The vision of Atmanirbhar Bharat (Self-Reliant India) envisages India as a leading global economic power with strong capabilities across strategic sectors. This ambition has gained increasing significance as India's economic stature continues to grow. As of 2026, India's nominal GDP is estimated at approximately USD 4.15 trillion, positioning India as the sixth largest economy, estimates IMF.

However, India's rise has unfolded against the backdrop of an increasingly interconnected yet geopolitically fragmented global order. The intensification of geopolitical rivalries, particularly following the Russia–Ukraine conflict, has led to the widespread use of unilateral sanctions by the United States and the European Union. Although India has not been the direct target of such measures, its expanding economic and strategic engagements have exposed it to the indirect consequences of sanctions regimes and associated compliance pressures. Consequently, India has found itself navigating the complex intersection of economic interdependence, strategic autonomy, and an evolving sanctions landscape that increasingly shapes international trade and investment flows.

Extraterritorial Sanctions and the Erosion of Contractual Sovereignty: The case of Nayara

The impact of unilateral sanctions on India is most clearly illustrated by the consequences of the European Union's sanctions package against Russia in 2025. The inclusion of Nayara Energy's Vadinar refinery within the scope of the EU's restrictive measures marked a significant development: a lawful Indian enterprise, operating in accordance with Indian law and beyond the jurisdiction of the European Union, became subject to substantial commercial disruption as a result of a foreign sanctions regime. The episode was notable not because India had adopted corresponding restrictions, but because it had not.

Neither the Government of India nor any domestic regulatory authority had prohibited transactions with the company. Nevertheless, a range of commercial actors, including financial institutions, insurers, shipping companies, and technology providers, altered or suspended their contractual relationships in response to perceived sanctions risks. The significance of the incident lies not in the sanctions themselves but in the phenomenon of sanctions over-compliance. Commercial decisions taken by private actors effectively imported foreign policy choices into the Indian marketplace without legislative approval or regulatory endorsement.

The suspension of banking facilities, contractual services, and commercial relationships occurred not because Indian law required it, but because market participants considered compliance with foreign expectations less costly than the potential consequences of non-compliance. As a result, contractual rights and commercial relationships governed by Indian law became vulnerable to decisions driven by external regulatory pressures.

The broader pattern extends beyond any single company. In recent years, a growing number of Indian entities have been subjected to foreign sanctions or export-control restrictions despite engaging in conduct that remains lawful under Indian law. The cumulative effect has been to influence commercial behaviour within India through legal measures adopted elsewhere. Whether in relation to energy imports, technology access, financial transactions, or supply-chain arrangements, foreign sanctions increasingly shape the choices available to Indian businesses, even where India itself has chosen not to impose corresponding restrictions.

This development raises concerns regarding India's contractual sovereignty, understood as the ability of parties operating under Indian law to structure and perform lawful commercial relationships free from external regulatory interference. While foreign sanctions may not formally bind Indian actors, their practical consequences often compel compliance through market pressure rather than legal obligation. In effect, decisions regarding the continuation, modification, or termination of contracts may be influenced less by Indian law and policy than by the sanctions policies of foreign jurisdictions.

The difficulty is compounded by the absence of an effective domestic legal response. Indian law does not generally require private parties to comply with foreign sanctions that have not been adopted domestically. Equally, however, it offers limited protection to businesses adversely affected by sanctions over-compliance. Constitutional guarantees, competition law, company law, and private law remedies provide only fragmented protection against the withdrawal of services or termination of commercial relationships motivated by foreign sanctions concerns. Consequently, while foreign sanctions may not possess formal legal force within India, they can nonetheless exert considerable practical influence over commercial conduct. The result is a regulatory gap in which lawful Indian businesses may find themselves subject to significant economic consequences without the benefit of any clear domestic legal remedy.

