Initial press reports last November that the Committee on Foreign Investment in the United States (CFIUS) had commenced a review of ByteDance’s acquisition of Musical.ly, the service that was merged into ByteDance’s video-sharing site TikTok and helped fuel its expansion, were not particularly surprising to those familiar with CFIUS and its concerns.  However, recent departures from established CFIUS processes in the TikTok matter are striking and concerning for persons engaging in cross-border transactions involving the United States, calling into question the scope, apolitical nature, confidentiality, and security focus of the CFIUS process. Continue Reading TikTok: Familiar Issues, Unfamiliar Responses

Yesterday, updated guidance from the U.S. Department of State relating to Section 232 of the Countering America’s Adversaries Through Sanctions Act of 2017 (“CAATSA”) was published in the Federal Register.[1]  The updated guidance, which became effective on July 15, 2020, expands the potential applicability of secondary sanctions pursuant to Section 232 with respect to Nord Stream 2 and the second line of TurkStream.  Any work on or financial involvement in NordStream 2 or the second line of TurkStream will now be sanctionable, even if undertaken pursuant to an existing contract.  This could affect, among other things, lending and other financing to companies (including European companies) with any connection to either project.

Continue Reading Updated Guidance for Section 232 of CAATSA Published

On July 14, President Trump issued an Executive Order pursuant to the Hong Kong Policy Act eliminating the separate status of Hong Kong and China under various provisions of U.S. law, including export controls, immigration, tax, and extradition, as well as providing for the implementation of recent Hong-Kong related sanctions authorities.

Please click here to read the full alert memorandum.

Today, President Donald Trump signed into law the Hong Kong Autonomy Act (“HKAA”), authorizing the U.S. administration to impose blocking sanctions against individuals and entities (as well as visa bans in the case of individuals) determined to “materially contribute” to the erosion of Hong Kong’s autonomy.  The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority.[1] Continue Reading United States Enacts Additional Hong-Kong Related Sanctions; Impact Remains Unclear

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.