EU court rules on business rights in light of exploding costs for ditching Iran deals — Analysis
The European Court of Justice (ECJ) in Luxembourg has ruled that companies based in the EU can cancel contracts with Iranian organizations if upholding the original deal would lead to “disproportionate economic loss.”
On Tuesday, the ECJ set a precedent by ruling that Deutsche Telekom’s decision to terminate a contract with the German branch of the state-owned Bank Melli Iran would be lawful if a regional court contended that the telecoms firm would have sustained major losses due to US sanctions on Tehran.
Bank Melli Iran sued Deutsche Telekom after it terminated a 2018 contract with the company. This occurred before its expiration. The US unilaterally pulled out of the Iran nuclear accord and put crippling sanctions on Iranian business. German companies make up about half of their revenue from US-based enterprises. This concern raised concerns about the possibility that they might be ensnared in American sanctions.
In an attempt to save the nuclear deal following the US’ withdrawal, the EU had passed a “blocking statute”Banning individuals and corporations from 27 nations bloc countries from complying with sanctions
Although the ECJ stated that they were aware of the fact, “blocking statute”Could be “relied on in civil proceedings,” the EU’s prohibition could not “infringe the freedom to conduct a business … by leading to disproportionate economic loss.”
According to the ECJ, the Higher Regional Court Hamburg will have to decide whether Deutsche Telekom would uphold its contract. “disproportionate economic loss.” If that were deemed to be the case, Deutsche Telekom’s move would indeed be lawful.
However, it noted that Deutsche Telekom hadn’t applied for a release from the contract pursuant to the blocking statute. The Hamburg court was to then take this into account.
There is no way to know when the final ruling will come.