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

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 second quarter of 2019.

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

Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) each announced changes to the Cuba sanctions rules.  OFAC is amending the Cuban Assets Control Regulations (CACR) to end group educational or cultural visits referred to as “people-to-people” educational travel, one of the major categories permitting non-family travel to Cuba.  People-to-people educational travel that was previously authorized will be allowed where the traveler has already completed at least one travel-related transaction (such as purchasing a flight or reserving accommodation) prior to June 5, 2019.  These amendments follow similar changes to CACR made on November 9, 2017 that removed authorization for individual people-to-people visits to Cuba.  OFAC also released an updated set of frequently asked questions regarding Cuba sanctions.

Continue Reading Cuba Sanctions Tighten: OFAC Limits Cuba Travel