European Court of Justice: European companies are allowed to terminate contracts with Iran due to US sanctions
Following Iran's complaint against a German company, the European Court of Justice ruled that European companies are allowed to terminate contracts with Iran if they suffer "disproportionate economic damage" due to US sanctions.
Following the complaint filed by the National Bank of Iran against the German company Deutsche Telekom after one of the company's subsidiaries unilaterally withdrew from the contract to provide internet and telephone services to the National Bank of Iran branch in Hamburg, the Court of Justice of the European Union announced that European companies can terminate their contracts with Iran in the event of "disproportionate economic damage" caused by sanctions.
The European Court of Justice, based in Luxembourg, says European companies can terminate their contracts with Iran if they find that they will suffer "disproportionate economic damage" from US sanctions by fulfilling them.
Telekom Deutschland, a subsidiary of Deutsche Telekom, which derives half of its revenue from its activities in the United States, unilaterally canceled the contract to provide telephone and internet services to the Hamburg branch of the National Bank of Iran in 2018, following the start of US sanctions against the Islamic Republic.
The German branch of the National Bank filed a lawsuit against Telekom Deutschland in 2019, seeking half a million dollars in damages from the German company, citing the European Union's umbrella laws protecting European companies against foreign sanctions.
The Court of Justice of the European Union must now decide whether Telekom Deutschland would have suffered “disproportionate economic harm” if it had continued to provide services to the Iranian bank.
After the US withdrew from the JCPOA in 2018, the European Union enacted laws to protect European companies and their contracts with Iran from US sanctions, but in practice, European companies abandoned Iranian projects and terminated their contracts due to their extensive trade and financial relations with the US.
The German company has not yet applied for exemption from the EU's umbrella rules, and it is not clear what the final ruling of the Court of Justice of the European Union will be regarding the company.
In the same context, the AFP news agency reported that judges at the Court of Justice of the European Union have concluded that Iran can sue under the EU's umbrella laws, which prohibit its companies from complying with unilateral US sanctions, but that European companies also have the right to freedom of action to protect their commercial and financial activities under the EU's Charter of Fundamental Rights.
The judges of the European Court of Justice say that the EU's umbrella laws are actually an attempt to protect the law and the interests of European companies, but in practice they are not capable of dealing with the consequences of US sanctions against European companies.
Thus, it seems that the National Bank of Iran will not have much chance of receiving compensation from the German company citing Deutsche Telekom's violation of the EU's umbrella rules, especially since half of Deutsche Telekom's revenue comes from activities and services it provides in the United States.
Source: Radio Farda