Viewed in this light, the Nayara episode is not merely a dispute involving a particular refinery. Rather, it exemplifies a broader challenge confronting India in an era of increasing economic coercion: the capacity of foreign sanctions regimes to shape commercial outcomes within India despite the absence of corresponding domestic legal measures. The episode therefore raises fundamental questions regarding the protection of contractual autonomy, commercial certainty, and economic sovereignty in an increasingly interconnected but geopolitically fragmented global economy.

Comparative Anti-Sanctions Regimes in the World

Various countries including China, UK, European Union, Cuba, Iran, Russia have a strong anti-sanction regime in place.

The Chinese and European Union Model of Anti Sanction Laws

China has developed a comprehensive legal framework to counter the extraterritorial application of foreign sanctions and other restrictive measures, centred on the 2021 Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures (the Blocking Rules)[1] and the Anti-Foreign Sanctions Law (AFSL). Together, these instruments reflect a sovereignty-based and defensive approach to foreign sanctions, premised on the view that unilateral sanctions and secondary sanctions constitute an unjustified extension of foreign jurisdiction beyond national borders. The Blocking Rules seek to neutralise the domestic effects of foreign measures by empowering Chinese authorities to prohibit compliance with specified foreign laws, requiring affected entities to report such measures, permitting exemptions in limited circumstances, and providing civil remedies to parties harmed by compliance with prohibited foreign measures. Complementing this framework, the AFSL establishes a broader counter-sanctions regime by authorising retaliatory measures against foreign individuals and entities involved in the formulation, adoption, or implementation of sanctions targeting China, while also providing legal remedies for Chinese parties adversely affected by such measures.

These measures must be understood within the broader context of China's strategic competition with the United States and its growing concern over the use of sanctions, export controls, and other economic instruments as tools of geopolitical influence. The Chinese framework is therefore aimed not only at protecting domestic entities from the effects of foreign sanctions but also at preserving regulatory autonomy, safeguarding economic security, and reducing vulnerabilities associated with the central role of the United States in the global financial and technological order.

Compare this with the EU blocking statute; The EU's principal instrument, the Blocking Statute (Council Regulation (EC) No. 2271/96),[2] was originally enacted in response to the extraterritorial application of United States sanctions against Cuba, Iran, and Libya. Its primary purpose is to protect the autonomy of the EU legal order and the legitimate commercial interests of EU operators by preventing compliance with specified foreign sanctions laws. The Regulation prohibits EU persons from complying with listed foreign measures unless authorised by the European Commission, nullifies the effect within the EU of certain foreign judgments based on those measures, and provides a right to recover damages arising from their application. The EU framework is therefore principally defensive in nature, seeking to shield European economic actors from the effects of foreign extraterritorial legislation while preserving the Union's regulatory autonomy.

The Case for an Indian Anti-Sanctions Framework

The contemporary sanctions architecture reveals a persistent asymmetry in the international economic order. The ability to impose sanctions, restrict market access, or disrupt cross-border trade is concentrated in a small number of economically and strategically dominant states. In practice, the effectiveness of sanctions is often less a function of legal principle than of geopolitical influence. States that occupy central positions within the global financial, technological, and trading systems possess the capacity to project their domestic laws far beyond their territorial boundaries, shaping commercial conduct across jurisdictions that neither enacted nor consented to such measures.

India's position within this landscape is distinctive. Despite its emergence as one of the world's largest economies and an increasingly influential geopolitical actor, India has traditionally refrained from employing unilateral economic sanctions as an instrument of foreign policy. With limited exceptions relating to national security concerns, India has generally maintained that only sanctions authorised by the United Nations Security Council possess legitimacy under international law. This position reflects India's longstanding commitment to strategic autonomy, sovereign equality, and a rules-based international order.

