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The UK and the European Union seek the greatest possible free movement of goods and capital between EU member states and between member states and third countries consistent with EU law and international law (including internationally agreed trade sanctions).
On occasions a third country may enact legislation that not only prohibits trade with or regulates the activities of businesses and individuals within its national jurisdiction but extends the application of these measures to traders and individuals operating in other countries. This is known as extraterritoriality.
The extra-territorial application of, for example, US trade sanctions against Cuba presents difficulties. It may impact upon the sovereign right of nations to regulate activities within their own territory and interfere with the freedom of countries to conduct their own independent economic policies. For businesses and individuals extra-territoriality can create a climate of uncertainty and businesses can and do find themselves caught between conflicting legal requirements (for example, compliance with US trade sanctions against Cuba and dealings with Cuban individuals may be in conflict with EU and UK legislation prohibiting EU traders and nationals from complying with such US sanctions or in conflict with UK Race Relations legislation).
Whereas the US authorities (including the Office for Foreign Asset Control – OFAC) may not generally be seeking to enforce US sanctions against Cuba on non-US based businesses, this may happen on occasions. In such circumstances, under EU legislation (Council Regulation (EC) No 2271/96 of 22 November 1996), individuals or persons affected are required within 30 days of discovering the fact to notify the European Commission either directly or through their national contact point. The Commission may then request information from the parties concerned and this must be provided within 30 days.
Council Regulation 2271/96 and corresponding UK legislation (Protection of Trading Interests Act 1980, as amended by Statutory Instrument (S. I. )1966 No. 371 made in October 1996) apply here. However, the EU legislation is limited in its scope as it applies only to counteract specific US legislation listed in its Annex. To view SI 1966 No. 371 and Council of Europe legislation on these issues please click on two links below:
In brief, the legislation provides that no judgements or administrative decisions of a third country will be recognised or enforced in the European Union. Furthermore, the legislation forbids compliance by traders and individuals with such judgements or administrative decisions. However, to the extent that non-compliance would seriously damage their interests or those of the EU there are procedures set out in the legislation to seek derogations.
The UK’s Protection of Trading Interests Act provides for fines against traders and individuals that comply with extra-territorial legislation.
The situation is complicated, particularly when companies find themselves caught between conflicting jurisdictions. For example, a US national working for a business registered in the EU may be in breach of his national legislation if he is involved in a business transaction involving a state subject to US trade sanctions. Financial institutions involved in transactions in $US may only be able to process such transactions in the US and would thereby be putting their own employees at risk if any business transaction involving a sanctioned state was concluded. The US can enforce its extra-territorial laws against any person entering US territory. Some persons, particularly US nationals, may have no choice but to enter the territory of the US and are therefore particularly at risk.
It is therefore important that traders and individuals talk to the UK contact point as soon as they hear that they may be affected.
Further information concerning UK relations with Cuba click on Foreign and Commonwealth Office website link below:
Andy Weller, Assistant Director, World Trade Operations
Department of Business Enterprise and Regulatory Reform
1 Victoria Street
London SW1H 0ET
Tel 020 7215 2321
External Relations Directorate-General (C1)
Rue de la Loi 170
Tel ++ 322 296 3070 or 298 8209 (Secretariat)