EU Sanctions on Iranian Businesses Adjudged Illegal
Posted: February 27, 2013 Filed under: Nuclear 2 CommentsI’ve also been meaning to write something for some time on the recent cases in which the EU General Court has ruled that sanctions imposed on Iranian businesses unilaterally by the EU – i.e. unauthorized by the U.N. Security Council – are unlawful. These are very significant cases, and as I understand it the illegality of these sanctions has become so well settled that the affected parties are now moving on to actions against the EU seeking compensation for the harm caused by these illegal acts of the EU. As noted in this report of the most recent case, the Court has ruled that “The Council (of EU governments) is in breach of the obligation to state reasons and the obligation to disclose to the applicant … the evidence adduced against it.” The Bank Saderat case can be viewed at this link.
EU law is one of the many areas outside of my expertise, so I would welcome comments from ACL colleagues and others who could explain to readers the bases for these decisions of the General Court better than I can.
Arms Control Law 
Regarding harm, it is done not only to Iran entities, the sanctions targets, but harm is also done to the entities, European in this case, with which the Iranian entities (e.g. banks) have been doing business.
When we look at the economic fortunes of those countries knuckling under to US pressure, we see diminished economic fortunes compared to the countries flipping Uncle Sam the bird. Sanctions don’t cause the entire difference of course, but they are a harmful component. Peugeot, for example, has suffered big-time from having to shutter its Iran car production operation. So I wouldn’t be surprised to learn that this EU General Court decision was France-driven, a way out of a harmful policy.
Real GDP Growth
projections 2013 — 2014
world 3.4 — 4.1
Acceding to sanctions
France 0.3 — 0.9
Italy -1.0 — 0.5
UK 1.0 — 1.9
also
Japan 1.2 — 0.7
US 2.0 — 3.0
not acceding
China 8.2 — 8.5
India 5.9 — 6.4
Korea 3.2 — 3.9
Russia 3.7 — 3.8
Click to access 022113.pdf
Not being an international trade attorney, I have always been curious about the legality of US extraterritorial sanctions. Back in the 1970s when the Arabs attempted to impose extraterritorial sanctions and “secondary” boycotts on any company anywhere doing business with Israel, the US was the first to harumph that such boycotts constituted an attempt by the Arabs to “impose sovereignty” on others and are contrary to the principle of the freedom of trade etc., and the US even passed blocking laws which prohibited any American company from abiding by the extraterrorial sanctions.
Laws and rules against secondary boycotts were created at the international level, at the World Trade Organization for example. In the case of trade with Cuba, such extraterritorial US sanctions (Helms Burton Act) have been effectively challenged by a number of countries (Japan, Mexico, etc.) and in addition several countries have passed domestic laws (countermeasures and “blocking statutes”) that specifically prohibit their nationals from abiding by extraterrorial US sanctions, as well as directing their courts to disregard judgments from foreign (US) courts in enforcing the sanctions. Indeed, the US itself has such countermeasure laws that prohibit Americans from abiding by the secondary Arab oil embargo on Israel, and there is an entire office dedicated to this at the State Dept.
In the case of Iran, the EU passed countermeasure laws (EU Council Regulation 2271/96) that that specifically addressed the extraterritorial application of US sanctions law on trade with both Cuba and Iran. As I understand it, the EU initiated actions at the WTO over US extraterritorial sanctions, but agreed to suspend the actions after an agreed “framework” was negotiated between the US and EU. However, if a country decided to pursue the actions against the US before the WTO, it probably stands a good chance of winning. The question is one of political will and economic necessity, and I am sure the US does not want things to reach that point so it is willing to grant exemptions and waivers to avoid things coming to a head.