Marija Đorđeska, LL.M., is a Thomas Buergenthal Scholar and an S.J.D. Candidate at the George Washington University Law School, in Washington D.C.
The U.S. Office of Foreign Assets Control of the Department of Treasury (OFAC) has again shocked the international financial community with a recent settlement with BNP Paribas, France’s largest financial institution. BNP Paribas was accused of violating U.S. sanctions against Iran, Sudan, Burma and Cuba from 2005 to 2012. For $8.9 billion in compensation – the priciest settlement to date – OFAC pardoned BNP Paribas and its subsidiaries from their civil liability under U.S. law. (Settlement Agreement , see also Enforcement Information for June 30, 2014).
OFAC is aggressively and effectively applying U.S. sanctions law to foreign institutions incorporated and doing business abroad, without taking into consideration foreign domestic legal regimes or international standards. French President François Hollande expressed his disapproval of the penalty imposed on BNP Paribas. The settlement should also cause concern among European and international lawyers, as BNP Paribas is the ninth European financial institution to be sanctioned since 2006 for processing funds for entities subject to U.S. sanctions. By threatening to cut off foreign financial institutions from the U.S. market, OFAC precludes these financial institutions from publicly and transparently arguing their case in legal proceedings (Settlement Agreement ). OFAC is establishing a precedent of a new, efficient, and not yet legal method for asserting U.S. laws abroad, bypassing the traditional territoriality principle of jurisdiction.
In the documents that are publicly available, OFAC does not mention any legal grounds on which it claims jurisdiction, leaving it unclear on what basis the U.S. can sanction transactions initiated abroad by foreign entities or the clearing of US dollars outside the U.S. (Factual Statement ) or regulate foreign exchange transactions (Settlement Agreement [12, 13]). Because the settlement negotiations were not made public, and BNP Paribas also waived its right to “any possible legal objection,” (Settlement Agreement ) the substantive public debate on the issue is necessarily limited.