Trapping European Companies Between Scylla and Charybdis: Unfulfilled Promises of the EU Blocking Statute

Since the withdrawal of the United States from the Iran nuclear deal in August 2018, EU businesses operating in the Iranian market have been facing a risk of becoming targets of the reinstated US sanctions programme, which applies not only to US nationals but also any foreign persons engaging in prohibited activities with Iran. While the EU sought to nullify the extraterritorial effects of the US legislation to save the Iran nuclear deal and preserve the interests of EU operators, the revived Blocking Statute has been largely unsuccessful in achieving these goals. Building on the theory of sanction busting, the paper argues that the roots of this failure are related to the vertical design of the Regulation, which relies on its enforcement by private parties whose economic ties are, however, stronger to the United States as the sender State than Iran as the primary target of the US sanctions. This incompatibility has translated into three critical gaps in the Regulation, namely the preventive over-compliance of EU businesses with the US sanctions, the unwillingness of the EU Member States to investigate and penalise the bypassing of the blocking provisions and, finally, the lack of deterrent effects for foreign public authorities. Tackling these inadequacies will be of critical importance for the pending reform process of the Regulation on the EU level.