ICSID Proposes Extensive Rule Revisions

On August 3, 2018, twelve years after its last major update, the International Centre for Settlement of Investment Disputes (ICSID) proposed extensive revisions to its rules. The “comprehensive set of proposed changes to modernize its rules for resolving disputes between foreign investors and states” includes new provisions on transparency, arbitrator disclosure, security for costs, and third-party funding.

For more information, please see our advisory.

Long-Awaited Decision Issued on FCPA’s Reach Over Non-Resident Foreign Nationals

On August 24, 2018, the US Court of Appeals for the Second Circuit rejected an attempt by the Department of Justice (DOJ) to expand the jurisdictional reach of the Foreign Corrupt Practices Act (FCPA) over foreign nationals. The three-judge panel affirmed the lower court’s ruling in United States v. Hoskins that a non-resident foreign national cannot be charged with conspiracy to violate the FCPA, or with aiding and abetting a violation of the statute, unless he falls within a category of persons covered by the substantive provisions of the Act. 

Historically the DOJ has relied on expansive use of conspiracy theories to reach conduct by foreign, non-issuer defendants in negotiated FCPA resolutions. The Hoskins decision restricts the statute’s reach over foreign persons whose alleged bribery-related crimes take place outside the territory of the United States. As a result, the ruling makes it more difficult for the DOJ to bring criminal charges in FCPA cases against foreign nationals, particularly those working for foreign companies that are not “issuers” and whose conduct takes place outside the United States.

The ruling is sufficiently narrow in scope, however, that we do not believe it will meaningfully affect the number or types of FCPA investigations that the DOJ will pursue.

For more information, please see our advisory.

Changes Afoot for CFIUS and US Export Controls as the Dust Settles on FIRRMA

Following months of hearings and other deliberations, Congress passed, and President Trump signed into law on August 13, 2018, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). FIRRMA is the first update to the Committee on Foreign Investment in the United States (CFIUS) in over a decade and will significantly expand the jurisdiction of the Committee and make other notable changes to its rules. A text of the final version of FIRRMA (Sections 1701 to 1728 of the National Defense Authorization Act for Fiscal Year 2019 (NDAA)), is available here. The NDAA also includes comprehensive US export control reform legislation that (among other things) mandates increased US export controls on “emerging and foundational technologies” to address some of the US national security concerns that contributed to calls for CFIUS reform. FIRRMA went through several revisions as it advanced through Congress and we discussed earlier versions of the bill in previous advisories from June and January of this year.

For more information, please see our advisory.

EU Blocking Statute Takes Effect to Counter US Re-Imposed Sanctions on Iran

In response to President Trump’s Executive Order re-imposing certain Iran-related sanctions, summarized in our recent post, the EU has expanded the scope of the EU Blocking Statute to cover certain US Iran-focused sanctions.  On August 7, immediately following the US government’s re-imposition of certain Iran-related sanctions, the Commission Delegated Regulation (EU) 2018/1100 amending the annex to the EU Blocking Statute was published in the EU Official Journal and entered into force.

In addition to the Delegated Regulation, the following two texts relating to the application of the Blocking Statute were published in the EU Official Journal:

  • Commission Implementing Regulation (EU) 2018/1101 which sets out: (i) the process for applying to the Commission for an authorization permitting full or partial compliance with the relevant US sanctions; and (ii) a non-exhaustive list of criteria that the Commission will consider in assessing whether an authorization should be granted; and
  • The Commission’s Guidance Note with non-binding guidance on the application of the revised Blocking Statute. The non-binding guidance covers various aspects of the Blocking Statute, including persons/entities within the scope of the Blocking Statute, its temporal application, effects of the Blocking Statute, recovery of damages arising from the application of US Iran-related sanctions, authorizations to comply with US Iran-related sanctions, etc.

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US State Department Announces New Russia Sanctions

On August 8, 2018, the US State Department announced that it would be imposing new sanctions on Russia pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act).  The new sanctions are in response to a determination by the US government that the Russian government was behind the recent use of a nerve agent in the United Kingdom against two UK citizens.  The CBW Act requires the imposition of sanctions following a determination by the President (delegated to the Secretary of State) of the use of chemical or biological weapons in violation of international law or in lethal form against one’s own nationals.  Sanctions under the CBW Act, which are expected to take effect on August 22nd, include the termination of foreign assistance, suspension of sales of defense articles or services, denial of credit or other financial assistance by the US government, and a prohibition of exports of national security-sensitive goods and technology.  In a background briefing the State Department announced that it is making “a number of carve-outs” to these sanctions to allow the continuation of certain foreign assistance; exports for space flight activities, safety of commercial passenger aviation, and “purely commercial end users for civilian end uses”; and perhaps other activities.  A Federal Register notice that is to be published by the State Department on August 22 should explain the sanctions and carve-outs in more detail.  According to the State Department, this is the third occasion on which sanctions have been imposed under the CBW Act.  Sanctions under the Act were imposed against Syria in 2013 and against North Korea earlier this year. Continue Reading

