On June 3, 2020, the International Chamber of the Paris Court of Appeal rejected an annulment application brought against an arbitral award rendered by a Paris-seated ICC arbitration tribunal. The ICC tribunal on December 27, 2018 rendered an award in favor of the Iranian Natural Gas Storage Company (“NGSC”), in a dispute arising out of the termination of a contract for the conversion of a gas field.

The Court held that the ICC award at issue, which had allegedly failed to take into account the impact of US and international sanctions against Iran on the termination of the contract, did not violate the French conception of international public policy. The court also found that EU and UN sanctions constitute overriding mandatory rules that form part of international public policy, whereas US sanctions do not. This decision provides useful guidance on the potential impact of international sanctions on the validity and enforcement of arbitral awards.

Please click here to read the full alert memorandum.

This Trade Summary provides an overview of WTO dispute settlement decisions and panel activities, and EU decisions and measures on commercial policy, customs policy and external relations, for the first quarter of 2020.

If you have any questions regarding the above, do not hesitate to contact fclaprevote@cgsh.com or tmuelleribold@cgsh.com.

On June 4, 2020, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) issued the Syria-Related Sanctions Regulations (SRSR).  Not to be confused with the pre-existing Syrian Sanctions Regulations found in 31 C.F.R. Part 542, the SRSR, which are found in 31 C.F.R. Part 569, are intended to implement Executive Order 13894, Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria (October 14, 2019; the Executive Order).[1]  We previously wrote about the broad authority to impose sanctions against a wide range of individuals and entities under the Executive Order here.  The impact of the Executive Order and the SRSR will depend, of course, on the scope of the actual sanctions imposed.  As of today, only the current Syrian Minister of Defense is designated on the list of Specially Designated Nationals and Blocked Persons (SDN List) maintained by OFAC pursuant to the Executive Order.[2]

Also, beginning June 17, 2020, the secondary sanctions provisions of the Caesar Syria Civilian Protection Act (the Act) will take effect.  The Act, which was included in the National Defense Authorization Act for Fiscal Year 2020 enacted into law on December 20, 2019, calls for the President to impose sanctions on foreign persons that knowingly engage in activities covered by the Act (which we wrote about here) beginning 180 days after enactment.  The U.S. government already had the authority to impose sanctions for certain activities covered by the Act.[3]  Nonetheless, as with other secondary sanctions programs targeting Iran, North Korea, and Russia, the Act has an optical impact and could ramp up political pressure to impose sanctions.  Application of secondary sanctions is highly discretionary as to likelihood, scope, and warning/negotiation prior to imposition.

[1] It is not clear why the SRSR could not just have been incorporated into the existing Syrian Sanctions Regulations.

[2] OFAC designated General Ali Abdullah Ayoub on March 23, 2020.  In connection with issuing the Executive Order on October 14, 2019, OFAC previously added the Turkish Ministry of Energy and Natural Resources, the Turkish Ministry of Defense, and the Ministers of the Interior, Energy and Natural Resources, and Defense to the SDN List.  OFAC subsequently removed the Turkish officials and ministries from the SDN List on October 23, 2019.

[3] The Act authorizes the U.S. government to sanction any person or entity that engages in significant transactions with the Government of Syria.  The U.S. government already had the authority to do that under Executive Order 13582, Blocking Property of the Government of Syria and Prohibiting Certain Transactions With Respect to Syria (August 17, 2011).

Even before the COVID-19 pandemic, the German Federal Ministry of Economics and Energy (Bundesministerium für Wirtschaft und Energie – BMWi), led by federal minister Peter Altmaier, announced a major revision of Germany’s foreign direct investment control regime (FDI Regime) to come into force in 2020, in what would become the third amendment of the FDI Regime since 2017. This announcement was made as part of the introduction of the BMWi’s “National Industry Strategy 2030”. The aim of this new industrial policy is to “protect and regain Germany’s commercial and technical expertise, competitiveness and industrial leadership at national, European and global level”.

Continue Reading Changes to the German Foreign Direct Investment Control Regime Take Shape Amid the COVID-19 Crisis

Over the last few weeks, there has been a flurry of activity at the Committee on Foreign Investment in the United States (CFIUS).  In addition to imposing filing fees, which we wrote about here, and issuing proposed amendments to broaden the mandatory CFIUS notification requirements, which we wrote about here, CFIUS recently blocked a robotics joint venture in China with no U.S. assets and limited to operations outside the United States, released detailed information regarding the transactions reviewed by CFIUS during 2018 (as well as summary data for transactions reviewed in 2019), and announced a new electronic filing system. Continue Reading CFIUS Blocks Joint Venture Outside the United States, Releases 2018-2019 Data, and Goes Electronic

On May 21, 2020, the U.S. Department of the Treasury published a proposed rule (the “Proposed Rule”) that would significantly broaden the scope of mandatory filing requirements of the Committee on Foreign Investment in the United States (“CFIUS”) for foreign investments involving U.S. critical technology businesses.

The Proposed Rule abandons the current restriction to specified industries and focuses on whether the target develops, tests, or manufactures critical technologies that would require a license for export—whether or not the critical technologies are exported or sold to third parties at all (e.g., proprietary manufacturing technologies)—to the jurisdiction of the foreign investor and its parent entities, effectively creating different mandatory notification requirements for different countries.

The Proposed Rule would:

  • Expand the CFIUS mandatory critical technology notification requirement to cover foreign investments in all industries, if the target U.S. business develops, tests, or manufactures technology that would require a license or other authorization under any of the four main U.S. export control regimes to export or transfer to any foreign party in the ownership chain of the investors in the transaction.
  • Complicate the mandatory CFIUS notification analysis by requiring parties to identify the export control status of all products, software, and technology produced, designed, tested, manufactured, fabricated, or developed by the U.S. business (whether or not sold to third parties), all jurisdictions relevant to the investors, and the corresponding licensing requirements, potentially introducing significant delays.
  • Provide a significant exemption from the mandatory notification requirement for a wide range of dual-use goods, software, and technology eligible for export to a list of countries thought to pose a low risk of diversion, based on an existing license exception in the export control rules.

The Proposed Rule also clarifies the ownership rules used to determine when an investor linked to a foreign government is required to file with CFIUS for an investment in a sensitive U.S. technology, infrastructure, or data business.

Please click here to read the full alert memorandum.

On May 15, 2020, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued an interim final rule (the Interim Rule) amending the direct product rule under the Export Administration Regulations (EAR) to further restrict Huawei Technologies Co., Ltd. (Huawei) and its affiliates designated on the Entity List from receiving semiconductor and other products produced outside the United States using U.S.-origin software and technology.  The changes, which are effective immediately (but subject to two savings clauses), could have a significant impact on the ability of non-U.S. foundries that manufacture semiconductor products for Huawei and its affiliates (e.g., HiSilicon) using U.S.-origin software or technology to continue to do so (and could have a corresponding significant impact on the competitiveness of U.S. semiconductor manufacturing equipment and software).  BIS also extended the temporary general license (TGL) that authorizes certain activities subject to the EAR involving Huawei and its affiliates through August 13, 2020.[1] Continue Reading BIS Expands Export Restrictions on Huawei, Extends Temporary General License

The COVID-19 pandemic has created market conditions ripe for increased cross border investment as businesses scramble for capital and investors target distressed assets.  The Committee on Foreign Investment in the United States (CFIUS) is focused on the trend.  Senior Department of Defense officials have recently and repeatedly stressed the need for the active use of CFIUS reviews to protect against “adversarial capital coming into our markets for nefarious means” during the current economic crisis.  Against this backdrop, U.S. businesses and foreign investors must be mindful of the CFIUS implications of acquisitions and financing transactions (including the exercise of creditors’ rights with respect to distressed companies).  The attached memorandum explores these issues and available approaches to mitigating them.

Please click here to read the full alert memorandum.

On April 28, 2020, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) published two final rules and one proposed rule[1] that will result in tighter restrictions on exports, reexports, and in-country transfers of dual-use items subject to the Export Administration Regulations (EAR) and controlled for national security reasons to China, Russia, Venezuela, and a number of other countries.  Companies involved in exports and reexports of controlled items to these countries should carefully review the changes. Continue Reading BIS Tightens National Security Export Controls

Today, the U.S. Department of the Treasury (“Treasury”) published an interim rule (the “Interim Rule”) implementing the filing fee provisions of the Foreign Investment Risk Review Modernization Act (“FIRRMA”) along the lines set out in Treasury’s proposal of March 9. The Committee on Foreign Investment in the United States (“CFIUS”) will assess tiered filing fees for all final notifications filed on or after May 1 (whether or not a draft notification was filed before May 1). The Interim Rule is open for public comment until June 1, 2020.

Please click here to read the full alert memorandum.