The updated EU Blocking Statute comes into force: 10 points to note

On 7 August 2018, the EU's updated Blocking Statute became effective.  It was accompanied by a European Commission Guidance Note, and other supporting materials.

The updated Blocking Statute is a response to the United States' decision to cease participation in the nuclear deal with Iran, with certain US extra-territorial sanctions re-imposed on 6 August 2018¹.

We have previously explained how the Blocking Statute operates and our briefing can be accessed here. 

This briefing identifies the key points to note.

1. The first question when considering the Blocking Statute is: who must comply with it?  The Guidance Note explains what constitutes an "EU operator" for the purposes of the Blocking Statute, and clarifies whether EU subsidiaries of US companies, branches of US companies in the EU and subsidiaries of EU companies in the US must comply².
2. The Blocking Statute contains a number of provisions, but at its heart is a prohibition on compliance with specified (rather than all) US extra-territorial sanctions laws.  It's important to understand which US laws are covered.  These are set out in the Annex to the Blocking Statute and are explained in the Guidance Note³.
3. Although the updated Blocking Statute was only enacted on 7 August 2018, it states that in the case of contractual obligations, it applies regardless of whether they were entered into prior to such date.  There is no grandfathering mechanism in respect of contracts concluded before the update⁴.
4. There is a requirement to notify the European Commission if the economic and/or financial interests of an EU operator are affected by the specified US laws.  This must be done within 30 days of the relevant interests being affected⁵.  An email address is provided for this purpose⁶.   
5. One aspect of the Blocking Statute which has caused speculation is the extent to which damages may be claimed as a result of the application of the specified US laws.  The Guidance Note makes clear that the scope of the relevant provisions of the Blocking Statute are broad, but ultimately leaves it to competent courts to determine when damages may be claimed, and from whom⁷.
6. The Blocking Statute also prohibits the recognition or enforcement of any judgment of a court or tribunal or decision of an administrative tribunal located outside the EU giving effect to the specified US laws.  National authorities, including courts and arbitrators are expressly required to give effect to this⁸.
7. The Blocking Statute clarifies that it does not oblige EU operators to conduct business with Iran.  It is concerned with ensuring that any decisions in relation to Iran are made freely, without EU operators being forced into avoiding Iran due to the specified US laws⁹.
8. The Guidance Note, and other materials, provide significant assistance in understanding the procedure for seeking authorisation from the European Commission to comply with the specified US laws.  This must be on the basis that not to do so would seriously damage EU operators' interests, or those of the EU¹⁰. An Implementing Regulation sets out the criteria which will be applied when assessing this¹¹. A template for applications for authorisations sets out the information the European Commission will require.
9. The Guidance Note provides some assistance for EU operators seeking to balance their obligations under the Blocking Statute and concerns about exposure to US sanctions.  However the Guidance Note remains vague and ambiguous on a number of points.  It states that the European Commission will review and update it as necessary in case new questions arise.  It must be hoped that it will be regularly updated to reflect questions and concerns of EU operators.  
10. US officials have already dismissed the Blocking Statute, stating that it is "not something that we’re particularly concerned by"¹².  EU operators are unlikely to be as relaxed, given the expansive approach taken by the European Commission in the Guidance Note to the interpretation of the Blocking Statute.  An example of this is that the European Commission considers that even seeking a license from US authorities permitting non-compliance with specified US laws (i.e. in order to act consistently with the Blocking Statute) requires authorisation from the European Commission¹³.

1. The Blocking Statute also covers extra-territorial sanctions in relation to Cuba, but this briefing focuses on Iran.
2.  Guidance Note, questions 2 and 21.
3. Guidance Note, question 7.
4. Guidance Note, question 3.
5. Guidance Note, question 1.
6. Guidance Note, question 1.
7. Guidance Note, questions 12 to 14.
8. Guidance Note, question 4.
9. Guidance Note, question 5.
10. Guidance Note, question 16.
11. Commission Implementing Regulation 2018/1101
12. https://www.state.gov/r/pa/prs/ps/2018/08/284955.htm
13. Guidance Note, question 23.