In a recently leaked private phone call, an EU foreign policy official, Helga Schmid, grumbled to the EU’s ambassador to Kiev that it was “very annoying” that the United States had criticized the EU for being “too soft” to impose sanctions on Ukraine. Criticism may be annoying, but EU softness is a fact of life, and the transatlantic trouble over sanctions goes beyond Ukraine. For the past year, British and European Union sanctions against Iran have faced a string of legal challenges and lost nearly every round. The sanctions relief offered by the so-called interim nuclear deal between the P5+1 and Iran conceals the broader problem that the European legal basis for sanctions is eroding. Iran is expert in the waging of terror wars. It’s also, it turns out, good at lawfare.

The EU has imposed broad sanctions against Iran since 2007, and in 2009 the British Treasury extended its own sanctions to include Bank Mellat, 20 percent owned by the Iranian government. The bank appealed and in 2013 won a judgment in the U.K. Supreme Court, which found the measures were “arbitrary and irrational” and “disproportionate.” Later that year, the European General Court, for similar reasons, ruled against EU asset freezes of seven firms connected with Iran.

The defeats keep on coming: Last month, the General Court removed Iran’s North Drilling Company from the list of sanctioned firms. It’s merely icing on the cake that Britain may be held legally responsible for the damages Bank Mellat incurred as a result of the sanctions.

The Iranians have reacted to these victories with a mixture of self-righteous indignation and barely suppressed glee. As a strategy, lawfare is particularly galling because it holds that terrorists and dictators are virtuous defenders of law, in contrast with supposedly rogue Western nations. Iran’s Fars News Agency happily reported the claim of a managing director of an Iranian bank that the EU’s actions were “illegal,” while Iranian deputy oil minister Ali Majedi called on French energy firms to invest in Iran and show “the independency of [the] economic sector from politics.”

The Iranians are not the only ones pitching the French. In a recent interview, Secretary of State John Kerry stated that “while the French may send some businesspeople over there, they’re not able to contravene the sanctions. They will be sanctioned if they do and they know it.” So, he sternly concluded, the French had been put “on notice.” When John Kerry scolds France, the world has stopped making sense. Perhaps if Paris fails to heed his notice, he’ll send a letter. He’d have to copy it widely: In mid-January, the Dutch ambassador to Iran held a speed-dating session with firms panting to join the Iranian action. The Wall Street Journal writes mordantly of the coming “gold rush” to Iran.

That characterizes the situation a bit too strongly. The challenge to EU sanctions will take time to unfold. Late last year, the EU started to warn companies that had won favorable rulings that they would be targeted with new sanctions. The EU has an ignoble tradition of using this try, try again approach—in national referenda, they only stop asking when they get the answer they want—but here their bureaucratic persistence serves a noble end. Warnings may not work, however: The Journal reports European officials are concerned that further legal defeats could destroy sanctions altogether.

The fall-back option is to rely on U.S. sanctions and the willingness of the United States to punish foreign firms that evade them. On February 6, Treasury penalized 18 businesses and 14 individuals in eight nations. The U.S. sanctions regime is legally more robust than Europe’s, which implicitly presumes that firms have a right of market access and any exclusion must be regularly justified. But it is one thing for the United States to punish a motley collection of mostly Middle Eastern firms. It would be politically quite another for the U.S. government to designate major European companies if EU sanctions collapse any further. Even a White House that badly wanted to ramp up the pressure on Iran might be reluctant to go after leading European banks, and this White House badly wants no such thing.

The EU’s losing streak could portend wider disaster. Since 9/11, the United States has emphasized using the international financial system to raise the costs that bad actors have to pay to do business. The most significant result of Iran’s European victories is that they threaten to make the EU reluctant to impose sanctions anywhere. And while the United States is indeed better at using its intelligence-gathering to inform its sanctions process, it is too easy to argue that the Europeans merely need a legal system that can make effective use of classified evidence.

It tells you a lot about the supposedly independent Iranian firms that their European victories were hailed in supposedly independent press releases from Fars. In the West, we think of the public and private sectors as separate. The basis of the U.K. Supreme Court’s judgment was that Bank Mellat had not been treated with the fairness owed any complainant in the tradition of English common law.

But believing in the probity of the Iranian banking sector is like relying on the Fars News Agency: It’s not a safe bet. It is not that there are no legitimate businesses in Iran; it is that, under any lawless regime, it is impossible to draw the line with certainty. Courts overstep their boundaries when they fail to give governments discretion to draw that line when matters of national security are involved. Majedi’s call to put energy beyond politics is just another effort to exploit Western confusion about how business works in a totalitarian system.

The irony is that the damage European courts are doing to sanctions only makes them a less attractive alternative to using force. Europe’s judges might remember that the rule of international relations is reciprocity. Until European firms (and Iranian citizens) can go to an Iranian court and receive a fair hearing, Iranian firms are the fruit of a closed and corrupt system, and they should be judged accordingly.

Editor's Note: Andrew Southam co-authored this commentary.

 - Ted R. Bromund is a senior research fellow in the Heritage Foundation’s Margaret Thatcher Center for Freedom.

 - Andrew Southam is a British writer on judicial cooperation and a former Home Office case officer.