Source: e-CommerceFacts.nl, 28 July 2011
According to Golem.de, Paypal has requested various German online shops to remove Cuban goods from their inventory and threatened to block their accounts. The reason cited is that the trade embargo that the United States has levied against Cuba since 1962 is mandatory for PayPal's US-based parent company, eBay.
Among others affected by the move is the German company Rum&Co which was asked recently by Paypal to remove all Cuban products from its product range: "Remove any Cuban cigars from your website that contravene PayPal terms and conditions," stated the message from PayPal as reported by Rum&Co proprietor Thomas Altmann. After it failed to respond its accounts were frozen. Paypal showed a willingness to resume the contract, as long as it was consistent with its terms.
Rum&Co eventually decided to go with other payment service providers: "We supply customers within the European Union." I do not see why US American companies should be able to simply dictate to us", explained Altmann. PayPal would not comment on the incident.
This is not the first time that PayPal has made headlines concerning its cross-border application of the US embargo. In March, the website of the British Guardian reported that the Paypal account of a British foundation that accepts donations to support students to study medicine in Cuba had been frozen by Paypal. At the Guardian's request, PayPal stated that the accounts had been closed due to their "indirect links with Cuba." It was stated that as an American company, PayPal is bound to observe this embargo.
In Paypal's terms and conditions it states: "At our own discretion, we reserve the right to close accounts at any time," and "to limit payment sources and payments, access to an account and some or all account features." However the specialist solicitor Michael Terhaag, consulted in April by Golem, has his doubts. At that time, he argued that the terms and conditions were not compatible with German law and are therefore invalid.
At any rate it seems surprising that eBay's subsidiary, PayPal Europe, which is regulated as a financial organisation under the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg, should subordinate itself to American laws.
*Update*: Rum&Co has stated in an interview with amerika21.de to prepare a joint legal action aganst Paypal with 20 other German retailers. Details are yet to be disclosed.