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.
In the past week, French company Total has announced that, unless it gets a sanctions waiver from the U.S., it will withdraw from the South Pars 11 oil project in Iran.
The renewal of U.S. sanctions after Donald Trump's decision to withdraw from the Iran nuclear deal has raised questions about a number of major energy initiatives.
It comes after the US President pulled out of the Iran nuclear accord and gave businesses around the world notice to end their dealings with Tehran. The decision follows US President Donald Trump's decision to withdraw from the treaty- and penalise companies that carry on doing business with Iran.
The European Commission has launched Friday the "blocking law", a device for protecting European companies against the sanctions the United States is preparing to reinstate against Iran.
The measures announced in Brussels will come into force within two months unless the European Parliament or the EU governments formally reject them.
"The American sanctions will not be without effect".
"US sanctions will not be without effect, so it is our duty, in the Commission and in the European Union, to do what we can to protect our European businesses, especially SMEs", said Friday. the President of the European Commission, Jean-Claude Juncker.
European Union leaders reaffirmed their commitment to the nuclear deal at a summit in the Bulgarian capital Sofia this week, even as multinationals such as the French energy giant Total and Danish shipping company Maersk Line signalled their intention to pull out of Iran.
Earlier this year, the European Commission said it was looking to open talks with Iran regarding gas supply to the continent through the Southern Gas Corridor (SGC), a huge pipeline under construction.
German Chancellor Angela Merkel acknowledged the deal "certainly has weaknesses", but said that sticking to it was the best way forward. "We can not and must not create illusions", she said.
Meanwhile, the head of Iran's Atomic Energy Organisation called on the European signatories to make up for the USA withdrawal from the agreement.