By: Danielle Hatch
In 2018 the US withdrew from the Joint Comprehensive Plan of Action (JCPOA) causing the US government to reimpose trade sanctions on Iran. This not only impacted US entities, but it imposed “secondary sanctions” on non-US entities who continue to trade with Iran.
The US applies its trade sanctions on an extra-territorial basis, requiring not only US entities, but also foreign entities involved in US dollar-denomination transactions, the US financial system, or inclusion of more than de minimus amounts of US goods or technology to abide by US sanctions, even if they aren’t in the US.
In response to the newly imposed Iran sanctions, The European Commission amended a 22-year old “Blocking Regulation” that prohibits an EU entity from complying with any requirement or prohibition under listed US sanctions against Cuba, Libya, and Iran. The Blocking Regulation provides that EU persons can recover any damages caused by application of blocked sanctions from the person or other entity causing such injury (e.g. from entity who refused to complete a transaction due to the applicability of US sanctions). It should be noted that there have only been a handful of instances where the Blocking Regulation was used in practice and it doesn’t look like there have been any entities penalized for noncompliance of the 22-year old rule.
At the moment, no one knows if the EU will ramp up the age-old Block Regulation and start enforcing it in an attempt to discourage EU entities from complying with the newest US sanctions. Unfortunately, EU entities are stuck in the middle and must weigh the pro and cons with current trade with Iran.