Updated EU Blocking Statute: authorisation criteria & guidance

EU2.jpgThe updated EU Blocking Statute came into force today (7 August 2018), see Commission Delegated Regulation (EU) 2018/1100 amending Council Regulation (EC) No 2271/96.

The Blocking Statute allows EU operators to recover damages arising from the extra-territorial sanctions within its scope from the persons causing them and nullifies the effect in the EU of any foreign court rulings based on them. It also forbids EU persons from complying with those sanctions, unless exceptionally authorised to do so by the European Commission in case non-compliance seriously damages their interests or the interests of the Union. The criteria for applying for an authorisation are contained in Commission Implementing Regulation (EU) 2018/1101. A template is available for authorisation applications. The Commission has stated that the “possibility to apply for an authorisation is foreseen as an exception in [the EU Blocking Statute], which does not create an individual right for the applicant to obtain an authorisation”. The Commission has published a Guidance Note.

Updated EU Blocking Statute in force tomorrow

EU6The European Commission announced today that the updated EU Blocking Statute (see previous blog) will enter into force on 7 August 2018 (tomorrow), in response to the re-imposition of US sanctions on Iran. They have also issued a document explaining its effect (EU Commission Q&As) which states that:

  1. The Blocking Statute aims at countering the effects of US sanctions on EU economic operators engaging in lawful activity with third countries.
  2. It applies with regard to specific legislation listed in its Annex. It forbids EU residents and companies from complying with the listed legislation unless they are exceptionally authorised to do so by the Commission, allows EU operators to recover damages arising from that legislation from the persons or entities causing them, and nullifies the effect in the EU of any foreign court rulings based on it.
  3. EU operators should inform the European Commission – within 30 days since they obtain the information – of any events arising from listed extra-territorial legislation that would affect their economic or financial interests.
  4. EU operators can recover “any damages, including legal costs, caused by the application of the laws specified in its Annex or by actions based thereon or resulting therefrom” from “the natural or legal person or any other entity causing the damages or from any person acting on its behalf or intermediary”. The action can be brought before the courts of the Member States and the recovery can take the form of seizure and sale of the assets of the person causing the damage, its representatives or intermediaries.
  5. Implementation of the Blocking Statute, including deciding on effective, proportionate and dissuasive penalties for possible breaches is the competence of Member States. It is also for Member States to enforce those penalties.
  6. The European Commission gathers information from EU operators on possible cases of application of the listed extra-territorial legislation, liaises with national authorities from EU Member states concerning such cases in their jurisdiction and receives notification from and shares information with Member States on measures taken under the Blocking Statute and other relevant aspects.
  7. The Commission can also, in exceptional cases, authorise an EU operator to fully or partially comply with the listed extra-territorial legislation if non-compliance would seriously jeopardise the interests of the operator or of the European Union. The Implementing Regulation containing the criteria on the basis of which the Commission will assess such requests for authorisation will also be published tomorrow.

New US Executive Order reimposing Iran sanctions

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In light of the US decision to cease participation in the JCPOA and to reimpose all nuclear-related sanctions lifted or waived in connection with the deal, President Donald Trump has issued today a new Executive Order reimposing certain sanctions on Iran.

On 7 August 2018, sanctions will be reimposed on:

  • The purchase or acquisition of US bank notes by the Government of Iran.
  • Iran’s trade in gold and other precious metals.
  • Graphite, aluminium, steel, coal, and software used in industrial processes.
  • Transactions related to the Iranian rial.
  • Activities relating to Iran’s issuance of sovereign debt.
  • Iran’s automotive sector.

On 5 November 2018, the remaining sanctions will be reimposed, including sanctions on:

  • Iran’s port operators and energy, shipping, and shipbuilding sectors.
  • Iran’s petroleum-related transactions.
  • Transactions by foreign financial institutions with the Central Bank of Iran.

The US Administration will also relist hundreds of individuals, entities, vessels, and aircraft that were previously included on sanctions lists. See Statement from the President, Text of a Letter from the President, and White House Fact Sheet. The Fact Sheet states that the “Trump Administration intends to fully enforce the sanctions reimposed against Iran, and those who fail to wind down activities with Iran risk severe consequences”.

