The Era of Sanctions Warfare (II)

BERLIN/WASHINGTON (Own report) - Berlin and Brussels are weighing countermeasures to the Trump administration's growing number of extraterritorial sanctions. The US government is seeking to globally enforce its unilaterally imposed sanctions to bind other countries, including allies, to its foreign policy course. The sanctions against Iran are the most prominent example. They also made German business with Iran largely impossible. Washington first implemented extraterritorial sanctions in the mid-1990s, but finally reached agreement with the EU not to enforce them against European companies. This was changed during the Obama administration, when it amassed billions in fines from banks in the EU. The Trump administration has expanded the extraterritorial sanctions to include Russia and Cuba. Following the failure of the INSTEX financial vehicle, German government advisors are proposing that legal action be taken in US courts. Now, “asymmetric countermeasures” are also being discussed.

Extraterritorial Sanctions under Clinton...

Already in the 1990s, Washington attempted to bind its western allies unilaterally to its foreign policy with extraterritorial sanctions. At the time, the Clinton administration had imposed sanctions on Cuba, Iraq, Iran, and Libya, prohibiting US citizens and companies to do business with these countries, even if it was transacted through US subsidiaries outside the Unites States. In addition, the export of goods, produced outside the Unites States, should no longer be allowed to these countries, if these goods contained individual US components. The "Helms-Burton-Act" was the most severe form of sanctions. Enacted into law on March 12, 1996 by US President Bill Clinton, it aggravated the embargo against Cuba. These US measures provoked fierce disputes also with the EU, which had adopted the Blocking Statute in 1996, prohibiting companies based in the EU from complying with sanctions imposed by third states under penalty of punishment. At that time, however, this did not lead to a showdown between the EU and the USA. In 1998, Washington conceded and promised not to take measures against companies in the EU.

..., under Obama and Trump

On a larger scale, Washington did not enforce extraterritorial sanctions until the presidency of Barack Obama. In 2010, several US authorities, including the Justice Department, launched investigations into foreign banks, accused of violating the unilaterally imposed US sanctions on Iran. A lawsuit against the Commerzbank ended in 2015, compelling the German bank to pay US $1.45 billion to US authorities in a settlement, because it had done business with Iran's state-owned Islamic Republic of Iran Shipping Lines (IRISL).[1] The French BNP Paribas even lost US $8,9 billion in a similar lawsuit. Because of these experiences, German companies immediately withdrew from Iran after the Trump administration renewed the imposition of sanctions on Iran. Like those under Obama, these measures have extraterritorial effects.[2] The Trump administration has begun to impose extraterritorial sanctions against Russia, also effecting German companies. German business circles speak of billions in losses. ( reported.[3])

Helms-Burton Act, Section III

Washington's most recent move came two months ago. Section III of the "Helms-Burton Act" went into effect on May 2. Because of international protests, all US presidents, have regularly suspended its becoming effective, since it was passed in 1996. At the beginning of the year, US President Donald Trump announced that he would break with this tradition. Section III stipulates that US citizens have the right to sue US American, as well as foreign companies, if they use Cuban property belonging to US Americans prior to the Cuban Revolution, which had been nationalized in the aftermath of the revolution. The first lawsuits against EU located enterprises have been filed. For example, the heir of a former landowner, whose Cuban property had been expropriated, recently sued Spain's Meliá hotel chain, which operates hotels on his expropriated real estate - in full compliance with Cuban law. Because the suit was filed in Spain, it is not legally based on the Helms-Burton Act, but the lawyers are explicitly basing the arguments of their case on that law.[4] Two descendants of a family, who had owned a hotel in Cuba, prior to the revolution, have now sued the hotel search engine Trivago, headquartered in Düsseldorf, for having mediated rooms in that hotel, which also had been expropriated, and is today legally operated by Meliá. The Trivago suit was filed in Florida on the basis of the "Helms-Burton Act."[5]

"In Violation of International Law"

In the meantime, the EU has announced countermeasures for various aspects. The EU is probably most affected by Section III of the "Helms-Burton Act." Enterprises in the EU have invested around a half-billion euros (figures from 2017) in Cuba - more than any other investor. They are mainly companies in Spain and France. But as Trivago's example demonstrates, German companies may also be sued. A statement by the EU, pertaining to the enactment of Section III, declares that "the EU considers the extraterritorial application of unilateral restrictive measures to be in violation of international law."[6] The outgoing EU head of foreign policy, Federica Mogherini has promised that "all applicable measures will be applied" to protect enterprises of the EU. Of course, Brussels had already made similar promises after the USA reimposed extraterritorial sanctions on Iran and re-enacted the 1996 blocking statute - without success. Until now, no German enterprise has successfully been able to avoid these extraterritorial sanctions with this statute. In addition, the EU's attempts to circumvent US measures using INSTEX - a finance vehicle operating on the barter system, originally planned to permit enterprises within the EU to maintain their trade with Iran - has proven ineffective. The attempt is considered a failure.[7]

Through the Courts

Government advisors in Berlin are applying pressure. The EU must "begin to create instruments that can provide long-term protection against extraterritorial sanctions," the German Institute for International and Security Affairs (SWP) declared in mid-May. This will be "necessary, if striving for a strategically autonomous Europe is meant seriously."[8] Ultimately, the conflict over the extraterritorial sanctions, is about "Europe's capability to carry out foreign policy." In the quest for means to undermine the Trump administration's measures, SWP suggests that not only political measures be applied, but judicial ones as well - "through US courts." "As a complement to increasing their strategic autonomy vis-à-vis the U.S. government, European foreign policy-makers could" also "rely upon the US judiciary," according to a recent study published by the chancellery-financed think tank. "In practice, this means systematically encouraging and eventually assisting EU-based companies" to challenge the US administration's extraterritorial enforcement in US domestic courts.[9] "Semi-official enterprises such as the European Investment Bank (EIB) or INSTEX" could lead the way.

"Asymmetric Countermeasures"

Foreign policy experts are further pursuing the debate and proposing, alongside efforts to reinforce the strength of the euro, also "asymmetric countermeasures" to the USA's and the initiation of an "international dialog" on sanctions. will soon report.


[1] See also On the Road to Autonomy.

[2] See also War of Sanctions Against Iran.

[3] See also Die Ära der Sanktionskriege (I).

[4] Álvaro G. Zarzalejos: El enriquecimiento injusto, el filón de las familias cubanas para reclamar en España. 14.06.2019.

[5] Mengqi Sun: Expedia's Trivago Is Sued Over Seized Cuban Hotel. 20.06.2019.

[6] EU will gegen US-Klagen zu Enteignungen in Kuba vorgehen. 02.05.2019.

[7] See also Die Tauschbörse der EU and War of Sanctions Against Iran (III).

[8] Oliver Meier, Azadeh Zamirirad: Was Europa jetzt noch tun kann, um das Atomabkommen mit Iran zu retten. 09.05.2019. See also Ein "Muskelaufbauprogramm" für die EU.

[9] Sascha Lohmann: Extraterritoriale US-Sanktionen. SWP-Aktuell Nr. 31. Berlin, Mai 2019.