Can A US Parent Require An EU Subsidiary To Violate EU Law?

An OFAC settlement involving an Italian subsidiary creates an impossible conflict between US sanctions compliance and EU law. Multinational companies should be aware of, and prepare for, this problem.

The Background

There is an old joke about multinational compliance:

The US company wants everyone to follow US law, the European subsidiary wants everyone to follow European law, and the lawyers want to know why nobody invited them to the meeting.

Unfortunately, neither this joke nor the fact pattern is particularly amusing.

On August 12, 2026, OFAC announced a US$60,764 settlement with Rice Lake Weighing Systems, Inc. (“Rice Lake”) relating to eight apparent violations of the Iranian Transactions and Sanctions Regulations. The conduct involved Rice Lake’s Italian subsidiary, Dini Argeo S.r.l. (“Dini Argeo”), that exported goods to Iran through a distributor in the United Arab Emirates, despite knowing that the goods were ultimately destined for Iran.

US sanctions prohibitions often extend to non-US entities owned or controlled by US persons. In this case, the chain of responsibility is long: the US parent did not ensure that its EU sub did not sell goods to a third-party distributor that then exported those goods to Iran.

OFAC did not allege that Rice Lake knew about the exports. Rather, OFAC claimed that Rice Lake had not done enough to ensure that its Italian subsidiary understood and complied with applicable US sanctions requirements.

The Conflict

At the time of the conduct, the EU’s so-called Blocking Statute restricted EU companies from complying with these US sanctions (that that had previously been suspended or waived under the Joint Comprehensive Plan of Action, now defunct). In fact, the express purpose of the EU’s Blocking Statute is “to protect EU operators from the extra-territorial application of third country laws”.

When conflicts of applicable laws arise, how should a lawyer advise a multinational client?

The Rice Lake settlement does not answer this question. Instead, it demonstrates that global sanctions compliance is not simply a matter of imposing US-oriented controls.

Questions for International Companies

• Has our global compliance program been designed around US requirements without sufficiently considering the laws applicable to the subsidiary?
• When could US and foreign sanctions requirements conflict? Could efforts to impose our global compliance program create operational problems for foreign subsidiaries?
• What sanctions obligations does the parent have with respect to foreign subsidiaries?
• What contractual, reporting, training, audit, and escalation mechanisms do we have in place?

Answers to these questions could prepare your multinational for potential conflicts in the future.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.