Extraterritoriality of American sanctions
Application of American sanctions and regulations (OFAC, EAR, ITAR) to non-American companies operating outside the United States.
Extraterritoriality of American sanctions
Extraterritoriality refers to the ability of the United States to apply its sanctions and export regulations to foreign companies, including European ones, when a link – even tenuous – with the United States exists.
Main American texts
- OFAC (Office of Foreign Assets Control): administers American sanctions programs. The SDN (Specially Designated Nationals) list lists sanctioned individuals and entities.
- EAR (Export Administration Regulations): controls the export of dual-use goods of American origin, including when they are integrated into products manufactured outside the United States (25% de minimis rule).
- ITAR (International Traffic in Arms Regulations): controls defense articles, with strong extraterritorial jurisdiction.
Connection points (nexus)
U.S. regulations may apply if the transaction uses U.S. dollars, passes through the U.S. financial system, involves U.S.-origin components, uses U.S. technology, or involves U.S. persons.
EU Blocking Regulation
The EU has adopted a Blocking Regulation (EC Regulation No. 2271/96, updated in 2018) which prohibits European companies from complying with US extraterritorial sanctions. In practice, businesses face a compliance dilemma.
Practical impact
Many French companies have been heavily sanctioned (BNP Paribas: USD 8.9 billion). Compliance programs must incorporate US sanctions in addition to EU sanctions.