{{Short description|Law meant to counter another jurisdiction's law}} A '''blocking statute''' is a law of one jurisdiction intended to hinder application there of a law made by a foreign jurisdiction. A blocking statute was proposed by the European Union in 1996 to nullify a US trade embargo on Cuba and sanctions related to Iran and Libya which affected countries trading with the US and with the named countries. The 1996 statute was not enacted as the disagreements were settled by other means.
==Operation==
A blocking statute shields companies in its jurisdiction against sanctions by prohibiting them from respecting the sanctions, and not recognising foreign court rulings enforcing them.<ref name="EC" />
== European Union blocking statute== A EU blocking statute was originally enacted in 1996 to "counteract" the sanctions imposed by the United States against Cuba, Iran and Libya.<ref name="lexology"/>
After the US reimposed sanctions against Iran following its withdrawal from an agreement which permitted trade if Iran curtailed its nuclear programme, on 17 May 2018 the European Commission announced its intention to implement the blocking statute of 1996 to declare the US sanctions against Iran null and void in Europe and ban European citizens and companies from complying with them. The commission also instructed the European Investment Bank to facilitate European companies' investment in Iran.<ref>{{cite web |url=http://www.dw.com/en/eu-to-reactivate-blocking-statute-against-us-sanctions-on-iran-for-european-firms/a-43826992 |title=EU to reactivate ′blocking statute′ against US sanctions on Iran for European firms |newspaper=Deutsche Welle|date=17 May 2018|access-date= 17 May 2018}}</ref><ref>{{cite web |url=https://www.reuters.com/article/iran-nuclear-eu-response/eu-to-start-iran-sanctions-blocking-law-process-on-friday-idUSL5N1SO4W2 |title=EU to start Iran sanctions blocking law process on Friday |work=Reuters|date=17 May 2018 |access-date=17 May 2018}}</ref><ref>{{cite web |url=https://www.aljazeera.com/news/2018/05/eu-moves-block-sanctions-iran-180517134848253.html |title=EU moves to block US sanctions on Iran |agency=Al Jazeera|date=17 May 2018 |access-date= 17 May 2018}}</ref>
===2018 update=== On 7 August 2018, the EU updated its blocking statute. The process of updating the EU blocking statute commenced by adding to its scope on 6 June 2018 the extraterritorial sanctions the US re-imposed on Iran.<ref name=EC>{{cite web |url=http://europa.eu/rapid/press-release_IP-18-4805_en.htm|title=Updated Blocking Statute in support of Iran nuclear deal enters into force |website=Europa.eu |publisher=European Commission Press Release Database|date=6 August 2018|access-date= 7 August 2018}}</ref> The European Commission said:<ref>{{cite web |url=https://www.bbc.com/news/world-europe-45085205 |title=Iran nuclear deal: EU shields firms from US sanctions law |last= |first= |date=August 6, 2018 |website=BBC News |publisher= |access-date=May 15, 2021 |quote=}}</ref>
{{blockquote|We are determined to protect European economic operators engaged in legitimate business with Iran, in accordance with EU law and with UN Security Council resolution 2231 ... This is why the European Union’s updated Blocking Statute enters into force on 7 August to protect EU companies doing legitimate business with Iran from the impact of US extra-territorial sanctions.}}
The 2018 blocking statute essentially prohibits EU companies from "direct" or "indirect" (via subsidiaries or intermediary persons) compliance with the laws listed in US sanctions annex.<ref name="lexology">{{cite web |last1=Craig |first1=Ashley W. |last2=Beck |first2=Jochen |last3=Ruessmann |first3=Laurent |title=International Firms Caught Between U.S. Iran Sanctions and EU Blocking Statute|url=https://www.lexology.com/library/detail.aspx?g=dc6d6b88-c580-4cd9-a884-c43365856759 |website=Lexology |date=13 July 2018 |access-date=2 September 2018 |language=en}}</ref> It also does not recognize any verdicts by courts that enforce US penalties. A to-be-established clearing house will, through a special-purpose vehicle set up for this purpose, facilitate trade with Iran by European companies, bypassing US sanctions.<ref name="FT16112018">{{cite news |title=EU Outlines Measures to Counter American Sanctions Against Iran|url=https://financialtribune.com/articles/domestic-economy/95103/eu-outlines-measures-to-counter-american-sanctions-against-iran|work=Financial Tribune|date=16 November 2018|access-date=18 November 2018|archive-url=https://web.archive.org/web/20181118103833/https://financialtribune.com/articles/domestic-economy/95103/eu-outlines-measures-to-counter-american-sanctions-against-iran|archive-date=18 November 2018}}</ref>
