Apr
30

Between an Embargo and a Hard Place

Posted by Clif Burns at 8:48 pm on April 30, 2007
Category: BIS, Criminal Penalties, Sanctions

LogicaLogicaCMG, Inc., the U.S. subsidiary of U.K.-based LogicaCMG plc, pleaded guilty last Wednesday to violating the U.S. embargo on Cuba. According to a Department of Justice press release, the violation occurred in 2001 when New Hampshire based CMG, which was merged into LogicaCMG on December 30, 2002, configured and shipped a telecommunications server to Cuba through Panama. The server was designed to permit text messaging on the Cuban wireless telephone network. LogicaCMG agreed to pay a $50,000 fine. The company also entered into a settlement agreements with the Bureau of Industry and Security (”BIS”) and the Office of Foreign Assets Control (”OFAC”).

The conundrum for LogicaCMG is that its parent company, which almost surely approved the guilty plea, is subject to European Union Council Regulation 2271/96, which forbids LogicaCMG “whether directly or through a subsidiary” from complying with the U.S. embargo on Cuba. The Settlement Agreement with BIS, although not yet posted on the BIS website, almost certainly involves further representations from LogicaCMG that it will not further violate the Cuba embargo, normally enforced by conditioning a suspension of a denial of export privileges or suspension of all or part of a monetary fine on future compliance with U.S. export laws.

LogicaCMG is no doubt taking a calculated risk that the E.U. is unlikely to enforce Regulation 2271/96. To the best of my knowledge, the blocking regulation has only rarely been enforced if at all. Still, this is hardly a comfortable position for the company.

Permalink

2 Comments »

  • EU Regulation 96/2271 is an especially powerful tool: It not only prevents compliance with US unilateral embargoes (Cuban and ILSA were specifically identified in the Annex), if used aggressively and properly, it can prevent normal cooperation between the US and EU customs services (such as the case last year where the German customs service executed a search warrant in Germany on behalf of ICE in an Iranian embargo case), prevent EU nationals from testifying or even giving statements to US investigators, prevent third parties such as freight forwarders/customs-brokers from providing copies of documentation, and make them liable for money damages and extraordinary relief if they do cooperate. But, like all good tools, it actually has to be used: Neither the EU nor Member State governments or courts will invoke it unless an EU national party complains.

    Comment by Mike Deal — May 1, 2007 @ 12:49 pm

  • A qualification to the above, EU Reg. 96/2271 isn’t much help in defending US enforcement actions because the act-of-state/sovereign compulsion doctrines are doctrines of judicial abstention, where the courts decline to act (e.g., on an anti-trust suit) where a foreign government has acted in order to not prejuidice the political branches of the US government. Where the US government is prosecuting, it is assumed the executive branch has already weighed the foreign policy concerns and the courts will proceed, assuming they have actual in personam and subject matter jurisdiction over the defendant. Of course, having a foreign parent or affiliate invoke EU Reg. 96/2271 can have its moments: I had a Yankee AUSA in one case call a client’s employees as witnesses before a grand jury trying to find out what I had communicated to European counsel.

    Comment by Mike Deal — May 1, 2007 @ 1:05 pm

RSS feed for comments on this post. TrackBack URI

Leave a comment

Comments are moderated, so your comment will not immediately appear, but will appear later after I've approved it. Although I will never disclose your email address to anyone, comments with fake or non-functioning email addresses are not approved. And, of course, spam comments with links to pornography and pharmaceutical sites aren't approved either.