Every summer the rise of temperatures rings in Cocktail season, and I stock up on suitable quality spirits for my bar. I have a preferred online vendor, which has a good selection and good prices, for some of my spirits.
♦ An unexpected obstacle
Alas, this year I experienced an unexpected obstacle: My Germany based vendor's Pay Pal didn't work, because of a bug, and when I asked what was up. I was told, in several calls, a story that I initially got totally wrong. What had happened was this:
In 2011 or so my vendor, and many other German online traders, received an E-Mail, in English, that demanded they drop all their Cuban products, or else lose their PayPal services. It was outright blackmail. Those who didn't, had their Payl Pal accounts frozen. What triggered this was apparently US government pressure on Pay Pal to enforce Helms Burton in Germany, on Germans.
As it went, my vendor then obtained an injunction and Pay Pal settled out of court, agreeing that Pay Pal lifts the freeze of the vendor's account while the vendor sells products from Cuba by other ways (bypassing US entities).
Normally, about US sanctions on Cuba I couldn't care less about. If you fools choose to deprive yourself of quality Cuban rum and cigars, just because you can't get over the Bay of Pigs, or the continued existence of Communism in your neighbourhood - it's your loss, not mine, and if you insist on silly ideas like having Helms-Burton, your hassle, not mine. Or so I thought, and with some reason.
♦ Helms-Burton's extraterritorial effect, and illegality
Because with Helms-Burton, the US have enacted a law that they assert applies to foreign companies and citizens in third countries. That is a conceit, an intolerable act. The sovereignty of the individual European states means that a sanction-happy US Congress cannot impose law on European companies or citizens.
Alas, by merit of sheer US economic weight, Helms-Burton and comparable laws have been creeping into international trade relations. My vendor's troubles are a trivial example, but illustrate well the overreach.
On the matter the European parliament resolved:
"The European Parliament,
- having regard to its previous resolutions on extraterritorial policy and its effect on trade and competition in the world market ... the Helms-Burton Act contains a number of provisions which are intended to extend US law unilaterally to companies from third countries (extra-territorial effect)
...
Calls on ... the Congress of the United States to refrain from attempts to impose legal order on third countries by extraterritorial policy with damaging effects to the world trade order, including European companies"
The European comission's position is that the Helms-Burton Act is contrary to international law. The EU never acknowledged the legitimacy of the Act and fully reserves its right to resume the WTO case against the Helms-Burton Act.
The impending normalisation of US relations with Cuba may pervent that, but since there are other, similar US laws on the book that share its claim to extraterritorial effect ...
♦ What do we have here?
Immediately, this results in the absurd situation that the US in effect sanctioned a shop in Germany for using Pay Pal Germany to sell Rum from Cuba. Ironically, when they shut down that, the shop couldn't sell Bourbon either, which incidentally was what I was after.
And that's how US sanctions on Cuba interfere with my drinking. Just who do you think you are?!
Cheers,
CP
Links:
- https://en.wikipedia.org/wiki/Helms%E2%80%93Burton_Act
- http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:51997IP0735
- http://madb.europa.eu/madb/barriers_details.htm?barrier_id=960295&version=5
Correction: I was misinformed and have subsequently learned that I got the initial story about what happened to the shop utterly wrong. I corrected it to reflect what actually happened and marked the passage yellow. My apologies. I should have checked first.
It is easy to now wonder what will befall the Cubans when the Castro brothers dead and sanctions lifted an Capitalism invades!
My important FP question is how will ownership of the Havanna and Santiago MLB franchises be decided?
Posted by: William R. Cumming | 01 July 2015 at 08:15 AM
They better be careful, or the US is going to devour them neck and crop. They'll have a hard time navigating the transition.
Posted by: confusedponderer | 01 July 2015 at 08:41 AM
CP. You refer to, "The sovereignty of the individual European states..." I am always amused by people in other nations who still think that America will respect their individual sovreignty.
Posted by: Bill H | 01 July 2015 at 09:08 AM
Perhaps a more important question will be old expropriation 'claims' to be settled. CP...my take is no one but a few old timers gives a damn about the Bay of Pigs. And they are dying off. This has always...in an odd, and complex way, been about Presidential Politics in Florida...a damn important state in the horse race.
