyond the likely illegality of the withdrawal, at the very least it signals that the U.S. is not trustworthy and is a serious rebuff to recent Iranian efforts at a rapprochement with the U.S. Withdrawal Questionable Under Trade Law The re-imposition of U.S. sanctions on Iran may also violate international trade law. The other signatories could file a dispute with the World Trade Organization (“WTO”) alleging that the U.S. violated its international free trade commitments under the General Agreement on Tariffs and Trade (“GATT”). This would not be the first time that the Trump Administration has violated or at the very least toed the line on GATT. For example, in the past few months President Trump practically started a trade war with China. However, a serious weakness for this argument is that Article XXI of GATT carves out an exception for reasons of national security. The security exception has far-reaching powers, and therefore if the Trump Administration invoked it, it would likely stand. However, the drafters of GATT realized the dangers of such a broad security exception and it has largely persevered through good faith behavior by nations. If the Trump Administration invoked it, almost certainly in bad faith given that Iran was in compliance with JCPOA, it would be moving into unchartered territory and would potentially allow the WTO to act. Particularly with the rise of anti-global governments in countries such as Italy and Poland, and popular anti-globalization sentiments across the globe, the number of governments wanting to break trade agreements has undoubtedly increased. However, pulling out of such deals violates GATT and governments must tread much more carefully in regard to trade than their popular rhetoric would lead us to believe. Practical Consequences Despite the highly questionable legality of the Trump Administration’s withdrawal from JCPOA, it is unlikely that there will be any enforceable legal consequences. Fellow signatories would be unlikely to use force and President Trump has already shown little respect for the WTO. However, the withdrawal of one country does not necessarily sink an entire deal. JCPOA still exists and European countries made it clear that they would uphold JCPOA despite the U.S. withdrawal. When the U.S. withdrew from the Trans-Pacific Partnership last year, the other signatory governments also continued without the U.S. There is also a broader consequence: pulling the Iran nuclear deal sends a strong signal that other countries cannot trust the U.S. to comply with its treaty obligations or act in good faith. This might be the most powerful deterrence on global efforts to pull back from treaties and trade. Even if governments think that violating the Vienna Convention or GATT will provide no real consequences, other governments around the world will take notice and remember their fickle dealing in the future.
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