India Needs An Anti-Sanctions Law, And It Needs One Now
Dr Suhasini & Pranjal Chaturvedi
27 May 2026 4:00 PM IST
The growing use of extraterritorial sanctions is challenging India's contractual sovereignty and strategic autonomy. According to a recent report, 'India is looking to enact an EU-like anti-sanctions law'[1], a blocking statute. The Indian government's deliberations on the anti-sanctions statute were prompted by Microsoft's unilateral suspension of Nayara's IT services last July. Though the suspension was short-lived, it raised a loud alarm bell for the Indian government. Microsoft's restoration of Nayara's IT services, after Nayara approached the Delhi High Court for an interim injunction, didn't cool the government's concern, as reflected by the deliberations that continued after a year.
The potential legal basis for the suspension of Microsoft services to Nayara was US OFAC's Executive Order 14024 of April, 2021[2]. This was not an isolated occurrence; rather, in October 2024, OFAC sanctioned 275 individuals and entities across 17 jurisdictions (including 15 India-based companies) involved in dealing with Russia's military industry.
The unilateral termination of a contract, based on the authority of long-arm jurisdiction by any other state, does not align with India's public policy and spirit of India's Contract Law. In Subodh Kumar Singh Rathour v. Kolkata Metropolitan Development Authority (2024) INSC 486[3], speaking through J. Dhananjaya Y. Chandrachud, the Supreme Court of India held that the sanctity of contracts is a fundamental principle underpinning the stability and predictability of legal and commercial relationships[4].
The Anatomy of an EU Blocking Statute:
The blocking statute is a law enacted by one jurisdiction to restrict the enforcement of a law enacted by another jurisdiction with long-arm jurisdiction. First, the European Union enacted Council Regulation (EC) No. 2271/96 (Blocking Statute) to restrict the effect of the "Traffic" Clause (Article III) of the Helms-Burton Act (1996) of the USA[5]. The "Traffic" Clause allowed U.S. nationals to sue in U.S. federal court and individual or business entities, foreign or American, who 'traffic' in property confiscated by the government of Cuba. Traffic here means knowingly or intentionally benefiting from the property's commercial use.
The EU Blocking Statute operates through two primary mechanisms: Refusal of Recognition and the Claw-Back Provision. No judicial pronouncements or administrative actions from outside the European Union, giving effect to sanctions, are either recognised or enforceable within EU territory[6]. The "claw-back" mechanism, Article 6, allows the European Union operators to sue in courts to recover damages caused by the extra-territorial application of foreign laws.
In the Bank Melli Iran v Telekom Deutschland GmbH (Case C-124/20)[7], the CJUE comprehensively clarified the use and purpose of the EU's Anti-Sanctions statute, stating that the Blocking statute provides a potential cause of action against a contractual counterparty when an EU operator terminates the contract to comply with certain US sanctions. Subsequently, the court stated about the statute's requirement of reversing the burden of proof, stating that if preliminary evidence indicates that the EU operator complied with the US Sanctions, then the 'EU operator may be required to establish to the requisite legal standard that his or her conduct did not seek to comply with those laws.” Moreover, the National Court has the authority to weigh in on the balance, whether the EU operator would suffer disproportionate loss if the EU operator is forced to reinstate the contract, and whether the EU operator applied to the European Commission for an authorisation to derogate from the Blocking Statute.
The Anti-Sanction laws create a deliberate legal standoff in which compliance with the provisions of the country of incorporation may amount to a violation of the laws of the operating jurisdiction. This forces the companies caught in a legal standoff to negotiate, not to acquiesce. India is late in recognising this, but Canada, the United Kingdom, France, Mexico, and China are already in sync with this logic.
Beyond Defensive Legalism
The US law's long-arm jurisdiction is designed to capture entities far beyond American domestic territory. The enforceability of the USA's sanctions is broad enough to cover not only American companies but also Indian subsidiaries of American companies. The blocking statute will compel corporations to choose between sanctions of a foreign jurisdiction and compliance with Indian law.
