Random sanctions thought of the day: AppliChem & Kollmorgen OFAC enforcement actions

So… Kollmorgen seems to have done a lot, if not all the right things in terms of due diligence, investigation and remediation, and they settle for almost double the base penalty – due to the actions of its Turkish subsidiary Elsim. In the meantime, Illinois Tool Works (ITW) itself doesn’t settle or get fined, but its German subsidiary AppliChem gets a penalty (not a settlement) for about half the base penalty. Mind you, the Kollmorgen settlement was a fraction of the penalty imposed on AppliChem, but … why the discrepancy in handling, especially considering that AppliChem’s actions were as egregious, if not more so, than Elsim’s – and involved a ton more violations (304 versus 6) for a lot more money…

I think I know why… by imposing a penalty on AppliChem, the EU Blocking Statute comes into play:

No judgment of a court or tribunal and no decision of an administrative authority located outside the Community giving effect, directly or indirectly, to the laws specified in the Annex or to actions based thereon or resulting there from, shall be recognized or be enforceable in any manner.

And this means that OFAC’s penalty is unenforceable. AppliChem’s violations were of the Cuba program, which was the program covered under the original 1996 statute – but Elsim’s were of the Iran program, which did not fall under it until its revision in 2018.

Nice for AppliChem… bummer for Kollmorgen… and confusing as heck to the rest of us (although I’m sure there are some lawyers who figured this out immediately).

Mr. Watchlist is not going to bother to ask OFAC about this – because I know they will never confirm or deny this.

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