On 14th May, Clyde & Co published an article explaining why the EU will find it difficult to counter US sanctions imposed following the withdrawal of the US from the JCPOA with Iran by the use of so-called “blocking” legislation (which would forbid EU companies from complying with US laws) – which were employed in the past, during the Reagan era and in 1996 over Cuba. One seemingly obvious fact it points out is that most major financial institutions outside the US are much more intimately connected to or reliant upon the US financial system and the ability to clear US dollars than they were 20 years ago – hence the sensitivity to the effect of OFAC sanctions, even where they have no legal effect in the home jurisdiction. It concludes that the reality today is that many EU (and non-EU) firms refrain from business with Iran not because of any legal prohibitions, but because of the contractual restrictions imposed on them and that was simply not the case in 1996. Furthermore, it points out that the general AML/CFT compliance obligations of financial institutions are vastly more complex and onerous to comply with now than they were 20 years ago. It would sit uneasily with these obligations to force EU financial institutions to support business with Iran. It should not be forgotten that the EU still maintains its own – admittedly more limited (and human rights abuses-based) – sanctions programme against Iran, designating a number of entities still for asset freezes. Finally, the article reminds one that the other tactic pursued by the EU in 1996 was to refer the matter to the WTO, alleging that the US sanctions breached obligations to other WTO members. The US response at the time was to threaten the use of the rarely used tool of the national security exception, and one should surely expect the Trump Administration to follow suit.
Meanwhile, on 17th May the Guardian reported –
EU SETS COURSE FOR US CLASH WITH LAW BLOCKING IRAN SANCTIONS
The EU has put itself on a collision course with the US over Donald Trump’s decision to withdraw from the nuclear deal with Iran, as major European firms started to pull out of the country to avoid being hit by sanctions. In an attempt to shield EU companies doing business with Iran, the European commission president, Jean-Claude Juncker, said he would turn to a plan last used to protect businesses working in Cuba before a US trade embargo was lifted on the Latin American country.