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Capsule collisions clipping

Hey all,

I have two static meshes, each one using a set of capsule collisions. The collision objects are imported with the STM from 3dsmax; they are carefully placed so there are no holes or thin places, and are recognized as capsules by UE.
Both objects are grabbable by two physics constraints. When they collide, the collisions are working to some extent; however, very soon the objects start clipping through each other.
I’ve tried changing physics constraint values, enabling CCD, increasing the number of substeps, etc; nothing helps so far.
I’ve considered switching to mesh collisions from lowest LOD, but from what I understand the mesh collisions do not work with physics.

I have got this setup to work properly a couple of months ago, but I did not make a backup. Now I am unsure what was done differently and how to get the objects to not clip.
Any ideas, anyone?