California Divests Iranian Investors


During summer 2010, many of the developed nations initiated sanctions against Iran, a signal that their political discourse was supported by economic realities. In the United States, that movement culminated in the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 ("CISADA"), which was signed into law July 1, 2010. While a great deal of attention was given to the sanctions related to petroleum investment and financial intuitions, one element of the law was left in the relative background, until now.

Section 202 of CISADA granted state and local governments the authority to divest the assets of the state or local government from persons who were engaged in investment activity in Iran. In passing the Iran Contracting Act of 2010 ("ICA"), California has chosen to exercise the authorization granted by the CISADA.


The goal of the ICA, as was the goal of CISADA, is to force individuals and entities who wish to do business with the government of California, and local California bodies, to cease investment in Iran. The ICA achieves its goal by requiring the Department of General Services ("DGS") to establish a list of persons and entities that engage in investment activities in Iran. The prohibited investments fall into two categories:

• An investment of goods or services of $20 million or more in the energy sector of Iran

• A financial institution's extension of credit for 45 days of at least $20 million if that extension of credit is to be used in the energy sector in Iran

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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