UK renewable energy investor Quercus has pulled out of a £500m solar plant in Iran ©Adobe Stock
UK renewable energy investor Quercus has pulled out of a £500m solar plant in Iran ©Adobe Stock

How Iran sanctions will play out in the EU

EU firms will recover costs in courts

The US withdrawal from the Iran nuclear deal has caught EU businesses in the cross-fire of US sanctions, and cancelled trade deals will run into billions of euros. But, the EU has taken steps to protect its trade, including allowing EU businesses to claim damages for loss caused by another EU business complying with US sanctions, says Marc Jones, senior partner at litigation law firm Stewarts.

From 7 August, EU businesses that fail to comply with US sanctions against Iran are at risk of being frozen out of the US economy and its financial system – preventing a company from clearing dollar transactions, for example.

In response, the EU activated its Blocking Regulation, prohibiting EU businesses from complying with US Iran sanctions; and requiring EU businesses to report to the European Commission if their financial interests have been affected by US sanctions. If significant, the firm can claim losses – so if one EU firm cancels a project to comply with the sanctions, all companies involved in the underlying supply chain could sue that company to recover losses.

But while the prospect of destroying important commercial relationships would deter many businesses from suing to recover losses, the good news is that for many in the supply chain, the ultimate cause of loss will not be the trading partner, but a bank or financial service provider whose withdrawal makes the commercial enterprise unviable. Supply-chain businesses may feel less concern about suing those at the top of the supply chain. 

These US sanctions have been made in Washington, with Tehran as the target. But courts in London, Brussels and beyond look set to be the arena in which many of the enormous consequences for supply chains in Europe and around the world are played out.

CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates