Whalesbook
India Weighs Law to Block Foreign Sanctions Impact
India is considering a new law to shield its companies from foreign sanctions. The government is studying the European Union's 1996 Blocking Statute for ideas on how to prevent foreign laws from being applied beyond their own borders, especially when these sanctions disrupt essential services from international firms working in India. This initiative aims to maintain business continuity and protect Indian companies from the fallout of sanctions imposed by other countries on their partners, creating a domestic shield against global political actions.
Microsoft Service Halt for Nayara Energy Sparks Policy Change
A key reason for this policy shift was Microsoft's sudden halt of IT services for Nayara Energy last July. This happened after the EU sanctioned Nayara Energy as part of measures against Russia. The disruption temporarily affected Outlook and Teams, cutting off the oil refiner's access to its data and tools even though they were licensed. The incident highlighted how vulnerable Indian companies are when relying on foreign digital systems. After Nayara Energy raised concerns, the Finance Ministry cited the EU statute as a model, proposing a similar domestic law. The main aim is to require Indian companies to sign service contracts and buy products from global providers only through their Indian subsidiaries.
EU's Own Law Offers a Template
The EU Blocking Statute, introduced in 1996, states that using sanctions that apply outside a country's borders is against international law. It shields EU individuals and companies by making it illegal to comply with such foreign sanctions, voiding non-EU court rulings based on them, and allowing companies to recover damages.
How India's Law Could Work, and Hurdles Ahead
The proposed law would make it illegal for companies registered in India to follow sanctions from their home countries or any other jurisdiction. This move is still in the early discussions among government departments. While the EU's law was first aimed at sanctions against Cuba and Iran, it has proven challenging to implement, sometimes forcing EU companies into difficult choices between complying with US sanctions or EU regulations. At the same time, New Delhi is looking at a policy that would require companies in key sectors to use domestically-made cloud systems. This aims to reduce reliance on foreign providers and improve data security amid growing geopolitical and cybersecurity risks. Microsoft, responding to the Nayara incident, explained it was due to an automated "legacy" compliance system and confirmed it has since improved its enforcement.