They better do a better job of protecting their cigar brand...i.e. like the French protect their wine. Because there are so many Cuban knock offs/or garbage that experienced cigar smokers tend to shy away...unless they have a secure and reliable connection.
Posted by: JONST | 01 July 2015 at 09:15 AM
CP,
Was your vendor forced to use PayPal Germany for transactions, or was that a choice? Seems to me it was PayPal that made a corporate decision not to violate Helms Burton (regardless of the merit of the law) with its international subsidiaries. Usually these things are disclosed in the 'terms of service'. Most likely, your vendor ran into problems because he violated those terms. I am willing to give your vendor the benefit of the doubt that it was an unintentional mistake.
But, ultimately, if you or your vendor have other options for purchasing directly from Cuba, is this really an intolerable act, or just an annoying inconvenience?
Now, please understand, I am sympathetic to what you say: I 'feel your pain'. This sounds completely ridiculous to me. But, just so you know, you are not the only one who suffers from this sort of thing, let me share this story.
I used to work for a very large German bank (it was a great place to work). Technically, it was a US subsidiary of a German bank. But because of our foreign ownership we were subject to a slew of EU regulations on our business, most especially in what was called 'cross border finance'. These regs were very specific and had to be followed. We received continuing education in them every year (which I believe was also mandated by regulations). So, a bank in Chicago that I did business with was purchased by a larger Canadian bank. This meant the settlement instructions for trades changed. When the new instructions arrived, they were from Montreal, Canada. All business was conducted within US borders, but Montreal received a copy as an 'interested party'. This changed the entire nature of the relationship in terms of how we conducted business, as it was now subject to EU regs on 'cross border finance'. Basically, we couldn't trade anymore. A US subsidiary of a German Bank, was restricted by EU regulation, from doing business in the US, with the US subsidiary of a Canadian bank. It was truly annoying as hell. What could I do? Nothing really. There was some discussion of a work around, but even that was considered too risky. We moved on.
This is the world we live in. I hope you eventually got your bourbon.
Posted by: nick b | 01 July 2015 at 09:18 AM
nick b,
I did get my bourbon, just that Pay Pay didn't see a penny, and they'll continue to.
Beyond that - you don't get the point. This is about something altogether different compared to what a multinational does. The problem here is Helms Burton, not Pay Pal.
(a) I would expect Pay Pal Germany to adhere to Eurpean law (given that Helms-Burton is is contrary to international law). Whatever US law holds, it doesn't govern their operations in the european common market. For all I care, Pay Pal Germany is a European legal entity, operating out of Luxemburg.
(b) Company policy is a different matter. I don't give a poop what Pay Pal does as corporate policy. I believe that company policy that takes into account Helms-Burton, despite its inappicability abroad, is simply motivated by fear of fines to the mother company.
(c) The shop owners here probably simply made a naive mistake. We're talking about a mom & pop type shop with an online presence.
(d) It is anyway unacceptable that German companies would have to consult specialists on US sanctions law when they want to business with Cuba when the deal doesn't involve the US - US law doesn't apply to them.
(e) The effect is that European companies will avoid US companies in such trade, to the extent they can be avoided, because they are a risk.
(f) My problem here is that the US Congress wantonly enacts sanctions bills with extraterritorial effect - which means they subject to US law how I, as a German in Germany do business with some country outside the US that congress chooses to sanction.
I did not elect the US congress. They do not legislate my country. Just who do they think they are?!
(g) There was a time Americans got quite upset over a formula that read 'No taxation without representation'.
Let me propose a new one: 'No regulation, without representation'. I might accept the imposition of US regulations by congress on how we are to trade with third parties if I get a vote in US elections.
Posted by: confusedponderer | 01 July 2015 at 09:47 AM
No, we don't think they will, but we still expect them to.
This is being met with resentment here.
Posted by: confusedponderer | 01 July 2015 at 09:49 AM
Jonst,
They are having a tough fight on the cigar front:
http://latino.foxnews.com/latino/news/2015/02/23/high-court-hands-win-to-cuban-firm-over-use-cohiba-brand-name-in-us/
Posted by: Fred | 01 July 2015 at 11:16 AM
US interpretation of IP laws, especially patent scope, seems to be the area where the US is pushing hardest to impose its interpretations outside of its jurisdiction.
