The withdrawal of the United States ('US') on 8 May 2018 from the Joint Comprehensive Plan of Action ('JCPOA') resulted in US sanctions - previously lifted following the entry into force of the JCPOA - being re-imposed. Having set a 90-day and a 180-day wind down period for different set of activities involving Iran, the US sanctions will be re-instated on 6 August 2018 respectively 4 November 2018.
As a consequence of the US withdrawal and extra-territorial application of the re-instated US sanctions for EU companies when engaging in trade with Iran, the European Union ('EU') announced countermeasures in order to safeguard the interests of EU companies investing in and trading with Iran as part of the EU's continued commitment to the JCPOA. One of the EU countermeasures involves the update of the so-called EU Blocking Regulation which is to act as a protective shield for EU companies against the extra-territorial effects of US sanctions against Iran.
The EU Blocking Regulation is directly applicable in all EU Member States and obliges EU companies:
In specific cases where non-compliance regarding US sanctions would seriously damage the interests of the EU company, the prohibition to comply with US sanctions can be waived upon Commission's approval. Further, the EU Blocking Regulation provides for the non-enforceability of decisions of US (judicial) authorities in the EU as well as for entitlement to recovery of any damages (including legal costs) caused to the EU company resulting from the listed US sanctions.
It is up to each EU Member State to enforce the EU Blocking Regulation in practice and specify the penalties for breaching its terms in national legislation. In certain EU Member States such as the Netherlands, any non-compliance with the EU Blocking Regulation is considered a criminal offence.
The proposal for updating the EU Blocking Regulation – as set in the delegated act of 6 June 2018 adopted by the European Commission ('Commission') – consists of amending the Annex to the EU Blocking Regulation which covers US sanctions having extra-territorial application and effects for EU companies in view of their trade with Iran.
Both the European Parliament and the Council of the European Union ('Council') - whose involvement as legislative bodies is necessary to get the update of the EU Blocking Regulation passed into EU law - have been notified by the Commission on 6 June 2018 with regard to the proposed update in the delegated act. The European Parliament and the Council have a period of two months to object or give notice of no objection to the delegated act. Provided that no objections are made by either the European Parliament or the Council:
Early this June, the European Parliament published a briefing on the US sanctions, the EU Blocking Regulation, mitigating effects as well as the latest on the SWIFT's services facilitating cross-border payments related to Iran. Furthermore, on 21 June 2018, the delegated act has been discussed and debated by the Committee on International Trade (INTA), being the European Parliament's responsible committee for this file.
So far, no objections by either INTA or the Council have been disclosed. The Commission is hoping that the update of the EU Blocking Regulation will be passed before the entry into force of the first set of re-instated US sanctions on 6 August 2018.
The proposed update of the Annex of the EU Blocking Regulation covers the following US sanctions having extra-territorial application with regard to Iran:
The updated Annex refers only to certain main (summarised) provisions of the listed US sanctions on Iran whereby EU companies are advised to self-consult the listed US sanctions for a full overview of all their provisions.
On a separate note, the EU Blocking Regulation was already subject to a general update which has been pending since 2015 when the European Commission submitted a proposal to recast the EU Blocking Regulation in the interests of:
At this stage, the general update of the EU Blocking Regulation is still in procedure awaiting a decision of INTA.
Begin of June, ministers of EU Member States and the EU High Representative have requested the US secretaries of State and of the Treasury for certain exemptions from US sanctions for EU companies that initiated or concluded their contracts within the JCPOA framework. It remains to be seen whether and to what extent these requests will be taken into account.
Concerned EU companies having Iran-related operations should assess their exposure to the re-instated US sanctions on Iran as well as the updated EU Blocking Regulation and - more so - how these might affect their overall global markets business strategy.Our Trade & Customs experts will closely follow and report on any new developments. If you have any questions, please contact our Trade & Customs team.