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ECJ provides clarity on EU Blocking Regulation

The EU Blocking Regulation (and its new, post-Brexit cousin, the UK Blocking Regulation) is always of interest to the London Market.

The Advocate General of the EU Court of Justice has provided some much-needed clarity in relation to a dispute between Bank Melli (an Iranian bank, with a branch in Germany) and Telekom Deutschland (part of telecoms giant Deutsche Telekom).

TD had withdrawn phone and internet services to the bank in 2018 over concerns about breaching US sanctions. The bank took DT to Court in Hamburg arguing, based on the EU Blocking Regulation (which is designed to curb the power of US extra-territorial/secondary sanctions as against European entities), it had no right to do so. The Hamburg Court asked the ECJ for clarification.

On 12 May 2021 the Advocate General published an Opinion which states an EU entity is not entitled to cancel a contract where the reason for doing so is solely concerns about US sanctions. Where it has other reasons for doing so (eg an internal social responsibility policy which precludes the company from dealing with certain regimes) that may be acceptable. It is for the Court to determine the veracity of those. It must also state its reasons, it cannot be silent.

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