On May 18, the Commission announced the launch of the formal process to activate the EU “blocking statute” (Council Regulation (EC) 2271/96) by updating the list of US sanctions on Iran falling within its scope.

The Commission starts the formal process after receiving unanimous informal support from the leaders of the EU Member States to a package of measures that the Commission has proposed to protect the interests of EU companies investing in Iran and to demonstrate the EU’s commitment to the Joint Comprehensive Plan of Action (JCPOA). As part of that package, the Commission:

  • Launched the formal process to remove obstacles for the European Investment Bank (EIB) to finance activities in Iran, under the EU budget guarantee.
  • Will continue and strengthen the ongoing sectoral cooperation with and assistance to Iran, including facilitating financial assistance through the Development Cooperation or Partnership Instruments.
  • Is encouraging Member States to explore the possibility of one-off bank transfers to the Central Bank of Iran which would allow the Iranian authorities to receive their oil-related revenues.

In order to activate the EU blocking statute, the Commission will be amending the list of non-EU laws listed in the Annex to the Regulation 2271/96 by adding to that list the re-imposed US sanctions on Iran.

Once the re-imposed US sanctions are added to the Annex, the Blocking Statute requires companies incorporated in EU Member States to notify the Commission within 30 days whenever the renewed US extraterritorial sanctions directly or indirectly affect the economic or financial interests of the company. EU companies will also be prohibited from complying with the extraterritorial effects of US sanctions identified in the blocking statute. The Blocking Statute allows EU companies to recover damages in EU courts from persons causing damages as a result of the sanctions. Finally, the Blocking Statute nullifies the effect in the EU of any foreign court judgments or decisions of administrative bodies which are based on the re-instated US sanctions.

The Annex to the Blocking Statute will be amended by means of a “delegated act” to be drawn up by the Commission in consultation with experts from the Member States. The European Parliament and the Council (the Member States) will also have a say on the amendments. The delegated act will enter into force if (a) neither Parliament nor the Council opposes it within a two-month period of review, or (b) once they inform the Commission that they do not object to the amendment.

The Commission’s aim is to add the relevant US Iran sanctions laws to the Annex before August 6, 2018, when the first batch of US sanctions are re-imposed.

The Commission is expected to control the entire process with support of the European External Action Service (EEAS) and it is likely that additional guidance will follow.

The companies should take the potential help from the EU Blocking Statute with a grain of salt. The Commission Vice President, Valdis Dombrovskis, noted that it could be of “limited effectiveness, given the international nature of [the] banking system and especially the exposure of large systemic banks to [the] US financial system and US dollar transactions.” UK Foreign Secretary, Boris Johnson, had earlier admitted that it would be very difficult to protect European business “due to the extra-territorial effect of US sanctions and the difficulty companies have when they touch the live wire of the American financial network and they find themselves almost immediately sanctioned.

The activation of the EU Blocking Statute could be viewed as a political statement rather than an effective legal tool that the EU companies will be able to rely upon. At the same time, the EU Blocking Statute could become an element of discussion between the EU and the US to try to mitigate the impact of the implementation of the re-instated US sanctions on Iran.