The U.S. Department of Commerce’s Bureau of Industry and Security has issued a rule, effective immediately, lowering the permissible level of de minimis U.S.-origin content in goods to be exported to Cuba.  Items manufactured outside the United States now may have no more than 10% U.S.-origin content (reduced from 25%) if they are to be exported to Cuba without violating U.S. export controls.  The rule also restricts leasing of aircraft and vessels subject to U.S. export controls (which, because of the de minimis rule, includes a majority of commercial aircraft) to Cuban entities.  These changes reverse liberalizations implemented in 2015 when Cuba was removed from the state sponsors of terrorism list.  The rule also restricts the availability of license exceptions for the export of certain telecommunications equipment and donations of items for scientific, cultural, and similar purposes to Cuban government entities.

In announcing the new rule, the Trump Administration linked the changes to Cuba’s repressive activities and support of the Maduro regime in Venezuela.  This action continues the pattern of relatively modest reversals by the Trump Administration of the relatively modest liberalization measures introduced by the Obama Administration.

On October 23, 2019, the Trump Administration rescinded the designation of Turkish officials and ministries.  The Executive Order remains in force, and so authority to re-impose sanctions remains.

On October 14, President Trump issued Executive Order 13894, styled “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria.”  Under this order, OFAC designated 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 for blocking sanctions.  This prohibits not only transactions with the relevant ministries and ministers (including in their official capacities) but any state-owned enterprise in which a 50% or greater interest held through those ministries.  OFAC also issued three general licenses providing a 30-day wind-down period for existing contracts with the sanctioned ministries or entities and permitting official U.S. government functions and certain international organization activities to continue, and OFAC has indicated that it is prepared to issue specific or general licenses to ensure that Turkey is still able to meet its energy needs. Continue Reading US Imposes Sanctions Against Turkish Ministries, Officials

U.S. authorities take an expansive view of their jurisdiction when it comes to sanctions. They cannot, however, directly restrict persons outside U.S. jurisdiction from dealing with sanctioned persons. They therefore exert pressure on persons outside U.S. jurisdiction by threatening to designate them as sanctioned persons if they engage in certain activities contrary to U.S. sanctions policy (“Target Activities”). Sanctions imposed in such circumstances are known as ‘secondary sanctions’, and were the topic of the September 2019 judgment of the High Court of England and Wales in Lamesa Investments v. Cynergy Bank. In a ruling that will surprise many, the Court found that the risk of incurring secondary sanctions could be invoked by a party seeking to be excused from its contractual obligations under an illegality clause. While the Court’s interpretation of secondary sanctions appears questionable in several respects, parties will nonetheless need to take it into account when drafting contractual provisions. Continue Reading High Court of England: U.S. Secondary Sanctions can Trigger Illegality Clauses

On September 17, 2019, the Department of the Treasury proposed regulations implementing most of the remaining provisions of the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), which updated the statute authorizing reviews of foreign investment by the Committee on Foreign Investment in the United States (“CFIUS”). Continue Reading Proposed CFIUS Regulations Expand Its Jurisdiction

In the case of Ministry of Defence and Support for Armed Forces of the Islamic Republic of Iran v International Military Services Ltd [2019] EWHC 1994 (Comm), the High Court examined in detail the effect of the EU sanctions regime against Iran in the context of the enforcement of arbitral awards.

The High Court found that EU sanctions precluded Iran’s Ministry of Defence (“MODSAF”) from enforcing the interest element of an ICC award against International Military Services Limited, a UK state-owned supplier of military vehicles (“IMS”), which would have accrued during the period MODSAF has been subject to EU sanctions. The judgment provides insight into the approach of the English courts in interpreting sanctions regimes and suggests that English courts may  be sympathetic under certain circumstances to the argument that obligations owed to EU sanctioned entities should be suspended while sanctions remain in place.

Although this case dealt with the application of the EU sanctions regime at the enforcement stage, the same analysis may also be relevant to the merits phase of certain international arbitration proceedings, given the prevalence of arbitral institution rules that hold that arbitral tribunals should make all efforts to ensure that an award is enforceable.

Please click here to read the full alert memorandum.

On August 5, 2019, the U.S. Administration imposed blocking sanctions on the Government of Venezuela (“GOV”) under a new executive order. Although named individual officials, the Central Bank of Venezuela, and Petróleos de Venezuela, S.A. (“PdVSA”) were already blocked entities under U.S. sanctions, now all Venezuelan government entities and state-owned enterprises are blocked entities.

Unless a license applies:

  • all property and interests in property (broadly defined) of the GOV within U.S. jurisdiction are blocked; and
  • all transactions within U.S. jurisdiction in which the GOV has an interest are prohibited.

GOV entities are now effectively barred from the U.S. economy and from U.S. dollar transactions.

However, the impact of this expanded designation has been significantly mitigated by 25 new and amended general licenses issued by OFAC, together with related guidance. Importantly, treatment of pre-sanctions Venezuelan bonds and dealings with PdVSA remain essentially unchanged, and most activities previously authorized by OFAC general license remain authorized.

The imposition of blocking sanctions on the entire GOV marks a meaningful expansion of U.S. sanctions against Venezuela. While the practical impact of the designation may be limited by the general licenses and the fact that PdVSA and the Central Bank of Venezuela were already subject to blocking sanctions, the complexity of one of the most complex U.S. sanctions regimes has increased. Parties involved in any dealings involving Venezuela face increased diligence requirements to ensure their activities remain authorized.

Please click here to read the full alert memorandum.

On August 5, 2019, the European Commission (“Commission”) published its official Guidance on Internal Compliance Programmes (“Guidance”).[1] The Guidance aims to clarify and harmonize implementation of Regulation 428/2009 on Dual-Use Goods[2] (“Dual-Use Regulation”) by competent Member State authorities (“national export authorities”) and EU-based exporters of dual-use goods (“exporters”). While the Guidance is non-binding, national export authorities will take it into careful account when considering applications to export, transit or broker dual-use items.

Continue Reading EU Publishes Non-Binding Guidance on Internal Compliance Programmes for Dual-Use Trade Controls

Late on Friday, August 2, 2019, the U.S. Administration announced that it would implement a second wave of sanctions under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act) against the Russian Federation.  These sanctions will;

  • prohibit U.S. financial institutions from participating in future primary issuances of non-ruble Russian sovereign debt;
  • require the United States to oppose any new assistance to Russia by international financial institutions; and
  • prohibit the export to Russia of dual-use goods controlled for chemical or biological warfare reasons.

Continue Reading United States Imposes Limited Sovereign Debt, Multilateral Lending, and Export CBW Act Sanctions on Russia

Late in the evening of August 1, 2019, President Trump signed an executive order (the Executive Order) re-delegating implementation of certain sanctions under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act) to the Secretary of the Treasury.  According to press reports, the Administration may be preparing for a second round of CBW Act sanctions against Russia as a result of the Skripal poisoning.

Continue Reading New Executive Order Hints at Additional Sanctions on Russia; Implementation to Come

Over the last few weeks, the U.S. House and Senate have separately passed a number of amendments to the National Defense Authorization Act for Fiscal Year 2020 (the “NDAA”) that, if enacted, would expand sanctions on persons and activities related to North Korea, China, Russia, Burma, and certain Central American states. Continue Reading Sanctions Outlook: Congress to Consider Sanctions Provisions in FY2020 Defense Bill