Glossary term
Blocking Statute
Subject: Financial Crime, Sanctions
Also known as: Anti-boycott law, Anti-sanctions statute
A blocking statute is a law that stops people and firms in one country from complying with another country's sanctions, usually because that country sees those sanctions as an overreach of its jurisdiction.
Explanation
Sanctions imposed by one state can reach firms elsewhere, especially through secondary measures. The affected state may answer by passing a law that bars its own businesses from obeying them, declares foreign court rulings based on them unenforceable, or lets firms claim damages. The best-known example is the European Union's 1996 regulation, adopted in response to American measures against Cuba and later extended to Iran. Companies caught between two laws face a conflict: following the foreign sanctions risks breaching local law, and ignoring them risks penalties abroad. Some blocking laws allow exemptions on application. Compliance teams resolve such conflicts through legal advice and documented decisions. Caught between the two laws, a firm needs a documented legal view before it stops or continues a contract.
Example
A manufacturer in an EU country supplies a customer in a country under US sanctions. Its bank, which has US ties, warns that it will end the relationship unless the manufacturer stops. The manufacturer's lawyers point out that EU blocking rules limit its freedom to stop trading for that reason alone. It applies for an exemption and asks the bank to explain its position in writing.
Not to be confused with
- Secondary Sanctions
- Secondary sanctions penalise outside parties for dealing with a target. A blocking statute is the counter-measure that forbids those parties to comply.