Triggering Parent Company Liability Under United States Sanctions Regimes: The Troubling Implications of Prohibiting Approval and Facilitation

Terence Lau, University of Dayton

Abstract

This article examines three issues surrounding the liability of U.S.-based companies with foreign subsidiaries or affiliates incorporated in countries where trade with U.S.-sanctioned countries is permissible. First, the article examines the statutory bases for economic trade sanctions and the OFAC-issued implementing regulations, namely the Trading with the Enemy Act (TWEA) and the International Emergency Economic Powers ACT (IEEPA) and how these statutes grant extraterritorial authority to OFAC. Second, the article explores regulations promulgated by OFAC that prohibit parent company "approval" or "facilitation" of transactions by such affiliates or subsidiaries, and how such regulations indirectly extend the reach of U.S. sanctions to the conduct of foreign subsidiaries and affiliates. Third, the article suggests that OFAC's broad and sweeping interpretations of the statutes implementing economic embargoes has resulted in the inability of U.S-based companies to comply with the spirit of that embargo, and that changes should be implemented by OFAC, or Congress if necessary, to ensure compliance.