Then there is the aiding terrorist problem. You can get yourself into trouble giving to a charity, that purports to deliver humanitarian aid in Gaza, only to find it has been added to a black list causing you to be giving material aid to the enemy. Which groups and States end up being added, or omitted, on any given terrorist list seems pretty arbitrary.
Posted by: JJackson | 01 July 2015 at 11:16 AM
The big case in this context was when the US recently fined BNP Paribas about 9 billion for deals with Sudan, Cuba and Iran that ...
(a) didn't involve the US,
(b) was legal under French,
(c) European and
(d) international law,
(e) but violated US sanctions and
(f) they claimed jurisdiction because a digital dollar went through a US bank for a logical second, in
(g) an apparently politically motivated prosecution.
The idea apparently was to kick France for sticking with the Mistral deal with Russia.
http://www.zerohedge.com/news/2014-06-04/france-responds-us-bnp-fine-will-train-hundreds-russian-seamen-operate-french-made-w
Posted by: confusedponderer | 01 July 2015 at 11:45 AM
International law professor Dan Joyner on the EU and judgments on illegality of sanctions
http://armscontrollaw.com/2013/02/27/eu-sanctions-on-iran/
Posted by: Croesus | 01 July 2015 at 12:08 PM
CP,
If, as you say, the problem is Helms Burton, then that could mean a couple of things.
1. You think this particular law is stupid and don't want to be bound to it in your dealings with international subsidiaries of US based corporations. To that I would respond that PayPal doesn't have the option to pick and choose which US laws it complies with. Perhaps they could make a claim based on religious freedom, but I digress.
2. You think that international subsidiaries of US corporations should not be subject to any US laws outside of US borders. That is well and good, but that decision is made by the controlling interest inside the US, and that interest is subject to prosecution if they break US law which extends to their off shore operations.
In regard to your other points:
A. Unfortunately, this decision is not yours to make. It belongs to the Corporate entity who is subject to the laws where they are domiciled in addition to all laws of countries their subsidiaries reside in.
B. Understood. Please understand that PayPal has no interest in subjecting themselves to prosecution, and it's their company. You are not required to use their services.
C. Agreed. I said as much in my earlier post. Nothing nefarious going on here.
D. PayPal does all the legal consulting. The results are then listed in their terms of service. Reading the terms of service is the responsibility of the user. Generally you are forced to acknowledge that you have read and understood them prior to using the service. You have the option to decline, but you will then be denied the service.
E. Once again, US law applies to the parent company of the subsidiary. They are responsible for the conduct of their subsidiaries. I don't know the specifics of the laws you mentioned vs trade with China. You could be right that it is a massive contradiction. I don't know.
F. Yes! Now you are thinking! Nothing motivates a corporation to lobby the government to change a law more than losing money and markets! Taking your business elsewhere is the best tool you have. I recommend it.
G. Yeah, it's an imperfect system. Just remember that the laws businesses who do international business are subject to can also protect your interests as easily as hurt them. The pendulum swings both ways.
H. Americans are insular and often don't consider or care about the unintended consequences that fall on their global neighbors as the result of their actions. Evidence of this is legion and oft discussed on these pages. I don't say this to excuse or defend it in any way, just that I recognize it and no longer find it surprising. I doubt you do either.
I'm glad you got your bourbon.
Posted by: nick b | 01 July 2015 at 12:23 PM
Helms-Burton probably violates the WTO agreement, and the case is only on halt as a result of political horse trading.
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds38_e.htm
Posted by: confusedponderer | 01 July 2015 at 01:40 PM
nick b, all,
Correction: I was misinformed and have subsequently learned how it actually went. Amusingly, in my case PayPal just didn't work because of some bug on the page, and when I asked I got the story, wrong.
Alas, here it goes:
It happened 2011 apparently. The traders and not just my endor of choice had received an E-Mail, in English, that demanded they drop all their cuban products, or else lose their PayPal services. It wasn't even that they foolishly ordered through PayPal, as I thought. It was outrigth blackmail. Also, I was misinformed that this was not immediate, but happened a couple years back.
This was apparently triggered by US gvt pressure on Pay Pal.
I will edit that in the post. My apologies for telling it wrong.
