Yes, a French company can be sanctioned by OFAC, the US Treasury office responsible for sanctions, without having any subsidiary or activity in the United States. Three connecting factors are usually enough: a payment in dollars, which passes through a US correspondent bank; a good, component or software of US origin incorporated in the exported product; or the involvement of a US person, including a US national employed in France. Secondary sanctions go further, targeting transactions with no US connection but exposing the party to designation on the SDN list, that is, exclusion from the dollar financial system. Against this, European law has adopted a blocking regulation which prohibits compliance with certain listed US measures (Article 5 of Regulation (EC) No 2271/96), and France has had a blocking statute since 1968.
The question becomes concrete the day a bank freezes a transfer, a supplier demands an end-user certificate, or a US law firm sends a document request in support of proceedings across the Atlantic. At that point the company has a few days to decide what it may lawfully answer, and answering wrongly exposes it either to a US penalty or to a French criminal offence. Neither of those decisions should be improvised by the finance department on the afternoon the letter arrives.
What OFAC is and what it sanctions
The Office of Foreign Assets Control is a bureau of the US Treasury administering some twenty sanctions programmes aimed at States such as Iran, Cuba, North Korea and Syria, at Russia for certain strands, at economic sectors, and above all at persons and entities listed as Specially Designated Nationals, the SDN list. Designation freezes the entity’s assets within US jurisdiction and prohibits any US person from dealing with it. The so-called fifty percent rule extends those effects automatically to any entity owned fifty percent or more, directly or indirectly, individually or in the aggregate, by one or more designated persons, even though that entity is not itself listed. It is the most frequent trap, because the ownership chain is rarely visible on the commercial documents.
US sanctions fall into two categories. Primary sanctions apply to US persons, a broad notion covering US nationals wherever they are, entities incorporated in the United States and their foreign branches, anyone physically present in the United States, and transactions involving US-origin goods or the US dollar. Secondary sanctions apply to non-US persons with no US connection at all, and their penalty is not a fine but designation: the company itself is placed on the SDN list and loses access to dollar clearing, which for most exporters is the commercial equivalent of closure.
The three connecting factors that bring a French transaction within US reach
The first is the currency. A payment denominated in dollars is cleared through a US correspondent bank, which places the transaction within US jurisdiction even though neither party has any American presence. This alone explains most frozen transfers. The second is the goods: any item, component, software or technology of US origin carries US export control rules with it, and the de minimis and foreign direct product rules extend that reach to foreign-made products incorporating controlled US content.
The third is the person. A US national employed in the French company, a US-incorporated subsidiary, or a director holding a green card is a US person, and involving that person in approving, facilitating or even referring a prohibited transaction brings the whole operation within the primary regime. Facilitation is interpreted broadly, so instructing a non-American colleague to sign instead is itself a violation. Mapping these three exposures across an existing business is the first concrete step of any compliance review.
The European blocking regulation: a prohibition on complying
Council Regulation (EC) No 2271/96 protects against the effects of the extraterritorial application of the legislation listed in its annex, which includes the Cuba measures and the Iran measures reinstated in 2018. Article 5 prohibits Union operators from complying, whether directly or through a subsidiary or intermediary, actively or by deliberate omission, with the listed measures or with any decision founded on them. Article 6 gives a right to recover damages caused by their application, and Article 4 denies effect in the Union to foreign judgments or administrative decisions giving effect to them.
The protection is real but narrow and uncomfortable. It covers only the listed measures, so it says nothing about most Russia-related sanctions. Compliance may be authorised by the Commission on application where non-compliance would seriously damage the operator’s interests or those of the Union, and that authorisation procedure is the route out of the contradiction. The Court of Justice confirmed in Bank Melli Iran v Telekom Deutschland (Case C-124/20, 21 December 2021) that Article 5 applies even where no order has been received from a US authority and that the operator terminating a contract must be able to show its decision had another motive. A company caught between the two systems therefore needs a documented decision, not an instinct.
The French blocking statute of 1968
Law No 68-678 of 26 July 1968, amended in 1980, prohibits any person from communicating documents or information of an economic, commercial, industrial, financial or technical nature intended to constitute evidence in foreign judicial or administrative proceedings, outside the channels of international treaties and agreements. Breach is a criminal offence punishable under Article 3, and the statute has been reinforced by Decree No 2022-207 of 18 February 2022, which requires the recipient of such a request to refer it without delay to the Strategic Information and Economic Security Service at the Ministry of the Economy, which issues an opinion within one month.
