German court narrows Clearstream’s liability in Iranian securities dispute
On 18 March 2025, Germany’s Federal Court of Justice (Bundesgerichtshof, BGH) handed down a key ruling in a long-running dispute between Clearstream Banking AG and an Iranian financial institution with a branch in Munich. The case centred on securities worth about €10.5 million, purchased in 2019, which were later frozen by Clearstream. The Iranian bank sued for damages, arguing that Clearstream’s actions unlawfully deprived it of access to its assets.
The background stretches back to August 2019, when Clearstream placed a freeze on the securities. In January 2020, the Iranian bank attempted to issue a disposal order, but the transaction was never carried out. By October 2020, the U.S. Treasury had expanded its sanctions regime with Executive Order 13902, imposing sweeping financial restrictions on Iranian entities. Clearstream’s earlier freeze thus collided with a changing legal landscape, straddling both U.S. and European rules.
In its decision, the BGH’s XI Civil Senate (Case No. XI ZR 59/23) held that the Iranian bank could not claim contractual damages, since it had no direct custody agreement with Clearstream. The judges rejected the argument that Clearstream owed the bank contractual duties, effectively shielding the Frankfurt-based institution from liability on that front. However, the court left open a possible path to recovery through tort claims under Section 823(1) of the German Civil Code, which addresses unlawful interference with property rights.The ruling also clarified the limits of the EU’s Blocking Regulation. The court found that Article 6(1), which provides for compensation in certain cases of unlawful compliance with foreign sanctions, did not apply to the Iranian bank, as it was neither an EU entity nor a protected subsidiary. For Clearstream, the decision narrows the scope of potential liability but keeps alive the possibility of tort-based claims. For international custodians, it highlights the precarious position of financial intermediaries caught between U.S. sanctions and European legal protections.