According to an article dated August 1 in the online edition of German newspaper Die Welt, the U.S. Internet payment company PayPal closed the account of a German website that had been selling Cuban rum among other alcohol and alcohol-related products. PayPal spokesman Christoph Hausel was quoted as saying the company, as a U.S. company, could not process payments for Cuban origin products.

Mr. Hausel is right. Section 515.204 of the Cuban Assets Control Regulations prohibit any person subject to U.S. jurisdiction from engaging in any transaction relating to any product outside the United States which is of Cuban origin.

But that’s not the end of the story here. E.U. Council Regulation No. 2271/96 makes it illegal for any company in the European Union to comply with the U.S. embargo on Cuba. PayPal operates in Europe through a Luxembourg-based banking entity. If that entity had any role in freezing the German company’s funds, it might be in violation of the E.U. Regulations, thereby putting PayPal, as it were, between a rock and a rum place. Not surprisingly, the German website owner is threatening a lawsuit against the Luxembourg entity.

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