On December 21, 2021, the Court of Justice of the European Union (ECJ) issued a long-awaited ruling on the application of Council Regulation (EC) No 2271/96 protecting against the effects of specific US sanctions programs against Iran, Cuba and Syria (“the Blocking Statute”).

The ECJ received several requests for preliminary ruling from a German court on the interpretation of the first paragraph of Article 5 of the Blocking Statute forbidding an European person to comply with US sanctions programs.

The ECJ Grand Chamber has provided the following answers:

•    Article 5 of the Blocking Regulation forbids European persons from complying with economic sanctions programs listed, even in the absence of an order requiring compliance with such programs issued by a US administrative or a judicial authority

•    Article 5 of the Regulation does not prevent an European entity from terminating the contract concluded with a person listed on the US Specially Designated Nationals and Blocked Persons (SDN list). However, in the context of civil proceedings concerning the alleged breach of the prohibition laid down by the Blocking Statute, the European entity must show that such termination did not seek to comply with the US sanctions programs referred to in the Statute. 

•    Termination of a contract in violation of a Blocking Statute may be sanctioned by the annulment of the termination, provided that such sanction does not result in disproportionate effects for the European entity. The European judge should weigh the objectives of the Blocking Statute against the economic risks that the entity could face if the contract with a blocked entity was to be maintained.

For further information on this ruling, do not hesitate to reach our Sanctions & Export Controls team.

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