Delhi High Court: SAP Nayara EU Sanctions Cannot Override Indian Contract

• The Delhi High Court ordered SAP India to immediately restore software and enterprise support services to Nayara Energy.
• SAP had suspended these services following the imposition of European Union sanctions on Nayara in July 2025.
• Justice Vikas Mahajan found SAP's suspension to be a prima facie breach of contract and rejected arguments of 'impossibility of performance' based on 'unproven EU sanctions' at the interlocutory stage.
• The court emphasized that the contractual relationship is strictly governed by Indian domestic laws, which hold unambiguous primacy over foreign rules or regulations.
• The ruling considered the volatile geopolitical situation and SAP's global operational capacity in determining the importance of maintaining Nayara's critical software infrastructure.

The court underscored that the contractual relationship between Nayara Energy and SAP India is unequivocally governed by the domestic laws of the Republic of India.

On Monday, the Delhi High Court issued a directive compelling technology giant SAP India to promptly reinstate essential software and enterprise support services for Nayara Energy, an Indo-Russian oil refining firm. The order, delivered by Justice Vikas Mahajan in the case of Nayar Energy Limited v SAP India Private Limited & Anr, addressed SAP’s abrupt cessation of services. This suspension followed the imposition of European Union (EU) sanctions on Nayara in July 2025. The court’s initial assessment indicated that SAP’s actions constituted a prima facie breach of the existing contractual agreement between the two entities, leading to the immediate restoration order for SAP India Nayara Energy services.

Central to the court's decision was its rejection of SAP's argument regarding the impossibility of contract performance due to the EU sanctions. Justice Mahajan explicitly stated that, at this interlocutory stage, SAP could not leverage these "unproven EU sanctions" to claim that fulfilling its contractual obligations had become unfeasible. This ruling by the Delhi HC foreign sanctions contract override argument is significant for international contracts in India. The court underscored that the contractual relationship between Nayara Energy and SAP India is unequivocally governed by the domestic laws of the Republic of India. Furthermore, the agreements between the parties contain a specific clause granting "conscious and unambiguous primacy to the Indian laws in the event of any conflict with foreign rules or regulations," thereby reinforcing the supremacy of national legal frameworks over external regulations. This stance highlights the court's view on EU sanctions Indian contract law.

Justice Mahajan also considered the broader geopolitical landscape in his reasoning, noting the importance of maintaining Nayara’s critical software infrastructure amidst the "volatile geopolitical situation and the current oil crisis stemming from the USA/Israel war with Iran." This contextualization underscores the critical nature of the services in question. The court acknowledged that while SAP's parent company is German, the entity itself operates as a global firm, providing support services on a worldwide basis. It was deemed "highly improbable" that a multinational technology conglomerate of SAP’s considerable size, possessing an extensive network of offices, servers, and a broad customer base, would be entirely incapacitated from fulfilling its contractual duties. This perspective suggests that the court views the global operational capacity of such companies as a factor in assessing claims of impossibility of performance, particularly when domestic law is explicitly designated as paramount, impacting the discussion around extraterritorial sanctions India.

Lawyers advising clients with international contracts in India should note this interlocutory ruling, which indicates Indian courts may prioritize domestic contract law over foreign sanctions, potentially limiting 'impossibility of performance' arguments based on extraterritorial measures. This reinforces the critical importance of governing law clauses and jurisdictional considerations in cross-border agreements.

Source: Original reporting via legal news coverage