BGH ruling: US sanctions as the basis for freezing assets – Iranian bank's claim for damages against German central securities depository

published on 20 March 2025 | reading time approx. 2 minutes

On 18 March 2025, the German Federal Court of Justice (BGH) handed down a landmark decision in the proceedings XI ZR 59/23 regarding a claim for damages by an Iranian bank against the German central securities depository. The point of contention was the defendant's freezing of the securities of the plaintiff bank. The judgement throws light on key legal issues regarding the protection of property under Section 823 (1) of the German Civil Code (BGB) and the application of the EU Blocking Regulation.

The facts of the case

The plaintiff bank, which operates a branch in Munich, purchased securities with a nominal value of around €10.5 million in 2019. These were held in custody by the defendant in its capacity as a central securities depository. In August 2019, the defendant froze the securities by transferring them to a blocked account. The background to this measure was the inclusion of the plaintiff on the Specially Designated Nationals and Blocked Person List (SDN list) of the US Office of Foreign Assets Control (OFAC) in November 2018.

In January 2020, the plaintiff instructed a Volksbank to sell the securities. However, the defendant refused to rebook the securities on the grounds that legal clarification was still required with regard to possible US sanctions. The plaintiff then claimed damages in the amount of €11.1 million, including for lost sales proceeds and unpaid interest.

Course of the proceedings so far

The Frankfurt am Main District Court dismissed the claim. The Frankfurt Higher Regional Court upheld the judgment, but found that some of the alternative claims were unfounded. The claimant then lodged an appeal and pursued its claim further. The defendant also lodged an appeal in order to have the claim finally dismissed.

Decision of the Federal Court of Justice

The Federal Court of Justice set aside the judgment under appeal and referred the case back to the court of appeal for retrial. It found that the plaintiff was not entitled to any contractual claims for damages, but that the defendant had in fact committed an infringement of property rights under Section 823 (1) of the German Civil Code (BGB).

Key statements of the judgment:

No contractual claim for damages: There was neither a custody agreement nor a commission agreement between the plaintiff and the defendant. A custody agreement with protective effect in favour of third parties was not assumed.
Infringement of ownership according to § 823 para. 1 BGB: The freezing of the securities constitutes an unlawful infringement of the plaintiff's ownership. By blocking the securities, the defendant prevented their intended use.
No claims under the EU Blocking Regulation: The plaintiff cannot invoke Article 6(1) of the EU Blocking Regulation because, as a bank established under Iranian law, it is not a legal entity within the meaning of Article 11 of that regulation.
Illegality of the measure: The defendant should have carried out a proportionality test regarding the impact of the US sanctions on its business activities. However, at the time in question (January 2020), the US secondary sanctions had not yet come into force.
Unresolved issues of fault: The Court of Appeal must now clarify whether the defendant acted negligently and whether the property infringement was the cause of the damage claimed by the plaintiff.

Legal basis

The judgment is based in particular on the following provisions:

Sec. 823 para. 1 of the German Civil Code (BGB): protection of property and other rights
Art. 1, 5, 6, 11 EU Blocking Regulation (Regulation (EC) No. 2271/96): protection against extraterritorial application of third-country sanctions
Iran Freedom and Counter-Proliferation Act of 2012: US legislation to sanction companies with Iran business

Comparison to the legal situation with EU sanctions

While the BGH ruling deals with the effects of US sanctions, the legal situation with EU sanctions is regulated differently. The EU sanction regulations contain explicit provisions on claims for damages in the event of the freezing of assets. Companies that freeze assets due to EU sanctions generally act on a clear legal basis and are protected from claims for damages provided that they comply with the requirements of the respective EU regulations.

Significance of the judgment

The Federal Court of Justice's decision is groundbreaking for dealing with the effects of extraterritorial US sanctions on companies in Germany. It strengthens the protection of property and sets limits for the voluntary compliance with US sanctions law. At the same time, it sets high standards for a proportionality test and emphasises the importance of the EU Blocking Regulation. The ruling could also have an impact on other cases related to international sanctions

Website: Der Bundesgerichtshof - Presse : Pressemitteilungen - Bundesgerichtshof entscheidet über die Schadensersatzforderung einer iranischen Bank gegen die deutsche Wertpapiersammelbank wegen des Einfrierens von Wertpapieren

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