Iran sanctions: international law firm CMS makes early move
In early February, just two weeks after international sanctions on Iran were lifted – after decades of being in place – CMS became the first international law firm to open its doors in the country.
Sanctions relief came as a result of the Joint Comprehensive Plan of Action (JCPOA), originally signed between Iran and the P5+1 group of world powers – the US, UK, France, China and Russia plus Germany – in July 2015. Widely recognised as a step forward for non-proliferation, months of tense negotiations ensued before the International Atomic Energy Agency declared, on 16 January, that Iran had fulfilled all its obligations.
Under the terms of the agreement, Iran will significantly roll back its nuclear activities in return for the UN, US and EU lifting sanctions that have crippled its economy for more than a decade. Iran is also set to recover an estimated $100bn in frozen assets from overseas bank accounts.
The lifting of sanctions was greeted with much global fanfare, though Cornelius Brandi, Executive Chairman of CMS, told Global Insight that the firm’s new office in Tehran has been several years in the making. ‘CMS set up a task force to establish connections in Iran a few years ago, following the election of President Rohani and the start of negotiations with the West,’ he says.
‘‘We think a small number of international firms will look to open in Iran
Stuart Grider, Freshfields; member of the IBA’s newly established task force on sanctions
‘Since then, we regularly held discussions with Iranian business partners and organisations, including several visits to Tehran. This meant that, in the event of sanctions being lifted, we would be well prepared to begin work.’
The new office will be led by CMS partners Jürgen Frodermann and Shaghayegh Smousavi and the team will include Iranian lawyers that can advise on local law issues.
Chris Watson, global head of technology, media and communications at CMS and a council member of the IBA’s Legal Practice Division, says the Tehran office will complement the firm’s existing offering.
‘I think it’s commercially a great moment for CMS and for Iran as the country is suited to our principal sectors – technology and energy,’ he says. ‘Life sciences and the creative industries are two other strong areas.’
|Chris Watson, CMS; Council member, IBA Legal Practice Division|
Watson, who was brought up in Iran and has considerable regional experience in Jordan, Lebanon, Saudi Arabia, Abu Dhabi and Dubai, adds that the country’s selling points cannot be underestimated: ‘There are 90 million people in Iran. The country has amazing natural resources and a highly-educated, highly intelligent and technologically sophisticated workforce.’
Brandi acknowledges it will take time for Iran’s economy to open up fully to international trade after years of isolation, but is confident the country will do its part to encourage investment.
‘Iran has ambitious plans for its future growth,’ he says. ’The country is looking to boost exports, reduce unemployment and modernise the already well-developed industrial infrastructure. Awareness campaigns are being launched and policies implemented to create a friendly environment for new business and to increase privatisation.’
CMS is the first global law firm to get off the starting blocks in Tehran, but most lawyers agree that others won’t be far behind.
|Sunil Abraham, Cecil Abraham and Partners; Co-Chair, IBA Asia Pacific Forum|
‘Given the economic impact of the lifting of sanctions against Iran, it is likely that some other international law firm will take steps to open an office in Tehran,’ says Sunil Abraham, Co-Chair of the IBA’s Asia-Pacific Forum and a partner at Cecil Abraham and Partners, based in Kuala Lumpur. ‘As to the timing of such a move, it remains to be seen.’
Stuart Grider, a partner at Freshfields and a member of the IBA’s new task force on sanctions, says there will be interest but also challenges ahead as Iran reintegrates into the global economy.
‘We think a small number of international firms will look to open in Iran,’ he says. ‘We would expect most of the larger players, like most major international financial institutions, to take a conservative approach to expanding in Iran. Companies wanting to invest in, or do businesses with, Iran need sound advice to take advantage of the new opportunities now available and manage the risks of sanctions and dealing in a frontier market.’
Both Grider and Abraham believe the lifting of sanctions will help stimulate cross-border work, which in turn will create more for both local and international law firms.
‘There will definitely be more opportunity for Iranian law firms involving themselves in cross-border work,’ says Grider. ‘This cross-border work essentially did not exist before. There aren’t a lot of Iranian law firms with extensive international deal-making experience, so this is an enormous opportunity for them, and an enormous challenge.’
Abraham says the move is also likely to boost cross-border trade between Iran and the Asia-Pacific Region.
‘As a consequence of this, there should be significant cross-border trade between Iran and the US as well as Europe and the Asia-Pacific Region,’ he says. ‘One would think that international law firms will be involved in some aspects of providing legal advice on such transactions in the coming future,’ he says.
‘The possibility of significant Iranian investment through its state-owned enterprises and its conglomerates within the Asia-Pacific Region and in particular in members states of the Organisation of Islamic Co-operation is also perhaps something to watch.’
Ruth Green is the IBA's Multimedia Journalist and can be contacted at firstname.lastname@example.org