The US decision to withdraw from the joint Iran nuclear deal is regarded as a huge blow not just to Iran’s economy, which the deal was expected to help revive, but also to European and other firms that had swiftly ventured to Tehran to sign business agreements after the deal was established in 2015.

After the White House announced the date Iranian sanctions would take effect, the EU responded by publishing a notice that the Blocking Statute – measures it had discussed in June to help protect its firms from the US sanctions – would also come into effect the same day.

So what is the Blocking Statute all about and how does it work? The European Commission explains:

What is the Blocking Statute?

The EU introduced the Blocking Statute in 1996 (Regulation 96/2271) in response to US extra-territorial sanctions legislation. It aims at countering the effects of US sanctions on EU economic operators engaging in lawful activity with third countries. The Blocking Statute constitutes an important achievement of unified EU action against extra-territorial legislation of third countries.

How does the Blocking Statute work?

The Blocking Statute applies with regard to the extra-territorial legislation mentioned in its Annex (“listed extra-territorial legislation”).

It forbids EU residents and companies (“operators”) from complying with the listed extra-territorial legislation unless they are exceptionally authorised to do so by the Commission; allows EU operators to recover damages arising from such legislation from the persons or entities causing them; and nullifies the effect in the EU of any foreign court rulings based on it.

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.

Why was the Blocking Statute updated?

The update was triggered by the US’ unilateral decision on 8 May 2018 to re-impose sanctions against Iran (after wind-down periods of 90 and 180 days, i.e. after 6 August 2018 and 4 November 2018) simultaneously with its withdrawal from the Joint Comprehensive Plan of Action (JCPOA) agreed in 2015 between Iran on the one hand, and China, France, Germany, the European Union, Russia, the United Kingdom, and the US, on the other.

Some of the re-imposed sanctions have extra-territorial effects and could potentially affect EU operators doing legitimate business with Iran.

How is the Blocking Statute amended?

The EU has amended the annex to the Blocking Statute by adding within its scope the list of extra-territorial US sanctions on Iran that the United States is re-imposing.

The amendment is made through a Commission Delegated Regulation, which was adopted by the Commission on 6 June 2018 and to which neither the Council, nor the European Parliament have objected in the 2 months’ scrutiny period that was foreseen for this purpose. The Delegated Regulation will be published and enter into force on 7 August.

What kind of damages can EU operators ask compensation for?

According to the Blocking Statute, 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 whom can EU operators claim compensation for those damages?

According to the Blocking Statute, EU operators can recover damages, namely from “the natural or legal person or any other entity causing the damages or from any person acting on its behalf or intermediary”.

How can EU operators claim compensation?

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. As in any litigation for damages, it will be for the judge to assess the merits of the case, or the causal link.