Bank Melli Iran: How corporate social responsibility reports may act as a shield in export controls law.

A short (and late – I am in mopping-up mood it seems) post on the AG’s Opinion in Case C‑124/20 Bank Melli Iran – in which he also cites my former colleague proximus Cédric Ryngaert. Hogan AG’s Opinion addresses the rock and the hard stone, or the devil and the deep blue sea dilemma facing corporations in the light of diverging export laws /sanctions law. May a German bank refuse to do business indeed end business with an Iranian bank, under pressure from US secondary export control laws?

More on the external relations aspects of the case is ia here and of course in the Opinion itself. My interest here lies in part of the Opinion: the AG’s view that an EU undertaking seeking to terminate an otherwise valid contract with an Iranian entity subject to the US sanctions must demonstrate to the  satisfaction of the national court that it did not do so by reason of its desire to comply with those sanctions. It must show other motives, such as ethical reservations about doing business with Iran. These reservations may be documented by a genuinely rolled-out CSR compliance program: (88)

‘In order, however, to establish that the reasons given in respect of any decision to terminate a contract on this ground were in fact sincere, the person referred to in Article 11 of the EU blocking statute in question − in the present case Telekom Deutschland – would need, in my view, to demonstrate that it is actively engaged in a coherent and systematic corporate social-responsibility policy (CSR) which requires them, inter alia, to refuse to deal with any company having links with the Iranian regime.’

CSR programs have been used as carrot ia in Trafigura and as stick ia in Vedanta. The view here is very much the carrot or if one likes, the shield function: CSR policies as a defensive weapon against the rock and hard stone dilemma. That is most interesting for the EU corporations concerned and likely to draw the attention of export sanctions practitioners (both in-house and out) to part of the corporation’s blurb which they may otherwise ignore. Yet it may put too much emphasis on fairly unregulated CSR policy drafting, and compliance issues.

Geert.