No Right to Refuse Performance Due to Inclusion in the EU Terror List
The question of whether the inclusion of a contracting party in the so-called European Union terror list can be derived as a right to refuse performance according to § 275 BGB was addressed by the Higher Regional Court of Frankfurt am Main in its judgment dated 04.11.2021 (Case No.: 6 U 65/20). The focus was on the civil law enforceability of claims in contractual relationships despite listings under European regulations.
Facts and Initial Situation
In the underlying case, an applicant claimed the fulfillment of obligations from a civil contract. The other party claimed that, as a result of the listing of the contracting party on the EU terror list, it was prevented from performing the contractually agreed services. The listing was carried out according to the so-called Terrorism Regulation (EC) No. 2580/2001, which prescribes measures to prevent the provision of economic resources to listed persons or organizations. This was intended to prevent economic benefits from being granted to listed persons or organizations.
Legal Assessment of Refusal to Perform
The Higher Regional Court of Frankfurt clarified that an entry on the EU terror list does not automatically render a civil contract void or impossible. Nor can a general right to refuse performance under § 275 BGB be regularly derived from this. Rather, it is decisive whether the contractual obligation can no longer be fulfilled in light of EU law requirements or whether granting performance is prohibited.
The Terrorism Regulation generally only prohibits actions that consciously and specifically create or provide economic resources for persons or organizations listed. Obligations entered into before listing on the terror list do not cause retroactive invalidity of contracts. The court stated that a refusal to perform can be considered, at most, if a license or authorization required is unavailable or if payment routes are factually blocked by sanctions.
Consequences for Existing Business Relationships
In the present case, the court concluded that the debtor was not justified in refusing its contractual duties solely because of the listing of the contracting party. The EU regulations aim to prevent further support and ensure a degree of legal certainty for already existing claims and contracts by their design. Unless a direct prohibition situation can be proven, the contractual obligation to perform generally remains.
Significance for Contractual Practice
The judgment confirms that the effectiveness of the right to refuse performance generally depends on the specific prohibition situation. Contracting parties cannot generally rely on the listing of the other party to avoid fulfilling existing obligations. Rather, it must be examined in each case whether an EU regulation orders an exclusion of fulfillment or actually prevents execution. In case of uncertainties regarding the legal consequences of a listing, a thorough examination of the relevant legal bases and the particular circumstances of the individual case is essential.
For companies, investors, or wealthy individuals facing similar issues in international trade, a thorough analysis of existing obligations and potential sanction-related hurdles is crucial. Those seeking an individual assessment of their contractual situation can find further information on Legal Advice in Commercial Law.
