Signed into law on December 31, 2012, the Iran Economic Sanctions Act , Public Act 517 of 2012, MCL 129.311, et seq., is only couple pages long and, at least on its face, is simple enough to interpret as a preventive measure in assuring that public entities are not engaged in businesses with persons or financial institutions that are tied to the Iranian energy sector. Beginning April 1, 2013, public entities accepting bids for requests for proposals (RFPs) are required to certify that bidders are not “Iran linked businesses”. The Act defines an “Iran linked business” as a person engaging in investment activities in the energy sector of Iran or a financial institution that extends credit to another person, if that person will use the credit to engage in investment activities in the energy sector of Iran. The “investment activity” is then defined as investments or credits (of 45 days or more) of 20 million US Dollars or more.
If a certification by a bidder is later found to be false, the bidder not only may lose all existing contracts with the public entity, but must be reported to the Attorney General who may bring a civil action demanding not more than $250,000.00 or 2 times the amount of the contract, the cost of reasonable attorney fees and the public entity’s investigation.
As simple as the Act appears, it actually results in a huge burden on financial institutions to investigate where the funds they will loan will be invested. Short of continuous monitoring of its loans, extending a certification based on the current knowledge of the financial institution may not protect it from the acts of its debtors.
Starting April 1, the State of Michigan or an agency or authority of the state, school district, community college district, intermediate school district, city, village, township, county, public authorities, or public airport authorities are required to seek these certifications from bidders on RFPs. Whereas public authority is not defined within the Act, it is likely that the Act would be held to be applicable to both Drainage Districts and Transportation Authorities. Hubbard attorneys
can be reached at (517) 886-7176 for comments and questions.