Banks caught by EU-US Iran sanctions clash

President Trump’s reinstatement of sanctions against Iran has caused the European Union to dust off its Blocking Statute, in order to salvage the 2015 nuclear deal. Now financial institutions in Europe face serious consequences if they conduct business connected to Iran and possibly if they do not; moreover, application of the EU provisions is as yet unclear. Ahmad Khonsari and Stefan Hoffmann report.

Watson Farley & Williams partner Ahmad Khonsari leads the firm’s Iran practice, while partner Stefan Hoffmann, who has expertise relating to cross-border sanctions and enforcement disputes, belongs to the Dispute Resolution Group. Contact them on akhonsari@wfw.com and shoffmann@wfw.com.

On 7 August 2018, the updated, so-called EU ‘Blocking Statute’ entered into force, prohibiting compliance with the United States secondary sanctions against Iran, the first tranche of which have already been re-imposed with the remainder to follow soon. The far-reaching implications for global banks of violating the sanctions are well known, not least from press coverage regarding billions already paid by them in fines. And now, serious liabilities may arise from the EU blocking statute as well. The following article takes a closer look at the conflict between EU and US law in the context of Iran sanctions and the resulting challenges for banks.