EU Commission Adopts 'Blocking Statute' to Save Iran Deal

According to the Commission, this step was taken in an effort to "help protecting the interests of EU companies investing in Iran and to demonstrate the EU's commitment to the Joint Comprehensive Plan of Action (JCPOA)".

Read the EU Commission's announcement.

The decision to initiate the procedure was adopted unanimously by the EU Heads of State or Government on 18 May, as described in our previous news article. In the same vein, the EU Commission also announced an update of the Lending Mandate of the European Investment Bank (EIB). 

The Blocking Statute has been in effect since 1996, when it was designed as a response to US extraterritorial sanctions against Cuba and Libya. Now as then the statute serves to nullify non-EU court judgments and administrative decisions based on the (US) laws listed in its annex, by stripping them of effect and enforceability within the EU. Further, it prohibits EU persons and companies from complying with the listed (US) laws, including compliance "directly or through a subsidiary other intermediary person, actively or by deliberate omission, with any requirement or prohibition, including requests of foreign courts, based on or resulting, directly or indirectly, from the laws specified in the Annex", cf. Article 5, EU Council Regulation 2271/96.

The updated version of the Blocking Statute maintains the original language of the articles, but inserts an updated list of US sanctions and regulations in the Annex, including:

• Iran Sanctions Act of 1996, as amended (formerly the ILSA)
• Iran Freedom and Counter-Proliferation Act of 2012
• National Defense Authorization Act for Fiscal Year 2012
• Iran Threat Reduction and Syria Human Rights Act of 2012, and the
• Iranian Transactions and Sanctions Regulations.

This means that all secondary US sanctions against Iran, to be re-imposed on Iran following President Trump's decision to withdraw from the JCPOA¹, are brought within the scope of the Blocking Statute, thus prohibiting EU persons from complying with them. For European and Danish businesses, the practical consequence is that they will be caught between the US sanctions on the one hand and the EU Blocking Statute on the other hand if they do business with Iran. Simultaneous compliance with both regimes will be virtually impossible.

Violation of the Blocking Statute is penalized at the national level, and the severity of consequences for non-compliance varies between member states from a spectrum of no penalty, over administrative penalties to criminal liability. In Denmark, violation is considered a criminal offence and punishable by fine, but no company has ever been convicted or prosecuted. In fact, the only EU country that has ever pressed charges against a company under a national law implementing the Blocking Statute is Austria. The charges were later dropped, as the company obtained a license from the American authorities to continue its business with Cuban nationals, thus avoiding a direct conflict between the US sanctions and EU Blocking Statute.

The European Parliament and the Council have two months to object to the updated Statute. If no such objections are raised before 5 August, the amended Statute will enter into force just before the first US transition deadline of 6 August (the US sanctions are scheduled to be re-imposed in two tranches; the second batch on 4 November). 

If the proposed amendment to EIB's lending mandate is approved, Iran will eligible for investment activities by the EIB. Commitments for the EIB to actually support concrete projects in Iran will, however, remain the prerogative of EIB's governing bodies.

¹ The JCPOA Agreement was signed in 2015 by the parties known as P5+1 consisting of the permanent members of the UN Security Council (China, France, Russia, The UK and the US) and Germany. In short, the Agreement obliged Iran to cease all attempts to develop nuclear weapons in exchange for the lifting of a significant part of the stifling trade sanctions imposed on the country. The JCPOA took effect on 'Implementation Day', 16 January 2016, from which date the majority of UN and EU sanctions on Iran were lifted, as well as a more limited part of the US sanctions.