Congress Moves Closer to Passing Sweeping Iran, Russia, and North Korea Sanctions Legislation

On July 25, the House of Representatives passed the Countering America’s Allies Through Sanctions Act (HR 3364), setting up a vote in the Senate and a showdown with President Trump. This bill is an omnibus of three separate sanctions measures: the Countering Iran’s Destabilizing Activities Act (“CIDAA”), the Countering Russian Influence in Europe and Eurasia Act (“CRIEEA”), and the North Korean Interdiction and Modernization of Sanctions Act (“NKIMSA”).  Together, they make a forceful, bipartisan statement that Congress supports the application of robust sanctions as a cornerstone of US foreign policy.  However, they also may put President Trump in the difficult position of receiving a strong Russia sanctions bill as he seeks to repair relations with Russia and members of his administration are embroiled in Russia-related controversies.  Moreover, the Senate has yet to take up the bill, amid concerns about the NKIMSA provisions, which has prompted Democratic finger-pointing that Republicans are delaying the bill to avoid sending the President a Russia sanctions package.

Russia Sanctions: Congress Flexes its Muscle

As Steptoe has previously discussed in our alert and on the blog, CRIEEA would authorize – and at times require – the President to impose significant new sanctions on the Russian energy, financial, and defense sectors. The Senate has previously passed two versions of this bill, and the House version includes further amendments designed to allay some concerns from the US energy industry and EU allies.  In particular, CRIEEA would do the following: Continue Reading

Lawsuits for Cuban Confiscated Property Still Suspended, For Now

On Friday, July 14, 2017, the Trump administration joined the administrations of Presidents Clinton, Bush, and Obama in suspending Title III of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, also known as the Helms-Burton Act, a controversial provision that would authorize lawsuits in U.S. courts to recover damages related to confiscated property in Cuba.

When the Castro regime came to power in Cuba in the late 1950s, it confiscated property from thousands of U.S. and other foreign individuals and companies. The U.S. Foreign Claims Settlement Commission (FCSC) evaluated the validity of claims for losses resulting from the expropriation and nationalization of property owned by U.S. nationals.  In total, the Commission considered 8,821 claims and certified 5,913 claims to be compensable for a value of $1.9 billion (most, but not all, claims related to confiscated property).

Cuba has resolved claims for confiscated property with several other countries, including Canada, France, Italy, Mexico, Spain, Switzerland, and the United Kingdom, but it has not resolved claims with the United States. After July 2015, when the United States re-established diplomatic relations with Cuba, both governments have held information-sharing discussions regarding the outstanding claims.  However, no funds have yet been made available for the claims, nor has a settlement with the Cuban government been reached. Continue Reading

Supreme Court to Decide Whether Firms can be Sued in Human Rights Cases

The unsettled question of whether corporations may be held liable for international human rights abuses may finally, after a tortuous deviation, be addressed by the Supreme Court in the case of Jesner v. Arab Bank.

The case, on appeal from the United States Court of Appeals for the Second Circuit in New York, contains allegations that the Arab Bank processed financial transactions on behalf of groups linked to terrorism. The plaintiffs are victims of terror attacks.  Among other things, plaintiffs alleged that the Jordan-based bank “knowingly used its New York branch to collect donations, transfer money, and serve as a ‘paymaster’ for international terrorists.”

Central to the case is the Alien Tort Statute, a 1789 law that allows United States federal district courts to hear “any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” The phrase “violations of the law of nations” has been construed by federal courts to cover human rights violations that are “obligatory and universal.” Examples of such acts have included extrajudicial killing, genocide, war crimes, crimes against humanity, cruel, inhuman or degrading treatment, forced labor, and other similarly peremptory norms. Continue Reading

Icebreaker: Two Pilot Program Declinations Are First FCPA Resolutions Under the New Administration

In June 2017, the DOJ released the first two corporate FCPA resolutions since the new administration took office. In both cases, the DOJ issued declination letters “consistent with” the FCPA Pilot Program and required the disgorgement of associated gains.  In one of the two instances, the declination letter also required the forfeiture of funds withheld by the company from foreign government officials involved in the alleged wrongdoing.  Neither company is a U.S. “issuer”; thus, unlike in some of the early Pilot Program declinations, there was no SEC disgorgement.

Many FCPA commentators have speculated on the reasons for the slowdown in corporate FCPA enforcement since the new administration took office. We do not intend to enter into that debate here, except to note that we continue to see robust DOJ and SEC activity at the investigation stage.  And, as we noted in our 2017 FCPA Mid-Year Review, final resolutions of ongoing matters may be delayed as a result of the slow pace to date of confirming senior DOJ and SEC officials to permanent enforcement posts.

Despite the slowdown in certain aspects of enforcement, however, the recent declinations are interesting for a number of reasons. First, the DOJ appears at least to remain committed to clearing longstanding investigations out of its inventory.  The DOJ issued the first declination, dated June 16, 2017, to Linde North America Inc. and Linde Gas North America Inc. (collectively “Linde”) relating to conduct that dated to 2006 and had been under investigation for a substantial period of time.  Continue Reading

The CFIUS Calculus Has Changed — In More Ways Than One

On July 19, 2017, Steptoe’s Stephen Heifetz authored an article titled “The CFIUS Calculus Has Changed — In More Ways Than One” for Law360.  The piece reviews how changes to CFIUS in the Trump administration, including stricter calculation of national security risk, may in turn impact the decision that companies make when determining whether to file with the committee.  What was originally designed as a process to assure a company that it poses no threat to national security may now do the opposite.

