Iran sanctions - an Asia update

News / / Hong Kong, Singapore

In this update, we focus on the lifting of sanctions by Hong Kong and Singapore and the impact on businesses in both these major Asian countries.

Hong Kong sanctions law

Hong Kong enforces the UN sanctions against Iran pursuant to the United Nations Sanctions (Iran) Regulation (Cap. 537AF) (the ‘Regulation’). On 12 January 2016, the Chief Executive issued L.N. 8 of 2016, which implements the easing of UN sanctions under the Joint Comprehensive Plan of Action (the “JCPOA”).

It is important to note that Hong Kong sanctions apply to all persons within Hong Kong territory, and have extra-territorial effect on all Hong Kong-incorporated companies and individuals who hold both Hong Kong permanent residency and Chinese citizenship, as well as aircraft and ships registered in Hong Kong. Directors of Hong Kong-incorporated companies or foreign companies doing business in Hong Kong are also at risk of personal liability for any corporate breaches of Hong Kong sanctions, irrespective of the nationality or domicile of the director.

Companies and individuals connected with Hong Kong now considering business opportunities with an Iran nexus will still need to consider whether the transaction falls within any of the new exceptions inserted into the Regulation, or in the appropriate case, whether it is necessary to apply for the relevant license from the Hong Kong Government.

Singapore sanctions law

Similarly, Singapore enforces the UN sanctions regime against Iran under the United Nations (Sanctions – Iran) Regulations 2014 and the Monetary Authority of Singapore Act. These apply to all persons in Singapore and have extra-territorial effect on Singapore citizens, Singapore-incorporated companies, foreign companies registered in Singapore, as well as aircraft and ships registered in Hong Kong.

It is anticipated that Singapore will shortly amend its sanctions law to reflect the termination of the UN nuclear-related economic and financial sanctions against Iran. However, many restrictions on transactions connected with Iran will likely continue to apply. Companies and individuals connected with Singapore should continue to bear in mind the need to comply with their statutory duty of vigilance in respect of all dealings with Iran-related entities.

The PRC position

As a member of the UN Security Council, China officially implemented the UN sanctions into PRC Law under Announcement No. 32 [2008] of the Ministry of Commerce. Chinese export operators are prohibited from dealing with sanctioned Iranian individuals as designated by the UN. An exemption permit is available upon application to the Ministry of Commerce in limited circumstances. The delisting of various entities and individuals as sanctioned persons or entities under the JCPOA should broaden the opportunities for Chinese entities to trade with Iran.

However, it is important to note that China has only ever adhered to the letter of the UN sanctions in respect of trade connected to nuclear proliferation and missile systems. It has declined to participate in the international embargo on the Iranian oil and petrochemical industry. Evidence of enforcement remains opaque, as the enforcement policies set by the Ministry of Commerce are not publicly available.

Therefore, the recent changes to the international sanctions regime is unlikely to have a significant impact on the PRC regime. On the contrary, China has been one of Iran’s biggest trading partners. However, the lifting of sanctions by the EU and the easing of sanctions by the US will present China with competition in Iran and the Middle East. China is trying to combat this by promoting its One Belt One Road policy aggressively in this region, through the use of initiatives including the US$40 billion Silk Road Fund. This could present business opportunities in the region.

Details of the UN Sanctions

In broad terms, the amendments to the UN Sanctions as implemented in Hong Kong mean that there are now a number of new exceptions concerning nuclear and arms-related material; transportation of nuclear and arms-related material; commercial and financial activity related to uranium mining; and the transit of sanctioned individuals through Hong Kong.

In addition, the licensing requirements have been relaxed in relation to the carriage of nuclear or military material; provision of services and training relating to Iran’s nuclear programme; financing or economic resources to sanctioned entities; ballistic missile technology; and certain services to ships with an Iran nexus.

It is important to understand that the new exceptions are conditional. Prohibitions in respect of the above list continue to apply unless the activity is in accordance with the terms of the JCPOA and, in the appropriate case, certain IAEA guidelines are satisfied. There is also scope for the UN Security Council to approve activities in advance on an ad hoc basis if it considers the activity to be consistent with the implementation or objectives of the JCPOA and Resolution 2231.

These above conditions also apply to any applications to the Chief Executive of Hong Kong for licenses to supply prohibited items or training, services or assistance in respect of prohibited items. The list of prohibited items includes conventional arms and those items on IAEA and UN lists which are considered to be linked to Iran’s proliferation sensitive nuclear activities.

What does this mean for you?

Now that these sanctions have been lifted Hong Kong entities may begin trading and working with Iranian entities. Some Hong Kong restrictive measures remain in place (but these relate largely to military goods; weapons; and, items that might be used for internal repression), and some entities and individuals remain listed. However, as with the lifting of the EU sanctions against Iran, this “opening up” of restrictions in Hong Kong presents a wealth of opportunities for, amongst others, those Hong Kong entities that are keen to take advantage of opportunities in Iran’s oil, gas, shipping, trade and aviation sectors. For companies involved in the LNG trade, the opening up of Iran presents significant opportunities as some reports have predicted that Iran’s trade in LNG has the potential to become one of the world’s biggest.

The long arm of the US cannot be ignored

Although the lifting of sanctions represents a significant step forward, the situation with Iran remains tense and is liable to change. For example, the US announced on 17 January 2016 that it was adding eleven (11) individuals and companies to the Specially Designated Nationals List (the ‘SDN List’) in response to the ballistic missile test conducted by Iran on 10 October 2015 in breach of UN sanctions. The SDN List names individuals and companies which US citizens and businesses are prohibited from transacting with. Among the new additions to the SDN List is one Chinese national and one Hong Kong company, which highlights the ongoing need for businesses in Asia to evaluate whether their conduct risks breaching US sanctions.

In this regard, it is important to bear in mind that the US maintains very broad definitions of ‘US persons’. Where a Hong Kong or Singapore based company is incorporated in the US, it will be treated as a ‘US’ person for the purposes of the Iran sanctions regime. This is the same if a Hong Kong or Singapore organisation is a subsidiary of a US company or owned by US persons. Accordingly, the long arm of US law has the potential to reach Hong Kong and Singapore organisations, despite the changes in local law.


It is important that anyone considering conducting business with Iran  remains vigilant and continues to carry out appropriate due diligence on proposed counterparties, and seeks legal advice to ensure that they comply with any remaining restrictions and are suitably protected in their contracts.  Furthermore, it is also vital to check insurance and finance arrangements to ensure that there are no restrictions  that preclude conducting business in or with Iran or Iranian entities. Finally, as Iran  scores highly on the Corruption Perception Index, it is important  to ensure that suitable anti-bribery and corruption policies are put in place to help to mitigate risks. 

Related services: