EU mulls Iranian company protection from US sanctions

A senior judge at the EU Court of Justice (ECJ) indicated today that the bloc's rules offer protection to Iranian companies if EU firms terminate contracts in order to follow US sanctions.

Iran's Bank Melli has argued that a contract termination by Deutsche Telekom, in order to comply with reimposed US sanctions against listed Iranian undertakings, breached the EU's 1996 blocking statute, which prohibits EU firms from complying with extraterritorial measures. ECJ advocate general Gerard Hogan today said that the blocking statute requires — in principle, at least — firms terminating an otherwise valid contract with Iranian entities subject to US sanctions to demonstrate this was not done so out of a desire to comply with extraterritorial measures imposed by the US.

Hogan said that the blocking statute is a "very blunt" instrument designed to sterilise the intrusive extraterritorial effects of US sanctions. But there will be "casualties", such as Deutsche Telekom, given its large US operations. The advocate general's opinion is not binding on the ECJ, but it does indicate how the court might interpret EU law for a Hamburg court to follow in a case between Bank Melli and Deutsche Telekom.

Neither the activation of the blocking statute nor an EU-inspired special purpose vehicle allowed for maintained crude imports from Iran following reimposition of US sanctions, also on third-country firms. The update to the blocking statute also did not prevent Belgium-based Swift from complying with the extra-territorial effects of US sanctions against Iran.

By Dafydd ab Iago