Reuters news agency claims ECJ has authorized decisions by EU companies to terminate Iran contracts.

The Reuters news agency has misinterpreted a new legal advice issued by the European Court of Justice (ECJ) claiming that the judgment allows EU companies to terminate contracts with Iran to prevent losses they could suffer because of US sanctions on Tehran.

Reporting on ECJ’s December 21 judgment on a German court case involving Iran’s Bank Melli and German company Telekom, Reuters said that the ruling authorizes decisions by European companies to end contracts with Iranian firms if sticking to the deals would entail disproportionate economic effect because of American sanctions.

That comes as the text of judgment published on ECJ’s website shows that the court in Luxembourg has endorsed Bank Melli’s legal action against Telecom by attributing it to an EU regulation prohibiting European businesses from complying with US sanctions.

ECJ’s judgment will be considered by a German court in Hamburg when it gives a final ruling on Bank Melli’s complaint about Telekom’s decision in 2018 to cut off contracts with the Bank.

The court insisted in its judgment that European companies can only be exempt from EU’s blocking statute on third country sanctions if they have applied for such an exemption and if they can prove that complying with the sanctions would lead to disproportionate economic loss.

Experts say Telekom’s contracts with Bank Melli to provide telecoms services to the bank to carry on its commercial activities are relatively small compared to the company’s entire business in Europe and in the United States where its mother company Deutsche Telekom has a major presence.

The ECJ also reiterated in its judgment that Telekom has not applied to the European Commission for an exemption under the blocking statute.

The court said that Bank Melli’s invocation of the EU law on prohibition of complying with US sanctions would only limit Telekom’s ability to assert its interests generally in the context of a contractual relationship rather than depriving the company from that ability.

It admitted, however, that EU’s blocking statute on third country sanctions can do little to protect companies in the bloc from punishment they might face because of violating US sanctions.

Reuters’ interpretation of the ECJ ruling has been widely reported in websites opposed to the Iranian government and its efforts to revive a 2015 nuclear deal with world powers which could lead to the removal of US sanctions on Iran.