Yet India's principled approach has not insulated it from the consequences of unilateral sanctions imposed by other states. As the Russia-Ukraine conflict demonstrated, sanctions adopted by foreign jurisdictions can exert significant influence over commercial activity within India even in the absence of corresponding domestic measures. The practical reality is that global corporations, financial institutions, insurers, shipping companies, and technology providers often choose to comply with foreign sanctions regimes irrespective of whether such measures have any legal force under Indian law. The resulting phenomenon of sanctions over-compliance effectively allows foreign policy decisions taken in distant capitals to shape commercial outcomes within India.

The implications extend beyond individual disputes. When an Indian company engaged in lawful commercial activity loses access to banking services, technology infrastructure, insurance coverage, or contractual counterparties solely because of a foreign sanctions regime that India has not adopted, the issue is no longer merely one of private commercial risk. It becomes a question of economic sovereignty. The ability of Indian businesses to enter into and perform contracts governed by Indian law is indirectly constrained by external regulatory pressures that operate outside India's democratic and legal framework. In such circumstances, commercial decision-making within India becomes vulnerable to foreign economic coercion despite the absence of any domestic legal mandate.

Recent developments have exposed the extent of this vulnerability. India is among the largest markets in the world for multinational technology and financial service providers. Nevertheless, Indian entities have found themselves deprived of critical services, financing arrangements, and commercial relationships because foreign corporations have chosen to prioritise compliance with external sanctions regimes over contractual commitments governed by Indian law. These incidents reveal a significant gap in India's legal architecture. While Indian law does not generally require compliance with foreign unilateral sanctions, it also provides limited protection to businesses adversely affected by sanctions over-compliance. As a result, Indian companies are often left to seek ad hoc relief through litigation without the benefit of a clear statutory framework capable of protecting their legitimate commercial interests.

This gap cannot be addressed through the wholesale transplantation of foreign models. The European Union's Blocking Statute was designed to protect a supranational economic union with its own institutional architecture and regulatory objectives. China's Blocking Rules and Anti-Foreign Sanctions Law are closely tied to its broader strategy of economic security, technological self-reliance, and geopolitical competition with the United States. India's circumstances are materially different. Any Indian response must reflect its constitutional framework, its commitment to an open market economy, its obligations under international law, and its carefully balanced diplomatic relationships with competing global powers.

What is required, therefore, is not a copy of the European or Chinese model but a distinctly Indian framework aimed at preserving commercial autonomy and contractual certainty. Such legislation could establish mechanisms for reporting foreign sanctions-related disruptions, provide remedies for parties harmed by sanctions over-compliance, clarify the obligations of financial institutions and service providers operating within India, and create a structured process through which the Government may assess the legitimacy and impact of foreign extraterritorial measures. The objective would not be to challenge every foreign sanctions regime, nor to compel businesses to disregard legitimate international obligations. Rather, it would be to ensure that lawful commercial activity conducted under Indian law is not undermined without recourse by external measures that India itself has neither adopted nor endorsed.

As India's economic influence continues to expand, the absence of such a framework will become increasingly difficult to justify. A nation aspiring to global economic leadership cannot remain dependent upon legal and regulatory choices made elsewhere when those choices directly affect domestic commerce. The question is no longer whether foreign sanctions influence Indian businesses; recent events demonstrate that they do. The more pressing question is whether Indian law should continue to remain silent when such measures disrupt lawful economic activity within its own jurisdiction. The development of a carefully calibrated anti-sanctions framework would not represent a departure from India's commitment to international law. Rather, it would constitute an assertion of regulatory autonomy and a necessary step towards safeguarding India's economic sovereignty in an era of intensifying geopolitical competition.

 Author is a legal practitioner based in Delhi and Consulting Editor at NDTV. She specialises in commercial disputes, international commercial arbitration, cross-border contracts, and constitutional law. The views expressed are personal

References: 

1. https://english.mofcom.gov.cn/Policies/AnnouncementsOrders/art/2021/art_f47febb76da64411b8de1845aeba4af4.html ↑

2. https://eur-lex.europa.eu/eli/reg/1996/2271/oj/eng?utm_source ↑