SAP Must Restore Nayara Energy Services: Delhi High Court Says EU Sanctions Cannot Override the Indian Contract
The Delhi High Court has directed SAP India to restore full and uninterrupted software and support services to Nayara Energy after the company’s access was suspended following the imposition of European Union sanctions. The judgment, delivered by Justice Vikas Mahajan on September 21, 2026, addresses a larger legal question: can foreign sanctions be used to suspend contractual obligations under a contract governed by Indian law?
The court found, at the interlocutory stage, that SAP could not rely on unproved EU sanctions as a basis for claiming that its contractual obligations had become impossible to perform. The ruling is significant because the dispute involves two companies operating in India, while one party sought to rely on foreign regulatory restrictions arising from its European parent company.
Why Did SAP Suspend Services to Nayara Energy?
The controversy erupted after the European Union added Nayara Energy to its sanctions list in July 2025. The reasons behind this were Nayara’s ownership of the refinery and its affiliation with Rosneft – a state-owned Russian oil company.
Following the European sanctions imposed on Nayara, SAP India announced suspension of Nayara’s ability to use SAP support services and the SAP Support Portal due to the sanctions and the compliance requirements incumbent upon SAP being an EU-based group.
In turn, Nayara objected to this decision stating that the agreements with SAP India were based on Indian laws and that the provision of SAP support services was a contractual obligation which could not be unilaterally terminated due to the sanctions imposed abroad.
What Did the Delhi High Court Say?
The court has carefully considered the contractual terms and found that the agreements made between Nayara Energy and SAP India were subject to Indian laws. According to the court decision, the parties deliberately made provisions for the applicability of Indian law to their contract.
An especially noteworthy aspect of the court decision pertains to the use by SAP of the terms of the contract related to export-control laws. In its opinion, although the clause in question provided for software, documentation and SAP material to be controlled by export-control laws, the term “Support Services” was not mentioned explicitly in the provision in question.
It should also be added that the term “export control laws” in the documents in question was not defined specifically. Thus, the court could not say that the contractual terms referred automatically to EU trade sanctions used by SAP.
Why Foreign Sanctions Became the Central Legal Issue
The major argument made by SAP in this case was that the EU law applied to its German parent company, and therefore, the company could face legal issues by supporting the sanctioned entity.
However, the court clarified that the sanctions imposed were foreign laws. According to the court, under the Indian evidentiary rules, foreign laws cannot be assumed or judicially noticed in the same manner as Indian laws. The application, scope, and legal effect of the foreign laws in the particular case had to be proven.
This proved to be a significant obstacle for SAP’s claim regarding the impossibility of performing the contract due to sanctions.
The Court Rejected the “Impossibility” Argument at This Stage
Similarly, SAP maintained that support services were centrally organized by SAP SE in Germany and would therefore be impossible to provide without risking infringement of the EU sanctions.
This argument was not accepted by the court. It referred to the territory definition of the concerned licenses and support services as “worldwide” based on the contractual provisions. It is reported that the contracts did not specifically mention that support services were to be provided solely out of Germany or other EU locations.
Accordingly, it held that the inability of SAP India to characterize the organizational global structure as the requirement of the contract and then rely on it for establishing impossibility of performance was without merit.
The judgment clearly differentiated between commercial hardship and impossibility of performance.
Why the Contractual Language Matters
Ultimately, the dispute hinged upon the obligations which SAP and Nayara Energy had in their agreements with each other.
The court analyzed the General Terms and Conditions, the Order Forms, SAP Enterprise Support Schedule and Delivered Support Agreement. The court ruled that the support arrangement had been in effect for years and that the relevant contract agreements had obligations related to support services.
Another matter considered by the court was whether the contracts were in themselves “determinable,” and thus not amenable to specific enforcement. The court found that the termination clause was tied to a particular regulatory reason rather than being open-ended.
The court was thus able to rule against the claim made by SAP that specific enforcement of the support agreements was illegal.
What Exactly Has the Court Ordered?
However, the Delhi High Court allowed the plea of Nayara Energy for restoration of suspended services and ordered SAP India to reinstate the complete and uninterrupted services of the software. Furthermore, the court also refused the request from SAP for placing their judgment on hold for two weeks.
It should be noted that the decision does not imply that the EU sanctions themselves have been nullified or invalidated. Neither is the validity of the sanctions regime of EU being decided here. What actually happens is that the question of whether SAP India can take advantage of such sanctions in suspending the services under the contract agreement becomes the issue here.
Why the Case Is Significant for Indian Businesses
This issue may have ramifications for something larger than just the issue of SAP and Nayara Energy since multinational corporations tend to work within India via subsidiary companies even while being bound by the laws of other regions.
This is a critical question regarding contract law in that it concerns how to handle contracts that have been made under the laws of India when the corporate structure of one of the parties leads to obligations being bound by foreign law.
This would apply to any Indian business using technologies from abroad.
What Happens Next?
The September 21 decision is a crucial step in the current litigation process, although it does not necessarily settle all legal matters involved in this dispute. This decision is specifically directed at solving the evidentiary and contractual issues in relation to the use of the EU sanctions by SAP in the current proceedings.
However, this broader dispute will probably involve further legal matters related to the exact meaning of the foreign sanctions and obligations of the multinationals.
Conclusion
SAP-Nayara Energy controversy has grown into a notable legal controversy regarding the interrelation of Indian contract law and foreign sanctions.
The September 21, 2026 decision of the Delhi High Court stated that SAP India must restart providing services to Nayara Energy, and that in the current phase, SAP cannot base its claim of impossibility to execute contractual obligations on unproven EU sanctions.
The decision does not render EU sanctions invalid. Rather, it addresses the issue of whether EU sanctions can override contractual obligations created by Indian-law contract.
