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February 8, 2019

The Ministers of Foreign Affairs of France, Germany and United Kingdom have announced the incorporation of the Special Purpose Vehicle "SPV", the entity intended for channeling the payment flows between EU/Iran – through a barter-like mechanism – with the purpose of saving the related import/export operations from the application of U.S. secondary sanctions.

The entity INSTEX SAS ("Instrument for Supporting Trade Exchanges") is based in Paris and the Presidency will be German. Further operational details, apart from the fact the SPV will focus initially on the pharmaceutical, medical devices and agri-food goods sectors, are not available.

The expectations of operators active in other sectors could be unfulfilled should the SPV focus be not extended. Indeed, none of the aforementioned economic sectors is actually targeted by U.S. secondary sanctions; therefore, the related transactions can be effectively carried out through traditional channels (provided that the Iranian banks involved in transactions are not SDN subject to secondary sanctions).

However, it shall be emphasised that - should the SPV focus be extended – the European Union would have to implement proper means to counter the extraterritorial effects of U.S. legislation; it must be underlined indeed that – as outlined by us on several occasions – Regulation No. 2271/96 (the so called "Blocking Regulation") does not currently provide any substantial protection. In the absence of any real action taken by the European Union, European companies would most certainly be an easy target for U.S. authorities.

Further operational details as well as the procedures for acceding to the SPV will be gradually defined in the coming weeks, through meetings involving also Italy. 

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