This demonstrates the strategic utility of blocking statutes in international economic negotiations. Every US President from 1996 to 2019 kept on suspending Article III of the Helms-Burton Act, because of the blocking statute enacted by the EU, Canada and Mexico. This establishes the credibility of the blocking statute as a bargaining chip. The US president, Donald Trump, activated Article III of the Helms-Burton Act as part of his campaign to create maximum pressure on Cuba, reflecting his confrontational approach in geopolitics. The activation did not provide the avalanche, but rather reflects failure in the desired goal due to the enactment of a blocking statute by several jurisdictions, consequently resulting in the increased cost of enforcing Article III of the Act.
A well-designed Indian blocking statute would serve three purposes simultaneously. Firstly, it would provide a legal safeguard to companies to resist foreign sanctions. Secondly, it would be a clear message to the world that India treats sanctions as a sovereign matter, and the response would be legal, not just diplomatic. Thirdly, it would position India as a leader in the Global South, resisting legal frameworks that enable unilateral coercive economic sanctions and securing its strategic autonomy. From India, the enactment of anti-sanction laws would be a legislative expression of India's commitment to state sovereignty against economic sanctions that violate international law.
Firm in Principle, Flexible in Design
Though practical hardships exist in the implementation of India's own blocking statute, a statement that India will not passively accept the extraterritorial subordination of its legal order is necessary. In the Trump era of assertive diplomacy, the anti-sanctions statute by India risks being perceived as a hostile act in Washington. But, this can not be a reason for indefinite inaction. The enactment of anti-sanction statutes must be projected as a message of India's sovereignty, rather than a statement of hostility to any of its strategic allies, especially when the European Union, China, Russia, and Canada have already enacted similar statutes.
The disclosure of a government official not translating into legislation would remain just a trial balloon. The European Union enacted a blocking statute to ensure protection for its economic operators. China enacted blocking measures to ensure policy autonomy. Canada enacted measures to protect its sovereignty. Along with the mentioned reasons, for India, the blocking statute is necessary to ensure contractual certainty, regulatory autonomy, and sovereign decision-making in an era of extraterritorial sanctions.
Anil Sasi, “Govt explores EU-like law to safeguard firms against third countries' sanctions”, The Indian Express, May 4, 2026, available at: The Indian Express (Last visited on May 21, 2026). ↑
Office of Foreign Assets Control, U.S. Department of the Treasury, “Russian Harmful Foreign Activities Sanctions”, Frequently Asked Questions, available at: OFAC FAQs (Last visited on May 21, 2026) ↑
Subodh Kumar Singh Rathour v. Kolkata Metropolitan Development Authority, (2024) INSC 486 (India) ↑
Yash Mittal, “Supreme Court Cautions Authorities Against Arbitrary Cancellation Of Public Tenders; Says It Can Impact Private-Public Partnerships”, LiveLaw, available at: https://www.livelaw.in/supreme-court/supreme-court-cautions-authories-against-arbitrary-cancellation-of-public-tenders-says-it-can-impact-private-public-partnerships-262952?utm_source=chatgpt.com (Last visited on May 21, 2026). ↑
David Kaye, “The Helms-Burton Act: Title III and International Claims”, 20 Hastings International & Comparative Law Review 729 (1997), available at: https://repository.uclawsf.edu/hastings_international_comparative_law_review/vol20/iss4/2/, (Last visited on May 21, 2026). ↑
European Commission, “The Blocking Statute”, available at: European Commission – Extraterritoriality (Blocking Statute) (Last visited on May 21, 2026). ↑
Bank Melli Iran v. Telekom Deutschland GmbH, Case C-124/20, Judgment of the Court (Grand Chamber), European Court of Justice, Dec. 21, 2021. ↑
Author Suhasini is an Assistant Professor at School of Law, Bennett University and Pranjal is a Doctoral Research Fellow at Bennett University. Views are personal.
