European High Court: European Companies Permitted to Terminate Contracts with Iran Due to US Sanctions

The Court of Justice of the European Union, following Iran’s complaint against a German company, announced that European companies are permitted to terminate contracts with Iran in case of “disproportionate economic damage” resulting from US sanctions.

Following the complaint by Bank Melli Iran against German company “Deutsche Telekom” after one of its subsidiaries unilaterally withdrew from a contract to provide internet and telephone services to Bank Melli Iran’s branch in Hamburg, the Court of Justice of the European Union announced that European companies can terminate their contracts with Iran in case of “disproportionate economic damage” caused by sanctions.

The European high court, based in Luxembourg, states that European companies, if they determine that complying with contracts they have signed with Iran will result in “disproportionate economic damage” from US sanctions, are permitted to terminate their agreements with Iran.

“Telekom Deutschland,” a subsidiary of German company Deutsche Telekom, which derives half of its revenue from operations in the United States, unilaterally terminated its contract to provide telephone and internet services to Bank Melli Iran’s Hamburg branch in 2018 with the onset of US sanctions against the Islamic Republic.

Bank Melli Iran’s German branch filed a lawsuit against Telekom Deutschland in 2019 and, citing the EU’s protective umbrella laws for European companies against foreign sanctions, sought to receive half a million dollars in damages from the German company.

Now the Court of Justice of the European Union must decide whether Telekom Deutschland would have suffered “disproportionate economic damage” if it had continued providing services to the Iranian bank.

After the US withdrawal from the JCPOA in 2018, the European Union enacted laws to protect European companies and their contracts with Iran against US sanctions, but in practice, European companies abandoned Iran projects and terminated their contracts due to extensive business and financial relations with the United States.

The aforementioned German company has not yet requested an exemption from the EU’s protective umbrella laws, and it is not entirely clear what the final ruling of the Court of Justice of the European Union regarding this company will be.

France’s news agency has also reported in this regard that judges of the Court of Justice of the European Union have concluded on one hand that Iran can file a lawsuit based on the EU’s protective umbrella laws that prevent its companies from complying with unilateral US sanctions, but European companies also have the right to freedom of action under the EU’s Charter of Fundamental Rights to protect their business and financial activities.

The judges of the European high court say that the EU’s protective umbrella laws are essentially an effort to uphold the law and the interests of European companies, but in practice cannot counter the consequences of US sanctions on European companies.

Thus, it appears that Bank Melli Iran will have little chance of receiving compensation from the German company based on Deutsche Telekom’s violation of the EU’s protective umbrella laws, especially since half of Telekom Deutschland’s revenue comes from operations and services provided in the United States.

Source: Radio Farda