Certain Iran Sanctions Reimposed after 90-Day “Wind-Down” Period Ends

President Trump issued an Executive Order today re-imposing and, in some cases, expanding sanctions on Iran that had been lifted under the 2016 nuclear deal (the “JCPOA”), as today marked the end of the first “wind-down” period of 90 days following the President’s May 8 announcement that the US would no longer honor its sanctions commitments under the JCPOA.  Some of the re-imposed sanctions will be effective tomorrow, August 7; others will come back into effect following the second (180-day) wind-down period ending November 4.  In addition, OFAC issued additional answers to frequently asked questions on Iran sanctions, including guidance on the circumstances in which payments from Iranian parties can be received after the end of the wind-down periods.  These actions are largely consistent with the President’s May 8 announcement and the earlier guidance that had been issued by OFAC on the re-imposition of Iran sanctions.

Effective August 7, the following sanctions that were lifted pursuant to the JCPOA, have been reimposed, including sanctions on certain support for and services related to the activities below: Continue Reading

Congress Agrees on Final Text of CFIUS Reform Bill

Earlier this week, negotiators from the House and Senate reached agreement on what will very likely be the final text of the Foreign Investment Risk Review Modernization Act (FIRRMA), which will be part of the National Defense Authorization Act for Fiscal Year 2019 (NDAA). FIRRMA seeks to overhaul the Committee on Foreign Investment in the United States (CFIUS) by expanding the scope of the committee’s jurisdiction and closing certain “loopholes,” among other revisions.  A text of the final version of the NDAA, including FIRRMA (at Title XVII), is available here. The negotiated text must still be passed by both chambers of Congress.  The House is expected to vote on the updated version in the coming days and the Senate shortly thereafter.

As expected, FIRRMA will expand the jurisdiction of CFIUS to cover additional investments in critical technology and critical infrastructure companies, real estate transactions and concessions at airports and port facilities, and other perceived gaps in the existing CFIUS process. The bill will also result in new US export controls oversight over exports of “emerging and foundational technologies” that are not currently subject to regulation.  Steptoe is preparing a detailed advisory on FIRRMA to be published in the coming days.  Previous Steptoe advisories on FIRRMA are available here and here.

U.S. Rejects European Requests for Exemptions to Iran Sanctions

Since President Trump’s announcement, on May 8, that the United States would withdrawal from the Joint Comprehensive Plan of Action (“JCPOA”) and re-impose previously lifted sanctions against Iran, the remaining JCPOA signatories have been scrambling to save the agreement. On June 4, officials from the UK, Germany, France, and the EU sent a letter to Secretary of State Mike Pompeo and Secretary of the Treasury Steven Mnuchin seeking a number of exemptions to US secondary sanctions scheduled to come back into effect later this year in order to facilitate the continued economic engagement between the EU and Iran that is a key part of the JCPOA. (See our previous advisory on the United States withdrawal from the JCPOA here). The letter from EU officials outlined a number of specific requests:

  • grant exemptions from US sanctions for EU companies that initiated or concluded their contracts after JCPoA Implementation Day (16 January 2016).
  • give public confirmation of areas of business that are exempt from US secondary sanctions, such as pharmaceuticals, healthcare; and grant exemptions to allow for economic relationships in key sectors, in particular in the fields of energy, automotive, civil aviation and infrastructure.
  • grant exemptions to maintain banking channels and financing channels with Iran. This notably includes maintaining links with the Central Bank of Iran as well as with the other Iranian banks that are not sanctioned by the European Union and the preservation of financial messaging services (SWIFT) to these banks.
  • grant extended and adapted winding-down periods according to the necessary time to properly wind down affected projects for companies that may eventually choose to withdraw from Iran.
  • prolong General License H (foreign subsidiaries of US companies to be able to continue business).
  • reaffirm the exemption for Embassy bank accounts.

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ZTE Denial Order Lifted

The US Commerce Department’s Bureau of Industry and Security (BIS) terminated the ZTE Denial Order, effective today.  As a result, ZTE is no longer subject to any specific US export control restrictions (except for ZTE Parsian, an Iranian affiliate that remains on the BIS Entity List).  ZTE still faces a series of stringent requirements that will last 10 years, pursuant to its settlement with BIS, and any failure to comply could lead to a reactivation of the Denial Order.  The Commerce Department issued a press release describing these developments in more detail.  A bipartisan legislative effort continues to try to impose similar restrictions on ZTE, but the fate of that effort remains unclear.

Supreme Court Upholds Travel Ban Version Three

On June 26, 2018, the US Supreme Court upheld the Trump Administration’s third travel ban and, more significantly, affirmed the president’s broad authority to restrict immigration by Executive Order (EO). In Trump v. Hawaii, the Court found that the EO was within the president’s authority under an Immigration and Nationality Act (INA) provision that gives the president the ability to restrict the entry of foreign nationals into the US whenever the president finds that such entry “would be detrimental to the interests of the United States.”

For more information, please see our advisory.

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