On June 9, 2021, the US Department of Commerce (Commerce), Bureau of Industry and Security (BIS), published a notice in the Federal Register amending the Export Administration Regulations (EAR), 15 CFR Part 760, to provide a new interpretation regarding the US antiboycott regime applicable to the United Arab Emirates (UAE). This Commerce action follows the US Department of the Treasury’s (Treasury) similar action earlier this year to remove the UAE from Treasury’s list of countries that require or may require participation in or cooperation with an international boycott not sanctioned by the United States. As a result of Commerce’s action, the UAE is no longer presumed to be a country engaging in an unsanctioned boycott, and the risk of violating the prohibitions and reporting obligations under Part 760 of the EAR have been substantially curtailed, but not wholly eliminated.
Client Alert: Biden Administration Reactivates Immigration Program for International Entrepreneurs
The Biden administration has reactivated a long-delayed immigration program for early-stage international entrepreneurs. The International Entrepreneur Rule (IER) is intended to benefit the US economy by filling a gap in US immigration options for individuals who are positioned to develop high-growth potential start-up companies. Under the IER, qualified entrepreneurial foreign nationals will be eligible to enter the US for up to five years to work for and assist in the growth of the start-up entity.
This program is available to all nationalities, as it is not tied to country specific agreements. Also, unlike other investment-based US visa options, the start-up company must be funded by qualified US investors, awards, and/or grants, rather than the entrepreneur’s personal funds. In light of these novel eligibility requirements, participants will include first-time as well as highly successful entrepreneurs. In all cases, IER participants need to incorporate US tax planning throughout the lifecycle of their ventures, to protect current and hoped-for wealth.
For more information on the IER, including considerations for tax planning for qualified individuals, click here to read the Client Alert.
Biden Administration Revokes TikTok and WeChat Executive Orders, Revises Framework on Security Threats from Foreign Apps
On June 9, 2021, the White House issued a new Executive Order (EO) that revokes three Executive Orders issued in 2020 and early 2021 that were aimed specifically at TikTok, WeChat, and eight other China-linked communications and financial technology software applications.
In place of these EOs, the new EO, “Protecting Americans’ Sensitive Data from Foreign Adversaries,” builds on steps the US Commerce Department has already taken under EO 13873 of May 15, 2019, to protect the information and communications technology and services (ICTS) supply chain against threats from China and other identified foreign adversaries.
As a result of the new EO, the US government will further analyze the risks arising from the use of applications such as TikTok and WeChat – including risks related to the security of Americans’ sensitive data — and could take further steps to mitigate those risks, either through existing ICTS regulations or through additional executive and legislative actions.
White House Issues Amended Executive Order on Chinese Military-Industrial Securities
On June 3, 2021, the White House issued an Executive Order (EO) amending EO 13959 of November 12, 2020, which imposed restrictions on US persons transacting in publicly traded securities of companies identified by the US Department of Defense (DoD) as “Communist Chinese military companies” (CCMCs). The new EO, “Addressing the Threat from Securities Investments that Finance Certain Companies of the People’s Republic of China,” reformulates and recasts the prior EO, by providing important clarifications on the scope of the restrictions, revising the criteria for designating Chinese companies under the EO, and shifting responsibility for designations from the DoD to the US Treasury Department. As a result of these changes, the EO creates a securities-related sanctions regime for so-called “Chinese Military-Industrial Complex Companies” that is effectively separated from the CCMC list maintained by DoD pursuant to Section 1237 of the Fiscal Year 1999 National Defense Authorization Act (NDAA) as amended. The new EO takes effect on August 2, 2021, at 12:01 a.m. eastern daylight time.
In conjunction with the new EO, the US Treasury Department’s Office of Foreign Assets Control (OFAC) published several new and revised Frequently Asked Questions (FAQs) explaining the new EO and addressing questions raised by the securities industry since the issuance of EO 13959 in November 2020. Finally, as evidence that the Biden Administration is pursuing a comprehensive effort across the relevant agencies, the DoD released for the first time a “Chinese Military Companies” (CMC) list under Section 1260H of the Fiscal Year 2021 NDAA.
Advocate General Hogan Issues Opinion on Interpretation of EU Blocking Statute against Extraterritorial US Sanctions
Advocate General of the Court of Justice Gerard Hogan rendered an Opinion in the first case before the Court of Justice of the European Union on the interpretation of the EU Blocking Statute. The case concerns Iranian bank Bank Melli Iran, which has a branch in Hamburg (Germany), and which claims before the German Courts that the notice of ordinary termination given by Telekom Deutschland with respect to their contracts for telecommunication services was motivated solely by Telekom Deutschland’s desire to comply with US sanctions legislation. Bank Melli Iran maintains that Telekom Deutschland violated the EU Blocking Statute, which prohibits EU undertakings (entities engaged in an economic activity, regardless of their legal form or the way in which they are financed) from complying with such extraterritorial US measures.
