EU blocking statute comes into force

  • The EU Blocking Statute came into force on 7 August 2018, driven by the US withdrawing from the JCPOA and re-imposing sanctions on Iran.

    The Blocking Statute was first introduced in 1996 in response to the extra-territorial reach of US sanctions on Cuba, Iran and Libya. However, the Statute was not relied on by major corporations and the extra-territorial strength of US sanctions, with the threat of penalties reaching billions of dollars in some cases, continued to dominate global corporations’ policies. It is expected that EU corporations will continue to adhere to US sanctions for these same reasons, despite the updated Blocking Statute.

    The Statute currently covers extra-territorial sanctions on Iran and Cuba. It does not oblige EU operators to do business with Iran and Cuba but aims at preventing harm to those who wish to do business with these countries but are hindered from doing so as a result of extra-territorial sanctions.

    The Guidance Note explains “the basic principle of the Blocking Statute is that EU operators shall not comply with the listed extra-territorial legislation…given that the EU does not recognise its applicability to/effects towards EU operators.” If the extra-territorial sanctions cause loss to EU operators, the Statute enables them to recover damages from the natural or legal persons whom have caused the losses. A likely scenario is where a company is already doing permitted business with Iran through a supplier/finance provider who then refuses to continue the business as a direct result of the US re-imposing Iran sanctions. The Blocking Statute also nullifies the effect in the EU of foreign court rulings on the extra-territorial legislation. Therefore US decisions against EU operators requiring seizure or enforcement will not be executed in the EU.

    If serious harm would be caused by not complying with the extra-territorial sanctions, EU operators may request authorisation to comply.