In addition, OFAC has published new FAQs relating to today’s Executive Order and updated existing FAQs. See OFAC Notice.

Standard Chartered agrees to 5-month extension of US DPA

Standard Chartered.jpgLast week (27 July), Standard Chartered announced that it has agreed to a further extension of its US Deferred Prosecution Agreement (DPA) until 31 December 2018.

The bank entered into the DPA with the US Department of Justice and the New York County District Attorney’s Office in December 2012 over breaches of sanctions against Iran and other countries.

In the announcement, the bank states that it has “taken a number of steps and made significant progress toward compliance with the requirements of the DPA and enhancing its sanctions compliance programme, but that the programme has not yet reached the standard required by the DPA”. Furthermore, that the bank will continue to cooperate with an ongoing US sanctions-related investigation, namely, whether it had continued to breach sanctions by processing US dollar transactions for Iranian entities even after the DPA was signed in 2012.

8 August 2018 Iran update to EU Blocking Reg – “significant risk” of civil litigation & “legal complexity”

Iran-USThe trade association UK Finance has published a paper setting out some considerations for the financial services sector arising out of the forthcoming amendment to the EU Blocking Regulation designed to protect the “Iran-related business interests of EU companies and individuals following the US JCPOA withdrawal” (see previous blog).  The paper explains the potential impact on EU and US persons, and notes that:

  1. The EU Blocking Regulation has rarely been enforced and has not (even with the forthcoming amendment) been considered to offer “any real protection” against US secondary sanctions.
  1. However, it will add “a further dimension of legal complexity and cross-border compliance challenges”. EU persons may be “exposed to liability” under the Regulation “regardless of whether they have a direct connection with Iran”, and it potentially exposes the financial sector to the possibility of damages & costs claims. UK Finance members “view the risk of civil litigation as significant”. (Please click the “contact us” section of this blog for advice about the legal issues arising out of the Blocking Regulation).
  1. There are a number of areas of uncertainty (examples / case studies are given in the paper) in which UK Finance suggest that dialogue with the Commission and competent authorities would be useful, eg on the little used procedure under the Blocking Regulation for EU persons to apply to the European Commission for authorisations to comply with US sanctions.

Iran brings ICJ claim against USA for new Iran sanctions

ICJ.jpgIran brought proceedings against the USA yesterday at the International Court of Justice (ICJ) in the Hague. The ICJ’s press release states that Iran’s claim alleges (in summary) that the US decision to re-impose sanctions violates the 1955 Treaty of Amity between the US and Iran in various respects, and asks the Court to order the US to terminate its sanctions and compensate Iran, and to grant “provisional measures” preventing the US from imposing its sanctions due to come into force in August.  Iran’s application is here and its request for provisional measures here (oral hearing announcement on provisional measures here). 

US rejects EU’s request for Iran sanctions exemptions

US Flag.jpgUS Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin have written a letter rejecting the EU’s request for exemptions to the US Iran sanctions that will be re-imposed in August and November 2018 after the US decision to withdraw from the JCPOA. The letter states that the “[US] will seek to provide unprecedented financial pressure on the Iranian regime”.

The EU had requested exemptions in a joint letter signed by the E3 last month (summarised in our previous blog). They sought carve-puts for finance, energy and healthcare. The US letter states that the US will only allow carve-outs if necessary for US national security or humanitarian purposes.

OFAC sanctions Malaysia-based Mahan Travel over Iran links

Mahan Air Travel.jpgOFAC has designated Malaysia-based Mahan Air Travel and Tourism Sdn Bhd (a.k.a. Mahan Travel), pursuant to Executive Order 13224, “for acting for or on behalf of Mahan Air, an Iranian airline previously designated in connection with Iran’s support for international terrorism”.

According to the US Treasury press release, Mahan Travel has served Mahan Air for at least 8 years as its sole General Sales Agent in Kuala Lumpur, Malaysia, and provides reservation and ticketing services for Mahan Air. As a result, Mahan Travel will now be subject to US asset freezing measures. See OFAC Notice.