Sanctions Confirmations In Finance Documents And The Updated EU Blocking Statute

Author:Mr Adam Pierce

On 7 August 2018, an updated version of EU Regulation 2271/96/EC (known as the EU Blocking Statute) came into force. The update was a response to the US withdrawal from the 2015 Joint Comprehensive Plan of Action relating to Iran, and the re-imposition of certain US sanctions on Iran. This note explains how and why this has changed the forms of sanctions-related representations and undertakings (sanctions confirmations) many European lenders are requesting from their borrowers.


Over the last five years, it has become increasingly common in the European loan market:

for lenders to demand sanctions confirmations on most deals, regardless of currency, facility type or location of the parties; and (except in the case of German lenders, who are subject to their own domestic anti-blocking legislation) for those sanctions confirmations to extend to US sanctions, as well as EU and domestic sanctions which directly apply to European lenders and borrowers. For background on how sanctions confirmations have developed in the loan markets, and their typical scope, see our earlier article Sanctions confirmations in facility agreements - is there a market standard?. However, all EU-incorporated companies are subject to the EU Blocking Statute. Since it was introduced in the 1990s, the EU Blocking Statute has prohibited those bound by it from complying with:

specified US sanctions, in particular specified US sanctions on Cuba and Iran (the Blocked US Sanctions); or "any requirement or prohibition based on or resulting from" them. Conflict between sanctions confirmations and the EU Blocking Statute

Assume an EU-incorporated lender requires its borrowers, as a policy point, to:

represent that they are not the target of any US, EU or UN sanctions (the Relevant Sanctions); and undertake not to use loan proceeds in any country, or for the benefit of any person, targeted by the Relevant Sanctions. Arguably the primary purpose of that policy is to ensure that the lender itself does not breach the Relevant Sanctions - including the Blocked US Sanctions - by providing the loan. This could constitute a breach by the lender of the EU Blocking Statute. As a result, there is a risk for the lender both of liability for that breach, and that the relevant contractual protection is unenforceable. An EU-incorporated borrower could also breach the EU Blocking Statute by giving sanctions confirmations which include the Blocked US Sanctions within their...

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