In its opinion, Advocate General Hogan finds that:
- The general prohibition contained in the EU Blocking Statute (which is directed against compliance with certain third country legislation providing for secondary sanctions) applies even in the event that such an undertaking complies with that legislation without first having been compelled by a foreign administrative or judicial agency to do so.
- An EU undertaking seeking to terminate an otherwise valid contract with an Iranian entity subject to the US sanctions must demonstrate to the satisfaction of the national court that it did not do so by reason of its desire to comply with those sanctions.
OFAC Extends General License for “Close Name Matches” under Executive Order 13959 as Biden Administration Reviews Communist Chinese Military Company Sanctions
On May 18, 2021, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued an updated general license under Executive Order (EO) 13959 authorizing US persons to transact in publicly traded securities of entities whose names “closely match” the name of any company previously identified as a Communist Chinese military company (CCMC). The general license (now called General License No. 1B), which was due to expire on May 27, 2021, now expires on June 11, 2021.
For the time being, the restrictions under EO 13959 apply only to entities whose names appear on OFAC’s Non-SDN CCMC List as well as seven entities who are yet to be formally added to OFAC’s Non-SDN CCMC List but were identified by the Department of Defense on January 14, 2021.
The EU Keeps Its Ability to Sanction Cyber Attackers for One More Year
The Council of the European Union (the Council) on May 17, 2021 agreed to prolong, for the second time, the sanctions framework concerning restrictive measures against cyber-attacks threatening the European Union (EU) or its Member States for another year, until May 18, 2022. The Council’s press release is available here.
Cyber sanctions are part of the EU cyber diplomacy toolbox and seek to prevent, discourage and respond to malicious cyber-attacks that have a significant impact on the EU. This framework was adopted in May 2019 under Council Decision (CFSP) 2019/797 and Council Regulation (EU) 2019/796, and is reviewed by the Council on a yearly basis. It allows the EU to sanction persons and entities deemed to be involved in major cyber-attacks threatening the EU or its Member States by imposing asset freezes or travel bans against those listed in the Council’s legal acts. The EU can also target those involved in attempted cyber-attacks with a potentially significant effect.
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EU General Court lifts sanctions against daughter of Muammar Qaddafi
On April 21, 2021, the EU General Court rendered a judgement on an appeal against the retention of Aisha Qaddafi, the daughter of the late Colonel Muammar Qaddafi, on EU sanctions lists. The judgment confirms the case law according to which the EU Council may, in certain cases, have to produce additional proof to justify the listing of a person, even where this person has been previously designated in a Resolution of the UN Security Council.
Aisha Qaddafi was first listed by the EU in March 2011, shortly after her designation by the UN Security Council. Since then, the EU sanctions lists have been updated several times without any amendments to the listing of Ms. Qaddafi. The contested acts by which the listing of Ms. Qaddafi was maintained and which were adopted in 2017 and 2020, did not mention any new factors other those which had been put forward for the initial listing of her name in 2011. The stated reason for listing her under EU sanctions was the simple fact that she had been designated by the UN Security Council in 2011.
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The EU response to AI challenges – Another (risk-based) Regulation
On April 21, 2021 the European Commission (EC) published its proposal for a Regulation laying down harmonized rules on artificial intelligence, the Artificial Intelligence Act (the Proposal). The EC sets ambitions to play a key role in the regulation of artificial intelligence (AI), not only by coming out the first in the area but also as its Proposal has elements of extraterritorial reach. The EC is proposing a legal framework consisting of rules developed on a risk-based approach that aim to ensure that AI systems are safe, ethical, transparent and human-centered. The overarching goal is to increase trust AI systems to ensure their uptake, which the 2021 Coordinated Plan outlines.
You can find an outline of the Proposal in our infographics available here. The key components are below.
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President Suspends Travel from India Effective May 4 Due to COVID Risks
With daily news reports of India’s current COVID crisis worsening, President Biden issued a Presidential Proclamation, effective May 4, 2021, suspending entry to the United States from India for individuals in temporary immigration statuses who have been present in India within the prior 14-day period. The travel restriction does not apply to US citizens or permanent residents or certain relatives of citizens and permanent residents. The Proclamation will remain in effect indefinitely, ending only upon termination by the president.
Economic Travel Suspensions End; Geographic Travel Suspensions Expand
With the change in presidential administrations, travel suspensions which created bars to entry to the United States for many immigration categories that were justified on the basis of economic protection have either been revoked or allowed to expire. (Details of these developments are set out in our February 25, 2021 and April 5, 2021 posts, Biden Administration Revokes Order Suspending Entry into the United States by New Green Card Holders | International Compliance Blog (steptoeinternationalcomplianceblog.com) and Entry Suspension on Temporary Work Visa Categories Ended | International Compliance Blog (steptoeinternationalcomplianceblog.com).) Conversely, health related travel suspensions which limit entry to the United States from designated countries or regions have expanded, with India being the latest addition.
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