For more information, please see our advisory.

Recent Settlements Reveal the Hidden ABAC Risks and Rewards of Internal Audits

On July 19, 2017, Steptoe’s Matthew Herrington and Brady Cassis co-authored a piece titled “Recent Settlements Reveal the Hidden ABAC Risks and Rewards of Internal Audits” for The Anti-Corruption Report.  In the article, the authors unpack the recent settlements revealing several strategies for successfully managing internal audits.

For more information, the full article can be read at The Anti-Corruption Report (subscription required).

Trump Administration Recertifies Iran’s Compliance with Nuclear Deal, Imposes Sanctions on IRGC-Linked Individuals and Entities

The Iran nuclear deal lives to see another day—but President Trump continues to express deep reservations regarding the agreement.

Iran Nuclear Deal Certification

On Monday, the Trump Administration reportedly certified Iran’s compliance with its nuclear-related obligations under the Joint Comprehensive Plan of Action (JCPOA) agreement, as required under the Iran Nuclear Agreement Review Act (INARA). As we previously have noted, the INARA requires the President to certify to Congress every 90 days that Iran is in compliance with its nuclear obligations under the JCPOA.  If the President fails to make the certification or advises Congress that Iran has materially breached its obligations, then the statute provides for expedited congressional consideration of legislation re-imposing sanctions.

According to reports, the President was strongly opposed to issuing the certification, and continues to press his administration to take a hard line towards Iran. Reportedly, during an hour-long meeting with senior administration officials last week—including Secretary of State Rex W. Tillerson, Defense Secretary Jim Mattis, National Security Advisor Lt. Gen. H. R. McMaster, and Joint Chiefs of Staff chairman Gen. Joseph F. Dunford Jr.—the President spent 55 minutes telling the officials that he did not want to make the certification. It was only after another round of meetings that the President finally relented, agreeing to make the certification late Monday evening but pressing officials to deliver results regarding Iran’s behavior. Continue Reading

OFAC Penalizes AIG’s Voluntary Disclosure of Overly “Narrow” Exclusion Clauses and Single Shipment Policies

On June 26, 2017, American International Group, Inc. (AIG) agreed to a $148,698 civil settlement with OFAC based on a voluntary disclosure of 555 apparent violations of OFAC’s Iran, Sudan, Cuba and Weapons of Mass Destruction Proliferators economic sanctions programs.  AIG processed approximately $396,530 in premiums and paid claims on policies covering maritime shipments of goods destined for or transiting through Iran, Sudan, or Cuba, or that involved a person on OFAC’s Specially Designated Nationals (SDN) list.  455 of the 555 transactions involved Iran, and 33 involved shipments aboard “blocked” vessels belonging to Islamic Republic of Iran Shipping Lines (IRISL).  IRISL was an SDN at the time, but was delisted as a result of the Iran nuclear deal in January 2016 (although IRSL remains subject to sanctions for U.S. persons and in limited circumstances also for non-U.S. persons).

OFAC’s Frequently Asked Questions (FAQs) concerning the Insurance Industry make clear that OFAC’s regulations trump state insurance law, and that the mere issuance of a policy or coverage to a prohibited person or for a prohibited activity constitutes a “service” that would violate U.S. law, assuming the insurer is subject to OFAC’s jurisdiction. Furthermore, an insurance policy that involves a restricted government, SDN, or entity owned 50 percent or more by an SDN, could be treated as “blocked” property, in which case the insurer essentially cannot take any action on the policy without a license from OFAC.

The standard practice for insurance companies operating with global scope to cope with these restrictions (in addition to screening the names of parties against the relevant sanctions lists) is to include “exclusionary clauses” in their policies to carve out from coverage any provisions that would violate U.S. economic or trade sanctions. There is no “one size fits all” exclusion clause that OFAC has published or officially endorsed, but the clause should be written in such a way and operate so as to put the insured on notice and legally exclude the sanctioned activity or party from the coverage. Continue Reading

President Trump Delays Decision on Permanent Rollback of Sudan Sanctions

On July 11, 2017, President Trump issued an executive order (“new executive order”) delaying the Trump Administration’s decision on whether to make permanent broad Sudan sanctions relief instituted in the waning days of the Obama Administration.

On January 13, 2017, President Obama issued Executive Order (“EO”) 13761, which waived a number of statutory provisions mandating sanctions on Sudan and established a framework for the potential permanent revocation of key Sudan sanctions programs. On January 17, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued a broad general license to allow all transactions that had previously been prohibited under the Sudanese Sanctions Regulations (“SSR”). (See our previous advisory here). The US Commerce Department’s Bureau of Industry and Security (“BIS”) also amended the Export Administration Regulations (“EAR”) to set out a favorable licensing policy for exports and reexports to Sudan of certain items related to civil or commercial aviation and railroads. These developments opened significant new business opportunities in Sudan and essentially lifted, on a temporary basis, the United States’ longstanding comprehensive sanctions on Sudan (although the Darfur and South Sudan sanctions programs remain intact).

EO 13761 would have made this sanctions relief permanent as of July 12, had the Secretary of State published a notice in the Federal Register indicating that Sudan had “sustained [the] positive actions that gave rise to this order.” President Trump’s new executive order pushed the date back to October 12, 2017, giving the Trump Administration more time to conduct its review of Sudan’s behavior.  Depending on the outcome of that assessment the sanctions against Sudan could be terminated in full.  Continue Reading