India Explores EU-Style Law to Shield Firms From Third-Country Sanctions

The Indian government is exploring legislative language that would shield domestic companies from penalties imposed by foreign governments acting outside established multilateral frameworks — an approach modeled on the European Union's 1996 Blocking Statute, according to a report published on 4 May 2026 by The Indian Express.

The proposal, which sources describe as still in the exploratory phase, would effectively prohibit Indian firms from complying with sanctions issued by third countries — primarily the United States — where those sanctions lack endorsement from the United Nations Security Council. It would also establish a mechanism for affected companies to seek legal redress domestically.

The timing matters. Washington has escalated secondary sanctions enforcement against financial institutions and commodity traders that continue processing Russian oil above a price cap imposed by the G7 — a cap India has refused to join. Indian refiners and banks operating in the dollarsphere have faced mounting compliance pressure, with the threat of secondary sanctions creating commercial uncertainty that the proposed legislation is designed to absorb.

What the EU Model Actually Does

The EU Blocking Statute was first enacted in 1996 after Washington's Helms-Burton Act threatened third-country companies with lawsuits for trading with Cuba. The mechanism — later updated to cover Iran following the Trump administration's unilateral withdrawal from the JCPOA — does not make US sanctions irrelevant. It creates legal cover for European companies to continue permissible commerce and provides a cause of action in EU courts against parties that suffer damages from foreign sanctions enforcement.

India's proposed version would do something similar: it would transform what has so far been a diplomatic and commercial pressure point into a matter of domestic law. Companies facing requests from correspondent banks to delist sanctioned counterparties or freeze transactions could point to the statute as grounds for continued engagement. It would not erase the political risk — US regulators retain the power to act — but it would shift the legal calculus for Indian firms caught between competing jurisdictions.

Precedent in New Delhi's Russia Calculus

India's posture on Russia is not new. Since the escalation of the Ukraine conflict in February 2022, New Delhi has declined to join Western sanctions regimes and has instead deepened imports of discounted Russian crude, coal, and fertilisers — purchasing from a supplier that Western restrictions have made price-competitive. Indian public-sector refiners have processed Russian oil at rates that Western analysts estimated at between 35 and 40 percent of India's total crude imports during 2023 and 2024.

That commercial logic has brought friction. Washington has repeatedly signalled concern about India's energy trade with Russia, and secondary sanctions risk has filtered into banking correspondent relationships in ways that are difficult to document precisely but are widely acknowledged in trade-law circles. The proposed blocking statute does not change the underlying geopolitical tension — it gives New Delhi a legal instrument to manage it without accepting the framing that Indian firms are in violation of anything.

The Structural Argument: Sovereignty Over Commerce

The legislation, if it proceeds in its current form, would represent a statement about whose rules govern Indian commercial decisions. The US Treasury's Office of Foreign Assets Control operates on a global reach that most countries accept because the dollar's centrality in trade finance gives Washington leverage that is structural rather than merely political. Challenging that reach requires more than a press release — it requires legal architecture that makes compliance with US sanctions legally ambiguous for firms operating under Indian jurisdiction.

The EU has used exactly this logic for three decades. The Blocking Statute does not prevent the US from enacting sanctions; it prevents EU companies from being compelled to enforce them on pain of domestic legal liability. The asymmetry is real: a European firm can be sued in a US court for trading with Cuba, but it can also recover damages in an EU court from whoever enforced that pressure. India is now exploring the same architecture.

The stakes of that structural argument are significant. If the legislation succeeds, it normalises a precedent that other governments — including states in Southeast Asia, the Gulf, and Latin America that have also faced US secondary sanctions pressure — could cite as a template. Dollar hegemony in trade finance is durable, but it depends on the willingness of commercial actors to treat US enforcement as authoritative. A domestic statute that explicitly contests that authority changes the compliance calculus in ways that radiate beyond India.

What Comes Next

The blocking statute remains at an early stage. Details on enforcement mechanisms, the scope of covered sanctions, and whether the legislation will include a clause requiring government approval before companies can claim protection under it have not yet been settled. The Indian Express reported on 4 May 2026 that the government was exploring the approach without specifying a parliamentary timeline.

Whether the legislation progresses will depend partly on the severity of US pushback. Washington's default position is to treat blocking statutes as non-cooperative — and OFAC retains broad discretion to designate firms outside the formal sanctions list if it judges them to be engaged in sanctionable conduct. A statute that India enacts without a diplomatic off-ramp could become a trigger for exactly the financial exclusion New Delhi is trying to guard against. The more likely outcome, practitioners in trade law suggest, is a framework that gives Indian firms legal cover to operate in a grey zone — neither fully compliant with US demands nor openly defiant — while the two governments manage the relationship through other channels.

India's move does not resolve the underlying tension. It shifts it from commercial pressure to legal contest — and that is, for New Delhi, the point.

This publication covered the Indian Express reporting as its primary input. Wire coverage of the sanctions-exploration story was limited to that outlet; no corroborating secondary reporting from Reuters, AP, or the financial wires was available in the source bundle at time of publication.