Iran Divestment Act: Overview, definition, and example
What is the Iran Divestment Act?
The Iran Divestment Act refers to state-level laws in the United States that restrict public entities—such as state pension funds, agencies, or universities—from investing in companies that do business with the Iranian government. These laws are designed to support federal sanctions by economically isolating Iran, particularly in industries linked to energy, defense, or nuclear development. States like New York, California, and Illinois have enacted their own versions of the Act.
Why is the Iran Divestment Act important?
The Act is important because it helps align state investment policies with national security interests and federal foreign policy. It also imposes restrictions on companies that seek to do business with state agencies or access public contracts. Many state versions require vendors and bidders to certify that they are not engaged in restricted business activities with Iran, making compliance a routine part of public procurement processes.
Understanding the Iran Divestment Act through an example
A construction company submits a bid for a state-funded highway project. As part of its bid submission, the company must sign a certification stating it is not on the state’s list of entities engaged in investment or commercial activity with the Iranian government. If the company is found to be non-compliant, it may be disqualified from the contract or face penalties under the Iran Divestment Act.
Example of how an Iran Divestment Act clause may appear in a contract
Here’s how an Iran Divestment Act clause may appear in a state procurement or services contract:
"Contractor certifies that it is not identified on any list created pursuant to the Iran Divestment Act of [State], and that it will not engage in any investment or business activities in violation of such Act for the duration of this Agreement."
Conclusion
The Iran Divestment Act imposes investment and contracting restrictions designed to deter business relationships with the Iranian government. Companies doing business with state entities must be aware of these laws and often must certify compliance to be eligible for public contracts. Including a clause addressing the Act helps public agencies meet legal requirements and ensures that vendors understand their obligations.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.