What is the blocking statute?
This mechanism, dating back to 1996 and never used, adopted at the time to circumvent the embargo on Cuba, allows European companies and courts not to submit to regulations relating to sanctions taken by third countries.
USA sanctions must be reinstated within 90 to 180 days.
The measure prevents firms from complying with non-EU sanctions laws and stops foreign court judgments based on these laws from being effective in the EU.
Under the "blocking statute", companies hit by sanctions will also be able to seek compensation and won't have to comply with any United States court orders against them.
Why does the European Union want to do this?
US President pulled out of the Iran nuclear accord and gave businesses around the world notice to end their dealings with Tehran. "We will have to see whether those remaining in the JCPOA can deliver those benefits to Iran", he said in the Belgian capital on Tuesday.
Brussels also needs to prove that Washington can not dictate how European businesses operate.
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The Commission said in a statement it had 'launched the formal process to activate the Blocking Statute by updating the list of USA sanctions on Iran falling within its scope, ' referring to an European Union regulation from 1996.
The Commission said the measure would come into force within two months, unless the European Parliament and EU governments formally rejected it, but that it could also be activated sooner if there was strong political support, Reuters reported. "But the American sanctions will not be without effect, so we have the duty... to do what we can to protect our European businesses, especially SMEs".
Jean-Claude Juncker, the president of the European Commission, said the statute was being introduced to protect European firms.
Privately, some European leaders acknowledge the scope for effective action is limited.
Danish shipping giant Maersk Tankers also said Thursday it would cease its activities in Iran, while German insurer Allianz announced plans to wind down its business deals there.
Where do Europe's leaders stand?
"The EU blocking regulation could be of limited effectiveness there, given the worldwide nature of banking system and especially the exposure of large systemic banks to USA financial system and US dollar transactions", he said.