Posted by: confusedponderer | 01 July 2015 at 01:58 PM
CP,
I just ran across this.
http://www.cnet.com/news/paypal-to-pay-7-7-million-fine-for-violating-us-sanctions/
Posted by: nick b | 01 July 2015 at 01:58 PM
nich b,
thanks. Divine retribution then. Please check my last reply and re-read the post.
Posted by: confusedponderer | 01 July 2015 at 02:13 PM
Agree!
Posted by: William R. Cumming | 01 July 2015 at 02:26 PM
CP,
No problem, let us not lose sight of the more important things, like you getting your bourbon and having unfettered access to more should you desire it! Prost!
Posted by: nick b | 01 July 2015 at 02:39 PM
Indeed.
It's just that sometimes I like Rum, too. In Germany buying and selling wares from Cuba is entirely legal. For that shops were threatened by Pay Pal with loss of revenue.
The case as it has manifested by now, is really nasty hardball stuff, and worse than the original story. The shops were given three days to comply.
The angle that the E-Mail was in English was sort of a rude touch (beyond the rudeness of the ultimatum itself) considering that it was directed at a German audience (but then, considering it enforced US law that was only consistent, I guess).
The point is that that approach instrumentalises corporations as the long arms of the US government to enforce US law in the guise of corporate policy.
Even though thus relabelled, it is still all about Helms-Burton being enforced in Germany, on Germans. And I really object to that.
Posted by: confusedponderer | 01 July 2015 at 02:52 PM
CP,
"Even though thus relabelled, it is still all about Helms-Burton being enforced in Germany, on Germans. And I really object to that."
And so you should. It is unjust. But the times they are a changin'. With today's announcement of embassies re-opening in Cuba and the US, perhaps we will see the end of Helms-Burton in the near future. I would happily drink to that.
Posted by: nick b | 01 July 2015 at 03:05 PM
Me too. Cuba Libre would be fitting, Coca Cola with Cuban Rum. Tasty, and quite symbolic.
The point remains that Congress is issuing extraterritorial sanctions bills much like a drunken sailor is spending money on booze and hookers.
Even with Cuba relations normalised and Helms-Burton off the books - the next time it'll be about trade with Iran or Russia. Alas, at least the first time in more than half a century Americans would be free to travel again (to Cuba). Because right now you aren't.
Posted by: confusedponderer | 01 July 2015 at 03:14 PM
Yes, and EU wants to force a US corporation "Google" to enforce the EU's "right to be forgotten" regulations on its US-located search engines. So the EU wants to be the world's speech controller.
Posted by: scott s. | 01 July 2015 at 04:16 PM
Cuba is already a capitalist country
Posted by: charly | 01 July 2015 at 04:56 PM
There are other examples that highlight two problematic aspects of the situation. Let us recall the Obama administration's reaction to the large-scale "drop" of documents by Wikileaks 2+ years ago. Instead of resorting to legal action based on statute, it issued decrees that amounted to ukases (or fatwas, if you prefer)to various financial and communications companies (including Paypal by coincidence) that they deny service to Wikileaks and any person associated with it. They companies complied because the White House threatened punishment - of a kind and at a time of its choosing.
So, what we are talking about is outright "non-legal" coercion; and a claim to universality since in today's world these companies are de facto public utilities organized and operating globally. It is no different that denying postal service to any group whom Obama arbitrarily judges to be acting in a manner that he finds anathema - without any legal process whatsoever. It's a simple matter of throwing your weight around. If the US thinks that is necessary, it should not hide the fact behind specious legal arguments; and it should be aware that others will act according - as they are doing on drones, electronic espionage, etc. Live by the rule of force; die by the rule of force.
Posted by: mbrenner | 01 July 2015 at 06:14 PM
Perhaps my point should be made concrete. What the US now says is that Pay Pal, by virtue simply of the fact that it does business in the United States, is subject to American law or Executive Order regarding business dealings with Cuba - wherever in the world those transactions occur. If it acts in violation of US dictates, it will be pursued in American courts and denied the right to do business in the US.
That means, as a practical matter, that at some point in the future China will pass laws that apply to any company that does business in China dictating that they refrain from engaging in commerce with India - even if that business relates to India-US trade - or run the risks of parallel penalties imposed by Beijing.
That will happen as sure as the sun will rise in the East tomorrow. Washington fantasists insist otherwise. Good Luck!
Posted by: mbrenner | 01 July 2015 at 07:18 PM