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The international reach of American law is an effective tool in persuading multinational corporations not to do business in countries targeted by US sanctions, as the case of Iran shows.
So-called secondary sanctions focus on non-US banks and individuals who do business with counterparts in countries subject to sanctions, and have enmeshed many dealing with Iran in recent years.
The Iran sanctions, which were mostly lifted as part of the 2015 joint nuclear deal between Iran and the world’s major powers, will be progressively re-imposed in the coming months following US President Donald Trump’s decision to withdraw from the agreement.
‘Secondary sanctions mean that the US president can decide that Total cannot have access to any US banks,’ Patrick Pouyanne, CEO of the French oil giant Total, said Thursday in Washington.
‘I cannot run a company in 130 countries without any access to any US banks. That’s impossible.’
Pouyanne said 90 percent of Total’s financing was tied to the US banking system and almost 35 percent its stock was owned by US shareholders.
‘I can’t lose them,’ he said. ‘That’s the rules of the game and we’re playing with the rules of the game in the best interest of the company.’
Such sanctions are not the only ‘extra-territorial’ power to regulate international business under US law.
Punishing global corruption
The 1977 Foreign Corrupt Practices Act, which prohibits bribing foreign officials to win business, can apply to foreign companies that are traded on Wall Street, and their employees, or to companies and individuals whose activities and financial transactions involve US banks or territory.
These transnational powers, which have no equivalent in Europe, allow the United States to punish global corruption and assert geopolitical influence.
Numerous European companies have learned this the hard way, including Total, which settled with US authorities in 2013 for $398 million over charges it bribed an Iranian official to win oil and gas concessions.
Germany’s Siemens paid $1.6 billion in 2008 to US and German authorities after pleading guilty to paying bribes in countries around the world.
France’s Alstom settled for $772 million in 2014 over corruption allegations involving Indonesia, Egypt, Saudi Arabia and the Bahamas.
The US also has punished foreign interests for sanctions violations, including French bank BNP Paribas, which paid $8.9 billion in 2014 for doing business with countries under US sanctions, Iran, Sudan and Cuba, while also operating in the United States.
Other countries, including US allies, have increasingly complained of the extra-territorial enforcement of US laws.
The European Commission has announced it will reactivate a law which will ban European companies from complying with US sanctions reintroduced on Iran.
The 1996 ‘blocking statute,’ originally introduced to allow trade with Cuba despite a US embargo, allows European companies and courts not to observe foreign sanctions and holds that foreign court rulings based on those sanctions will not apply within the European Union.