TR-TR 
EN-US 
The Court of the Justice of the European Union (“the Court”) has published a press release regarding the Advocate General’s opinion on the case Bank Melli Iran, Aktiengesellschaft nach iranischem Recht v Telekom Deutschland GmbH (“Opinion”) on May 12, 2021. With the Opinion, the Advocate General states that the Iranian undertakings may invoke European Union (“EU”) law blocking United States (“US”) secondary sanctions before the courts of the EU’s the member states.
In the case under evaluation for the Opinion, the Iranian bank Bank Melli Iran, which has a branch in Hamburg, Germany, claims in German courts that the ordinary notice of termination for contracts with the German telecommunications provider Telekom Deutschland for telecommunications services is invalid. It has also been asserted that the services offered by Telekom Deutschland represent the only basis of Bank Melli Iran's internal and external communication systems in Germany, making them crucial for its commercial activity.
Moreover, as per the bank's statement, the notice was only driven by Telekom Deutschland's wish to comply with US legislation, which was re-applied when former US President Donald Trump opted to withdraw from the Iranian nuclear deal in 2018. Such legislation forbids non-US entities from trading with Iranian entities subject to US primary sanctions and provides for secondary penalties against such non-US entities in the event of a breach. Additionally, former US President Donald Trump's decision to pull out of the accord resulted in new US sanctions. Certain large European corporations faced significant challenges that affect this. As a result, to mitigate the effects of the reactivation of US sanctions against Iranian entities as an outcome of the US withdrawal from the Joint Comprehensive Plan of Action, the EU has added US legislation related to the Iran sanctions program to the list of foreign legislation covered by the EU blocking statute. As such, Bank Melli Iran contends in these actions that Telekom Deutschland violated the EU blocking legislation, which prevents EU undertakings from participating with such extraterritorial US measures.
Thereupon, Telekom Deutschland, which is owned by the Deutsche Telekom group and generates almost half of its revenue in the US, contended that the EU blocking rule did not affect its regular right to cancel such a contract without explanation. Furthermore, Telekom Deutschland noted that the EU blocking law allows them to end its business agreement with Bank Melli Iran at any moment for any reason.
Bank Melli Iran's case is currently before the Hanseatic Higher Regional Court in Hamburg, Germany, which has asked the Court to clarify the scope of the EU blocking statute, which was designed to sterilize the intrusive extraterritorial effects of US sanctions within the EU, and thus to protect European companies and thus indirectly, the national sovereignties of the member states, against US legislation that is contrary to international law.
To begin, the Opinion argues that, according to the Court's established case-law, interpreting an EU law provision entails taking into consideration its context as well as the goals achieved by the regulations of which it is a part. With this being said, Article 5 of the EU blocking statute provides that no person referred to in Article 11 shall comply, whether directly or through a subsidiary or other intermediary person, actively or by deliberate omission, with any requirement or prohibition, including requests of foreign courts, based on, or resulting, directly or indirectly, from the laws specified in the Annex or from actions based thereon or resulting therefrom. On this basis, Article 11 of the EU blocking statute, which is considered in the Opinion, provides that the statutes’ provisions shall apply to any natural person being a resident in the community and a national of a member state, any legal person incorporated within the community, any natural or legal person referred to in Article 1(2) of Regulation (EEC) No 4055/86, any other natural person being a resident in the community, unless that person is in the country of which he is a national, any other natural person within the community, including its territorial waters and air space and in any aircraft or on any vessel under the jurisdiction or control of a member state, acting in a professional capacity.
Within this frame of reference, considering other provisions too, the Advocate General evaluates in the framework of the Opinion that the general prohibition contained in the EU blocking statute for EU undertakings that are directed against compliance with such third-country legislation providing for secondary sanctions applies even if such an undertaking complies with that legislation without first being compelled to do so by a foreign administrative or judicial agency. Furthermore, the Advocate General asserts that the prohibition's phrasing, objective, and context make this circumstance obvious.
The referring court's second question, in essence, asks whether the first paragraph of Article 5 of the EU blocking statute must be interpreted as precluding an interpretation of national law under which a person referred to in Article 11 of that statute may terminate a continuing obligation with a party to a contract named on the Specially Designated Nationals List held by the OFAC without given explanations for its decision to terminate those contracts. On this issue, the Opinion further considers that an EU business wishing to cancel an otherwise legitimate contract with an Iranian firm subject to US sanctions must establish to the satisfaction of the national court that it did not do so to comply with those penalties.
To elaborate, Advocate General further finds that, while the EU blocking law does not seek to safeguard third-country companies directly targeted by US sanctions, it does bestow a right of action on such undertakings, such as Bank Melli Iran. If such a right of action is not recognized, the Advocate General believes that the execution of the policy indicated in the EU blocking act will rest only on the desire of the member states and, indirectly, the Commission. As a result, in the certain member states that are unwilling to execute the blocking law, for example, a significant commercial operator such as Telekom Deutschland might deliberately comply with the US sanctions system by canceling the relationship with Bank Melli Iran. As per the Opinion, where they lead, others would follow, and the entire public policy underlying the EU blocking law may be swiftly undercut if numerous European firms quietly opt to comply with those sanctions.
For much the same reasons, Advocate General evaluates that the EU blocking law must be interpreted in such a way that it imposes an obligation to justify terminating a business engagement with a person subject to main penalties. If this were not the case, an entity could quietly decide to implement US sanctions legislation and, by maintaining an obscuring silence, impenetrable as to its reasons and unreviewable as to its methods, the major policy objectives of the EU blocking statute would be jeopardized and rendered null and void, as appears to have occurred in this case.
The Advocate General considers that it is up to Telekom Deutschland to assess if there is an objective cause, given that Bank Melli Iran and Telekom Deutschland already do business with each other and have not changed their business practices. Bank Melli Iran was subject to the primary sanctions necessitating the termination of these contracts, but to Hanseatisches Oberlandesgericht Hamburg to check the validity of such grounds. It is also said that what matters is the purpose of the economic operator to comply with such measures, regardless of whether they are tied to those sanctions.
However, it has been determined that economic operators can demonstrate, for this intent, that they are currently participating in a consistent and systematic corporate social responsibility policy, which has led, among other things, to their rejection to do business with any company associated with the Iranian regime.
Further to that, according to the Advocate General's Opinion, if such an EU undertaking fails to comply with the prohibition contained in the EU blocking statute to comply with US legislation providing for secondary sanctions, the national court seized by its party to the contract subject to US primary sanctions must order the EU undertaking to maintain their contractual relationship. According to the Advocate General, the limitation in question is not inherently incompatible with the freedom of enterprise granted by the European Union's Charter of Fundamental Rights, given that economic operators may apply to the Commission for permission to deviate from it.
Finally, as a result of the facts of this case, Advocate General concludes that the EU blocking law is a relatively blunt weapon, aimed to sterilize the invasive extraterritorial effects of US sanctions within the Union. This sterilized procedure will certainly result in casualties, and many may believe Telekom Deutschland will be among the first to suffer, given its massive US operations.
Şafak Herdem, Esra Temur
