The Higher Regional Court [Oberlandesgericht, OLG] of
Hamburg has ruled that banks cannot simply terminate the accounts
of enterprises that are listed in the so-called Iran
Embargo Regulation. The proceedings have highlighted a
situation increasingly being faced by bank customers in connection
with their legal business conducted with Iran: where the business
policy decisions of banks exceed the legal stipulations of the Iran
A corporation and the applicant in said proceedings renders a
variety of services, in particular for the Islamic Republic of Iran
Shipping Lines. In the annexes of the Council Regulation (EU)
concerning Restrictive Measures Against Iran (EU/267/2012), the
so-called Iran Embargo Regulation, the company is listed as an
entity whose assets are to be frozen and to whom no economic
resources may be made available. The respondent is a Hamburg
commercial bank where the applicant holds an account. The Hamburg
bank terminated the business account on grounds that the company is
listed in the annexes of the Iran Embargo Regulation. The company
opposed the account termination, inter alia because it had been
unable to open a new account with another European bank. The
applicant had evidently approached more than 100 European credit
institutions to try and open an account.
The Higher Regional Court of Hamburg ruled that the account
termination was invalid. The account must at least be continued
until the customer can successfully open an account with another
bank. It argued that the bank holding the account is obliged
pursuant to the General Business Terms and Conditions to take due
account of the customer's legitimate interests. In the
court's opinion, it is a legitimate interest of the customer
that it relies on the account in order to maintain its business
operations. The Senate expressly and especially states in this
connection that the Iran Embargo Regulation does not demand the
termination of accounts. As far as the relationship between the
bank and the listed customer is concerned, the freezing of funds
and all economic resources as demanded by the Regulation means that
no account movements are permitted without the authorisation of
German Central Bank [Bundesbank]. The Regulation does not, on the
other hand, demand that the account relationship be terminated. The
Senate justifies this by arguing that the creation of the
authorisation proceedings at the German Central Bank would
otherwise be superfluous.
The proceedings highlight a situation that is increasingly being
faced by bank customers in connection with their legal business
with Iran: where the business policy decisions of banks exceed the
legal stipulations of the Iran Embargo Regulation. For example,
many banks are currently refusing to accept and credit payments
coming from Iran for their customers and that is even if the actual
transaction underlying the money transfer is legal. The
authorisation proceedings of the German Central Bank are therewith
being made obsolete; if no payment is accepted, then there can be
no examination of incoming payments.
According to the Regulation, the German Central Bank will not
authorise a transfer of funds if sufficient grounds exist to
indicate that such transfer of funds might violate one of the
prohibitions or obligations of the Regulation. However, fact is
that, even with the currently applicable Iran Embargo Regulation,
many transactions are still possible. Many entrepreneurs are
already shying away from supplying to Iran, however, because they
fear that the payment owed therefor will either not reach them or
only will only reach them in Germany with great difficulty. Hence,
in practice the embargo is being extended to include legitimate
transactions, as was not intended by the Regulation, however.
In the current proceedings concerning the termination of the bank
account, the Higher Regional Court of Hamburg placed the legitimate
interests of the customer above the business policy interests of
the bank. Case scenarios in which a crediting of funds is refused
have not yet been the subject matter of court proceedings, but are
still comparable. Here as well, one could argue that the legitimate
interests of the customer may not simply be sacrificed in favour of
business policy decisions.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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