EU Court Successes Complicate Sanctions Against Iranian, Russian Companies

Iranian banks’ recent successes in the EU courts are complicating sanctions ahead of June-end talks to curb Iran’s nuclear ambitions.



Iranian eyes will be on the European Court of Justice on February 27 as the European Union and British government seek to appeal an earlier judgement overturning sanctions against Bank Mellat.

The private bank, which had been accused of funding the Iranian nuclear programme under the UK’s Terrorism Act, has also served up a claim of up to $4 billion in London’s commercial court, citing compensation to restore the financial position it would have enjoyed had trading restrictions not been imposed in 2009.

Next week’s appeal is another key moment for Iranian sanctions in the EU this year, after the bloc’s second highest court struck down sanctions against Bank Tejarat and 40 shipping firms in January on a lack of evidence, although granting the EU time to appeal or reimpose the sanctions under different legal grounds.

Following these decisions, Sarosh Zaiwalla, senior partner, of Zaiwalla & Co Solicitors which acted on behalf of both banks, told Gulf Business he is already being approached by and receiving instructions from other Iranian entities wanting to challenge their sanctions.

“In Tejarat’s decision I think the court has once again reiterated that you cannot merely on suspicion re-list the entity or an individual, you must have hard evidence and you cannot simply rule by association, just because there was a bank account is not sufficient to show that Bank Tejarat was supporting the Iranian government’s policy of nuclear proliferation,” said Zaiwalla.

“The EU is now changing its procedural rules to allow secret hearings, but even then unless there is concocted evidence in the case of Bank Tejarat, we are confident that no such evidence exists,” he added.

Regarding Bank Mellat’s compensation claim, Zaiwalla believes the bank will recover some damages: “It may not be $4 billion, but what the court considers the fit, right and correct loss.” A preliminary issue is expected in March or April with a judgment possible by the end of the year.

Bank Tejarat will also be taking similar action in the EU courts, he reveals, although differences in English and EU law mean the Iranian lender will not be able to claim as much compensation.

Whether other Iranian companies will follow their example is expected to depend on talks between the six world powers and Iran, with an end of June deadline.

In the mean time Zaiwalla believes activity from Russian companies looking to lift their EU sanctions may increase, depending on the political situation.

Russian-owned oil giant Rosneft had its UK sanctions challenge referred to the European Court of Justice earlier this month by the British High Court.