European governments regard the blocking statute as "more of a political weapon than a regulation", since, it wrote, the blocking statute's rules were "vague and difficult to enforce".<ref>{{cite news |last1=Emmott |first1=Robin |title=In 1990s redux, EU to consider blocking U.S. sanctions over Iran |url=https://www.reuters.com/article/us-iran-nuclear-eu-business/in-1990s-redux-eu-to-consider-blocking-u-s-sanctions-over-iran-idUSKBN1IA2PV |access-date=3 September 2018 |archive-url=https://web.archive.org/web/20180903071046/https://www.reuters.com/article/us-iran-nuclear-eu-business/in-1990s-redux-eu-to-consider-blocking-u-s-sanctions-over-iran-idUSKBN1IA2PV |archive-date=3 September 2018}}</ref> A senior US administration official said they were not "particularly concerned by" the imposition of the blocking statute.<ref>{{cite news |last1=Riley-Smith |first1=Ben |last2=Ensor |first2=Josie |title=America dismisses EU 'blocking statute' as Iran sanctions finally bite |url=https://www.telegraph.co.uk/news/2018/08/06/america-dismisses-eu-blocking-statute-iran-sanctions-finally/ |access-date=2 September 2018 |work=The Telegraph |date=6 August 2018}}</ref>
Following the withdrawal of the United States from the Joint Comprehensive Plan of Action in 2018, the European Union additionally supported the creation of the Instrument in Support of Trade Exchanges (INSTEX), a special-purpose vehicle intended to facilitate limited trade with Iran while bypassing direct exposure to U.S. sanctions enforcement mechanisms.<ref>{{cite web |title=Joint statement on the creation of INSTEX |url=https://www.diplomatie.gouv.fr/en/country-files/iran/events/article/joint-statement-on-the-creation-of-instex-the-special-purpose-vehicle-31-01 |website=Ministry for Europe and Foreign Affairs (France) |access-date=2026-05-20}}</ref>
Scholars and commentators have argued, however, that the Blocking Statute has limited practical effectiveness for firms with substantial exposure to the United States economy, because it cannot prevent the United States from restricting access to U.S. markets, dollar-clearing systems, correspondent banking networks, or the broader U.S. financial system through secondary sanctions and enforcement by the Office of Foreign Assets Control (OFAC).<ref>{{cite journal |last=Hofer |first=Alexander |title=Bank Melli Iran v Telekom Deutschland GmbH |journal=American Journal of International Law |publisher=Cambridge University Press |volume=117 |issue=2 |year=2023 |pages=325–332 |doi=10.1017/ajil.2023.14}}</ref> This tension was examined in Bank Melli Iran v Telekom Deutschland GmbH, in which Deutsche Telekom terminated a contract with Bank Melli Iran after the reimposition of U.S. sanctions on Iran.<ref>{{cite journal |last=Hofer |first=Alexander |title=Bank Melli Iran v Telekom Deutschland GmbH |journal=American Journal of International Law |publisher=Cambridge University Press |volume=117 |issue=2 |year=2023 |pages=325–332 |doi=10.1017/ajil.2023.14}}</ref>
In its judgment, the Court of Justice of the European Union held that companies invoking exposure to U.S. sanctions as justification for terminating business relationships may be required to provide reasons for their decision before national courts.<ref>{{cite journal |last=Hofer |first=Alexander |title=Bank Melli Iran v Telekom Deutschland GmbH |journal=American Journal of International Law |publisher=Cambridge University Press |volume=117 |issue=2 |year=2023 |pages=325–332 |doi=10.1017/ajil.2023.14}}</ref> However, the Court further held that measures compelling the continuation of the contractual relationship, or imposing penalties for termination, would be incompatible with EU law where they would expose the undertaking to disproportionate economic consequences, including serious risks to its business arising from possible exclusion from the U.S. market or financial system.<ref>{{cite web |title=Judging the EU Sanctions Blocking Regulation: Bank Melli v Telekom Deutschland |url=https://www.financelitigationhub.com/insight/judging-eu-sanctions-blocking-regulation-bank-melli-v-telekom-deutschland |website=Finance Litigation Hub |access-date=2026-05-20}}</ref> Commentators described the case as demonstrating the limits of the Blocking Statute as a countermeasure to U.S. sanctions policy, arguing that although the EU could formally nullify the legal effect of U.S. sanctions within its jurisdiction, it could not eliminate market-driven compliance motivated by the risk of exclusion from the U.S.-dominated global financial system.<ref>{{cite journal |last=Hofer |first=Alexander |title=Bank Melli Iran v Telekom Deutschland GmbH |journal=American Journal of International Law |publisher=Cambridge University Press |volume=117 |issue=2 |year=2023 |pages=325–332 |doi=10.1017/ajil.2023.14}}</ref><ref>{{cite web |title=Judging the EU Sanctions Blocking Regulation: Bank Melli v Telekom Deutschland |url=https://www.financelitigationhub.com/insight/judging-eu-sanctions-blocking-regulation-bank-melli-v-telekom-deutschland |website=Finance Litigation Hub |access-date=2026-05-20}}</ref>
==References== {{reflist|30em}}
==External links== * [https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:31996R2271 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] * [https://ec.europa.eu/info/business-economy-euro/banking-and-finance/international-relations/blocking-statute_en Blocking statute; Protecting EU operators, reinforcing European strategic autonomy]
Category:International law