Abstract | The Blocking Statute has been an integral part of EU law for a number of years and serves as an EU "anti-sanctions" instrument. It inherently aims to protect EU natural and legal persons against the extra-territorial application of selected laws enumerated in the Annex to the Blocking Statute.
The Blocking Statute offers, inter alia, a defence mechanism consisting in special grounds for the refusal of the recognition and enforcement of a decision, introduced in Article 4 of the Blocking Statute. The provision stipulates that no decision giving effect, directly or indirectly, to the laws specified in the Annex to the Blocking Statute shall be recognized or be enforceable in any manner in the territory of the EU. That being said, the European Commission has interpreted this provision as essentially covering all types of decisions, i.e. judgments or decisions of a judicial, administrative, arbitral or any other nature.
But this interpretation is rather controversial, primarily in relation to the enforcement of an arbitral award. The aim of this paper is to offer a more detailed analysis of the Blocking Statute in the context of the recognition and enforcement of judgments/decisions, and to highlight any questionable aspects, especially in relation to arbitral awards and court settlements.
I. Introduction
5.01. The States regularly apply sanctions against each other in the international environment, whether for political, business/ economic or other reasons. Sanctions are, however, often accompanied by anti-sanctions laws. Such laws are, conversely, aimed at preventing the effects of the sanctions imposed by another State. But the authors of such laws are frequently ignorant of some of the consequences relating to such measures, primarily in the sense of their overlap in private-law relations.
5.02. One such regime has been introduced by the EU Blocking Statute. This Regulation is based on the principle of the identification of "unwanted" legal rules of foreign States and the subsequent blocking of the application thereof, shielded by the argument of protecting natural and legal EU persons. Admittedly, some efforts to prevent the consequences of the application of foreign sanctions regimes could be functional, but their impact on private-law relations could be problematic.
5.03. Although the Blocking Statute entered into force and effect as early as on 29 November 1996, it has been largely ignored by legal practitioners. Hence, this paper aims to analyse the Blocking Statute and to outline the principles of its operation. At the same time, however, this paper highlights some of the controversial aspects associated with the application of the Blocking Statute in relation to the recognition and enforcement of judgments/decisions.
II. Blocking Statute
5.04. The established practice among the States in the international environment is to use sanctions to accomplish their desired objectives. Hand in hand with the introduction of sanctions, the States started to use anti-sanctions laws. One such instrument at the EU level is Council Regulation (EC) No 2271/96, the Blocking Statute. This Regulation aims to "shield" selected EU persons by ensuring protection against the application of selected legislative instruments enumerated in the Annex to the Regulation. But the Blocking Statute goes even further and itself stipulates special grounds for the refusal to recognise and enforce certain judgments/decisions. The analysis of the refusal to recognise and enforce judgments/decisions in terms of the Blocking Statute requires a detailed clarification of the Blocking Statute itself at the general level. This clarification will help to explain the overall context.
5.05. Article 1 of the Blocking Statute stipulates that the Regulation aims to provide protection (cit.): "... against and counteracts the effects of the extra-territorial application of the laws specified in the Annex of this Regulation, including regulations and other legislative instruments, and of actions based thereon or resulting therefrom, where such application affects the interests of persons, referred to in Article 11, engaging in international trade and/ or the movement of capital and related commercial activities between the Community and third countries." The scope ratione personae is provided for in Article 11 of the Blocking Statute, which stipulates that the Blocking Statute shall apply to (cit.):
- any natural person being a resident in the Community1 and a national of a Member State,
- any legal person incorporated within the Community,
- any natural or legal person referred to in Article 1 (2) of Regulation (EEC) No 4055/86,2
- any other natural person being a resident in the Community, unless that person is in the country of which he is a national, and
- any other natural person within the Community, including its territorial waters and air space and in any aircraft or on any vessel under the jurisdiction or control of a Member State, acting in a professional capacity.
5.06. It is important to keep in mind that according to Article 1 of the Blocking Statute, the Regulation only applies to defined legal transactions. Indeed, the Blocking Statute aims to provide protection against the application of selected laws only if such application affects the interests of persons referred to in Article 11 (cit.): "... engaging in international trade and/or the movement of capital and related commercial activities between the Community and third countries." This provision is relatively limiting in that not every person referred to in Article 11 is automatically protected against the effects of specified laws in each and every legal transaction. Nevertheless, the definition is sufficiently general to essentially cover all activities performed in international trade. Indeed, the additional requirement of between the Community and third countries must be perceived as a merely territorial condition. It should not just cover legal transactions involving the Community [EU] acting directly vis-à-vis a third country. Quite the contrary, the Blocking Statute should target the commercial activities of natural or legal EU persons (more specifically, the persons referred to in Article 11 of the Blocking Statute) vis-à-vis persons from non-EU countries.
5.07. The scope of the Blocking Statute is determined primarily by the individual legislative instruments specified in the Annex to the Blocking Statute. At present, the Annex to the Blocking Statute only lists US legislative instruments, specifically:
- National Defense Authorization Act for Fiscal Year 1993;3
- Cuban Liberty and Democratic Solidarity Act of 1996;4
- Iran Sanctions Act of 1996;
- Iran Freedom and Counter-Proliferation Act of 2012;
- National Defense Authorization Act for Fiscal Year 2012;
- Iran Threat Reduction and Syria Human Rights Act of 2012; and
- Iranian Transactions and Sanctions Regulations.
5.08. The above legislative instruments indicate that the Blocking Statute is only activated in a limited number of cases, because the laws specified in the Annex to the Blocking Statute concern relatively narrowly-defined matters. But the general wording of the Blocking Statute indicates that future expansion of the applicability of the provisions of the Blocking Statute to other areas of commercial activities cannot be ruled out. This will always depend on the legislative instruments included in the Annex to the Blocking Statute. The following section of this paper therefore presents a comprehensive analysis of this issue, albeit with due respect for the scope of applicability due to the individual laws included in the Annex to the Blocking Statute as of the day of this paper.
5.09. Despite the fact that the application of the Blocking Statute in the context of Article 1 is conceivable primarily in relation to commercial (especially banking) relations, one cannot rule out a broader scope. For instance, the Annex to the Blocking Statute lists the following possible damages to EU interests in relation to the Cuban Liberty and Democratic Solidarity Act of 1996 (cit.): "Legal proceedings in the USA, based upon liability already accruing, against EU citizens or companies involved in trafficking, leading to judgments/decisions to pay (multiple) compensation to the USA party. Refusal of entry into the USA for persons involved in trafficking, including the spouses, minor children and agents thereof." Hence, these legal regulations might eventually result in interventions in other legal areas, even family law. Similarly, the inclusion of the National Defense Authorization Act for Fiscal Year 2012 in the Annex to the Blocking Statute is justified by potential civil and criminal penalties. Consequently, the Blocking Statute cannot be interpreted restrictively, only in relation to issues of commercial law.
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Footnotes
1. According to the footnote incorporated in Article 11(1) of the Blocking Statute, "being a resident in the Community" means (cit.): "... being legally established in the Community for a period of at least six months within the 12-month period immediately prior to the date on which, under this Regulation, an obligation arises or a right is exercised."
2. This specifically refers to Council Regulation (EEC) No 4055/86 of 22 December 1986 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries.
3. Here specifically in relation to Title XVII – "Cuban Democracy Act 1992", sections 1704 and 1706.
4. Here specifically in relation to Titles I, III and IV.
Originally published by Czech Yearbook of International Law.
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