Advocate General Gerard Hogan of the European Court of Justice ruled on Wednesday 12 May in case C-124/20 between Bank Melli Iran and Telekom Deutschland that an EU company’s decision to terminate a contractual relationship with an Iranian company subject to US primary sanctions should be considered invalid if it could not be justified on any grounds other than the desire to comply with US law, which falls within the scope of the Union’s blocking statute.
US law provides for secondary sanctions against non-US companies that do business with such Iranian companies. The EU blocking statute prohibits compliance with US extraterritorial measures (see EUROPE 12077/7).
German telecoms provider Telekom Deutschland has terminated its contracts with Bank Melli Iran, which has a branch in Hamburg, in order to comply with US legislation and avoid secondary sanctions. According to Bank Melli Iran, Telekom Deutschland has violated the EU blocking law. Telekom Deutschland argues that the EU blocking statute does not alter its ordinary right to terminate such a contract without giving reasons.
The case brought by Bank Melli Iran is pending before the Hanseatisches Oberlandesgericht Hamburg (Higher Regional Court of Hamburg), which has asked the Court of Justice of the EU to clarify the scope of the blocking law.
In his opinion for the European judges, the Advocate General considers that the general prohibition of the EU blocking statute applies even if a European company complies with this legislation without being forced to do so by an administrative or judicial body.
He also considers that an EU company seeking to terminate an otherwise valid contract with an Iranian entity subject to US sanctions must “demonstrate to the satisfaction of the referring court ” that it did not do so because of its concern to comply with the sanctions. He adds that the blocking statute gives non-Member State companies targeted by US measures a right of appeal.
The Advocate General warns that some Member States, reluctant to implement the blocking statute, may allow a major economic operator, such as Telekom Deutschland, to decide to comply with the US sanctions regime by terminating the contract with Bank Melli Iran.
“Where they led, others would surely follow, and the entire public policy behind the EU blocking statute could be quickly undermined by a state of affairs in which many European entities quietly decide to comply with those sanctions”, Mr Hogan adds.
According to the Advocate General, the Hanseatisches Oberlandesgericht Hamburg is obliged to order Telekom Deutschland to maintain their contractual relationship with Bank Melli Iran.
See the conclusions: https://bit.ly/3hpkZLZ (Original version in French by Camille-Cerise Gessant)