In 1996, the EU adopted the so-called “Blocking Statute” to counteract the effects of U.S. extraterritorial sanctions. Furthermore, in 2018, in support of the Iran nuclear deal, Commission Delegated Regulation (EU) 2018/1100 amending the annex to the blocking statute, entered into force.
The blocking statute aims to protect “EU Operators” against the effects of extra-territorial laws adopted by third countries. However, who are EU Operators?
- any natural person being a resident in the Union and a national of a Member State,
- any legal person incorporated within the Union,
- any national of a Member State established outside the Union and any shipping company established outside the Union and controlled by nationals of a Member State, if their vessels are registered in that Member State in accordance with its legislation,
- any other natural person being a resident in the Union, unless that person is in the country of which he is a national, and
- any other natural person within the Union, including its territorial waters and air space and in any aircraft or on any vessel under the jurisdiction or control of a Member State, acting in a professional capacity[i].
How does the blocking statute operate? The blocking statute protects EU Operators by:
- imposing a duty on EU Operators to inform the Commission where their economic and/or financial interests are affected directly or indirectly by the listed laws or by actions resulting based thereon or resulting therefrom within 30 days. This information can be provided to the European Commission either directly or through the competent authorities of the Member States;
- prohibiting the recognition of foreign decisions, including court rulings, arbitration awards, and administrative decisions based on and/or giving effect to the listed laws or measures based thereon or resulting therefrom in the Member States;
- prohibiting EU Operators to comply directly or indirectly with the listed extraterritorial laws;
- entitling EU Operators to seek compensation for the loss suffered from compliance with the listed sanctions; and
- foreseeing an authorisation mechanism through which the EU Commission may authorise EU Operators to comply with the listed laws fully or partially in cases where non-compliance would cause “serious damage” to their interests or those of the EU. [ii]
Scope of Application
Following the entry into force of Commission Delegated Regulation (EU) 2018/1100, the Annex to this regulation replaced the Annex to Council Regulation (EC) No 2271/96 (the blocking statute). The Annex now includes the following acts and regulations concerning Iran:
- Iran Sanctions Act of 1996
- Iran Freedom and Counter-Proliferation Act of 2012
- National Defense Authorisation Act for Fiscal Year 2012
- Iran Threat Reduction and Syria Human Rights Act of 2012
- Iranian Transactions and Sanctions Regulations[iii]
The EU does not recognise the extraterritorial laws in its jurisdiction and the Blocking Statute prohibits EU operators to comply with those laws. Furthermore, following the JCPoA, the EU lifted nuclear-related financial and economic sanctions against Iran. However, some restrictive measures are still in force. The Due Diligence Helpdesk on EU Sanctions for EU SMEs dealing with Iran provides EU SMEs with free-of-charge due diligence verifications on specific business projects in Iran, assessing their compliance with EU restrictive measures (sanctions). If you’re an EU SME intending to do legitimate business with Iran, you can submit your enquiries via the Sanctions DD Analysis tool.
[i] European Commission, Guidance Note Questions and Answers: Adoption of Update of the Blocking Statute
[ii] Council Regulation (EC) No 2271/96 of 22 November 1996 protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom
[iii] Commission Delegated Regulation (EU) 2018/1100 of 6 June 2018 amending the Annex to Council Regulation (EC) No 2271/96 protecting against the effects of extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom