The European Commission has recently published a new roadmap / inception impact assessment relating to the review of the current Blocking Statute (Regulation 2271/96). By way of background, the Blocking Statute was originally enacted in November 1996, in response to US sanctions against Cuba, Iran and Libya. In its current version, it aims to provide protection against, and counteract the effect of, the US secondary sanctions imposed in relation to Iran and Cuba. A summary of the main provisions of the Blocking Statute can be found in our previous briefing.
The latest announcement follows the Commission’s January 2021 communication: “the European economic and financial system: fostering openness, strength and resilience” in which it announced the consideration of additional policy options to amend the Blocking Statute with two key objectives:
- To further deter and counteract the unlawful extra-territorial application of third country sanctions to EU operators, by taking additional commercial, capital market or other measures to protect EU operators; and
- To streamline the application of the current provisions, as well as reduce the administrative burden required for compliance with the Blocking Statute.
The Commission has stated that these objectives could be met by enacting an amending regulation, or a regulation repealing and replacing the existing Blocking Statute. The impact assessment currently anticipates that any amendments will be adopted in Q2 of 2022. A number of policy options are under consideration, as set out below:
- In relation to Objective 1 (deter and counteract extra-territorial sanctions):
- Provide the Commission with powers to apply deterrent and counteracting measures against third countries applying extra-territorial sanctions, or persons benefitting from their imposition. These could relate to commercial or other measures regarding judicial cooperation; exclusion from / restrictions on access to the EU capital markets or EU public tenders; and/or visa limitations for individuals.
- Award financial or other support to EU operators willing to engage in trade that is prohibited by third country sanctions (but not prohibited by the EU).
- In relation to Objective 2 (streamlining):
- Streamlined processing for authorisation requests (i.e. requests by EU operators to be permitted to comply with blocked extra-territorial laws), including a review of the information required to process such requests.
- Clarification of the prohibition on complying with third country sanctions, including a possible specific focus on strategic sectors.
The Commission is carrying out an impact assessment, gathering information on the impact of third country sanctions on EU operators, and on the EU as a whole. In this regard, the Commission is also launching a public call for evidence in order to gather: (i) additional evidence on the nature and impact of third country extraterritorial sanctions on EU operators; and (ii) feedback in relation to the above policy options. Feedback can be submitted online until 30 August 2021.
In parallel with this impact assessment, the Commission will carry out an evaluation of the application and effectiveness of the Blocking Statute, 25 years after its adoption. The Commission has stated that the evaluation will “take into account the changed nature and scope of extra-territorial sanctions adopted by third countries” and will “reflect upon the direct and indirect compliance costs for EU persons subject to the [Blocking Statute]”. The impact assessment identified that the Blocking Statute needs to be reviewed in light of (amongst other things) the proliferation of extra-territorial sanctions and their increased complexity, noting that “non-compliance with such extra-territorial sanctions has become increasingly expensive for at least some globally active EU operators”.
It is therefore hoped that, through this process, the EU may engage more closely with some of the difficulties that the Blocking Statute has so far presented to multinational businesses, such as its inability to protect EU operators from many of the commercial impacts that may result from the imposition of US secondary sanctions. Clearly it will be helpful if responses to the Commission Call for Evidence highlight the practical difficulties to which the Blocking Statute gives rise; these were aptly described by AG Hogan’s recent Opinion in the Telekom Deutschland case as “impossible – and quite unfair dilemmas”.
The Commission’s announcement is silent on whether this exercise will involve any consideration of Member States’ enforcement of the provisions of the Blocking Statute, which has generally been limited. For example, we are unaware of any enforcement action by the UK during its membership of the EU.
UK readers will be aware that the EU Blocking Statute forms part of the post-Brexit body of EU retained law. The UK regime is currently substantially similar to the EU (the UK’s guidance on the regime can be found here) but developments in the EU regime create scope for the two regimes to diverge, creating further compliance challenges for multinational companies.