Talking Trade Finance

The UK passes new Order making it a criminal offence to breach the EU Blocking Statute

Posted by Sam Fowler-Holmes on Feb 8, 2019 11:21:08 AM

By Sam Fowler-Holmes and Fiona Luong

UK companies who are GettyImages-1089727634trading or are considering trading with Iran may now face potential criminal penalties for breaching the EU Blocking Statute, underscoring the need to carry out due diligence in order to best manage their risk profile. This includes:

  • assessing whether any authorisations are required from either the US or EU in relation to current and future business activities (e.g. by obtaining the EU Commission’s authorisation to comply with specified US extraterritorial sanctions); and
  • weighing up the risks associated with breaching US extraterritorial sanctions against those of breaching the EU Blocking Statute and updating internal policies, protocols, and business plans (where appropriate).

This may cause problems for parties who will be caught between US sanctions and UK/EU requirements.

To recap, Commission Delegated Regulation (EU) 2018/1100 (the updated EU Blocking Statute) came into force on 7 August 2018 and amends Council Regulation (EC) No 2271/96.

The EU Blocking Statute aims to ensure that EU companies can continue to trade with Iran by forbidding EU persons from complying with extraterritorial sanctions unless non-compliance would seriously damage their interests or the interests of the EU. It also allows EU operators to recover damages caused by US sanctions and nullifies the effect of relevant court rulings in the EU.

On 1 February 2019, the Extraterritorial US Legislation (Sanctions against Cuba, Iran and Libya) (Protection of Trading Interests) (Amendment) Order 2018 (SI 2018/1357) (the Amendment Order) came into force in the UK making it a criminal offence for UK entities and nationals to breach the EU Blocking Statute.

Under the Amendment Order, any UK entity or individual that breaches the EU Blocking Statute will be guilty of an offence punishable by (i) an unlimited fine on indictment; or (ii) a fine not exceeding the statutory maximum on summary conviction.

Previously, criminal offences were imposed by Extraterritorial US Legislation (Sanctions against Cuba, Iran and Libya) (Protection of Trading Interests) Order 1996 (S.I. 1996/3171) (the Order) on UK entities and nationals that breached Council Regulation (EC) No.2271/96. The Amendment Order amends the Order so that criminal offences extend to the EU Blocking Statute.

Sam Fowler-Holmes is a senior associate and Fiona Luong is a trainee solicitor at Sullivan & Worcester UK LLP.

Topics: international trade, EU Blocking Statute, Amendment Order

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Simon Cook is a partner in the Trade & Export Finance Group in Sullivan’s London office. He has experience in a wide variety of banking and finance transactions, including structured trade and commodity finance, project finance, warehouse finance, supply chain finance, ECA finance and borrowing-base facilities. He advises on transactions across emerging markets for both lenders and borrowers notably in the oil, telecoms, soft commodities and metals sectors in Africa and the Middle East, where he was based for four years. Simon also acts for industry bodies and is a member of ITFA’s Africa Regional Committee.


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