The practical consequence is that a document request from a US regulator or from opposing counsel in US discovery cannot simply be answered. The lawful route is the Hague Evidence Convention of 18 March 1970, or a transmission validated after referral to the service. Producing voluntarily is a criminal risk in France; refusing without organising the referral exposes the company to sanctions in the United States. Handling the first letter correctly is what determines which of those two risks the company ends up carrying.
What to put in place before there is a problem
Screening comes first, and it has to cover both the counterparty and its ownership chain, because the fifty percent rule catches unlisted entities. That means consolidated screening against the SDN list, the EU consolidated list and the national lists, repeated at each order rather than once at onboarding, with the search results dated and archived. Contracts then need a sanctions clause allowing suspension or termination where performance would become unlawful, drafted carefully so that it does not itself amount to prohibited compliance under Article 5 of the blocking regulation.
Beyond screening, the exposures have to be mapped: which contracts are priced in dollars and could be redenominated, which products contain US-origin content and at what percentage, which employees or directors are US persons and which decisions they must be kept out of. A written procedure naming who receives a foreign authority’s request, who refers it to the ministry and who instructs counsel turns a crisis into a process. All of this is inexpensive in advance and nearly impossible to improvise once a bank has frozen a payment.
What the firm does
The firm advises French and foreign companies on their exposure to US sanctions and export controls, on screening obligations, and on drafting sanctions and termination clauses that hold up under both regimes. That work starts with a factual map of the currency, goods and personnel exposures, because the legal answer differs entirely depending on which of the three applies.
Where a request has already arrived, the firm handles the referral under the 1968 statute and Decree 2022-207, organises transmission through the Hague Evidence Convention where appropriate, and negotiates with counsel abroad. It also handles frozen payments and blocked shipments, applications to the European Commission for authorisation to comply under the blocking regulation, and licence applications where a transaction can be authorised. A first assessment is normally possible within a few days on the strength of the contract, the correspondence and the shipping documents.
A bank has frozen your payment, or a foreign authority is asking you for documents? The firm assesses your exposure and organises a lawful response under both the US and the European rules.
Frequently asked questions
Can a French company with no US activity be sanctioned by OFAC?
Yes. A payment in dollars cleared through a US correspondent bank, US-origin goods, components or software incorporated in the product, or the involvement of a US person including a US national employed in France, each bring the transaction within US jurisdiction. Secondary sanctions go further still, targeting transactions with no US connection and exposing the company to designation on the SDN list, which cuts it off from dollar clearing.
What is the fifty percent rule?
OFAC treats any entity owned fifty percent or more, directly or indirectly, individually or in the aggregate, by one or more designated persons as itself blocked, even though it does not appear on the SDN list. Screening the counterparty’s name alone is therefore insufficient: the ownership chain has to be checked, which is where most compliance failures in practice originate.
Does the European blocking regulation really protect?
It protects within limits. Regulation 2271/96 prohibits compliance with the measures listed in its annex, gives a right to recover damages and denies effect to foreign decisions applying them, but it covers only the listed measures and not most Russia-related sanctions. The Commission may authorise compliance on application where non-compliance would seriously damage the operator’s interests, and that authorisation is usually the practical way out.
Can we answer a document request from a US authority?
Not directly. Law No 68-678 of 26 July 1968 prohibits communicating economic, commercial, industrial, financial or technical documents intended as evidence in foreign proceedings outside treaty channels, and Decree No 2022-207 of 18 February 2022 requires referral without delay to the Strategic Information and Economic Security Service, which gives its opinion within one month. The lawful routes are that referral or the Hague Evidence Convention of 1970.
How can exposure to US sanctions be reduced?
By addressing the three connecting factors: invoicing and clearing in euros rather than dollars where the counterparty accepts it, identifying and where possible designing out US-origin content, and keeping US persons out of decisions on transactions that touch sanctioned jurisdictions. Add consolidated screening repeated at each order with dated archived results, a carefully drafted sanctions clause, and a written procedure naming who handles a foreign request.
Further reading: governing law and jurisdiction clauses, recovering an unpaid invoice from a foreign customer, the firm’s international practice.
Written by Hervé Guyader, avocat at the Paris Bar, doctor of law. This content is general information and is no substitute for advice on your own matter.