On January 19, 2021, the European Commission presented a Communication setting out a strategy to stimulate the openness, strength, and resilience of the European Union’s economic and financial system.

An important part of this Communication concerns EU sanctions, in particular:

  1. the implementation and enforcement of EU sanctions regimes.
  2. the EU’s resilience to the effects of

On January 19, 2021, the US State Department announced the imposition of sanctions on Russia-based entity KVT-RUS and Russian-flagged vessel FORTUNA pursuant to Section 232 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), for “knowingly selling, leasing, or providing to the Russian Federation goods, services, technology, information, or support for the construction of Russian

On January 14, 2021, the White House issued an Executive Order (EO) to amend EO 13959 of November 12, 2020, which prohibits US persons from transacting in securities related to so-called “Communist Chinese military companies” (CCMCs).

The amended EO 13959 makes clear that US persons must divest their holdings in such securities within designated wind-down periods, after which possessing the securities will also be prohibited. For CCMCs identified in the Annex to EO 13959, on November 12, 2020, the wind-down period will end on November 11, 2021. The amended EO also clarifies that prohibited transactions include both “purchase for value” and “sales” of covered securities.

Meanwhile, the US Department of Defense (DoD) identified an additional nine entities as CCMCs, bringing the total number to 44. Restrictions under EO 13959 will take effect with respect to the newly named CCMCs after 60 days, on March 15, 2021.

Shortly thereafter, the US Treasury Department’s Office of Foreign Assets Control (OFAC) published four new Frequently Asked Questions (FAQs) and General License No. 2 (GL-2) authorizing securities exchanges operated by US persons to engage in transactions involving covered securities through the relevant wind-down periods.


Continue Reading Updated: Amended Executive Order Makes Clear US Persons Must Divest Securities of Chinese Military Companies as Defense Department Identifies Nine More Entities

Following the adoption of the EU Global Human Rights Sanctions Regime, which is set out in Council Regulation (EU) 2020/1998 and Council Decision (CFSP) 2020/1999 (see our previous client alert), the European Commission published a Guidance Note on the implementation of certain provisions under Council Regulation (EU) 2020/1998. The stated aim of the Guidance Note is to address the questions most likely to arise in the application of the new restrictions and to ensure their uniform implementation by EU operators and EU Member States competent authorities. Upon its issuance, Mairead McGuinness, European Commissioner for Financial Services, Financial Stability and Capital Markets Union, explained that this was the first time that a new EU sanctions framework is accompanied by such Note.

The Guidance Note provides guidance on the scope of financial restrictions, including the freezing of funds and economic resources and the prohibition to make funds and economic resources available to sanctioned persons, entities and organizations. It also addresses compliance obligations and specific notions, such as “ownership” and “control” of entities by listed persons. Further, the Guidance contains information on exceptions and derogations, including for the provision of humanitarian aid.


Continue Reading European Commission issues Guidance Note on the EU Global Human Rights Sanctions Regime

On January 1, 2021, the U.S. Senate passed – over President Trump’s veto – the National Defense Authorization Act, or NDAA, for Fiscal Year 2021 (H.R. 6395), a massive annual Department of Defense spending bill, which this year includes a section expanding sanctions on the Nord Stream 2 and TurkStream pipeline projects.  The Senate action follows House passage of the bill over the President’s veto on December 28, 2020.

Section 1242 of the 2021 NDAA broadens the scope of the sanctions provisions contained in the 2020 NDAA in the following principal ways:

  • For Nord Stream 2 only, it targets foreign persons that provide “services for the testing, inspection, or certification necessary or essential for the completion or operation of the … pipeline[.]”
  • For both Nord Stream 2 and TurkStream, it –
    • expands the scope of sanctionable activities in support of pipe-laying for these projects to include activities that “facilitate pipe-laying, including site preparation, trenching, surveying, placing rocks, backfilling, stringing, bending, welding, coating, and lowering of pipe[;]”
    • includes, in addition to selling, leasing or providing the covered pipe-laying vessels, “facilitat[ing]” that activity (even if not involving “deceptive or structured transactions,” language that had been included in the 2020 NDAA); and
    • clarifies that the scope of sanctionable activity includes providing underwriting services for covered vessels or insurance or reinsurance necessary or essential for the completion of the project; and providing services or facilities for technology upgrades or installation of welding equipment for, or retrofitting or tethering of, covered vessels that are necessary or essential for the completion of the project.


Continue Reading U.S. Tightens Sanctions on Nord Stream 2, TurkStream Pipeline Projects

On December 11, 2020, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued a much-anticipated report under Section 5(b) of the Hong Kong Autonomy Act (HKAA) that—to the relief of non-US financial institutions, including those in Hong Kong—stated the Treasury Department had not identified any foreign financial institution (FFI) at risk of secondary sanctions under the HKAA at this time.

Background

Under Section 5(b) of the HKAA, Congress directed the Treasury Department to identify any FFI that knowingly conducted a significant transaction with a person identified by the State Department in a report under Section 5(a) of the HKAA. The State Department issued its report on October 14, 2020, identifying ten individuals, including Hong Kong’s Chief Executive and other prominent government officials.

(For more information about the HKAA and the State Department’s Section 5(a) report, see our blog post of October 15, 2020, “Update: Hong Kong Financial Institutions Face US Secondary Sanctions after State Department Issues First Report under Hong Kong Autonomy Act.”)

Under the HKAA, FFIs identified in a Section 5(b) report could be subject to a “menu” of ten secondary sanctions described in Section 7 of the HKAA. Those sanctions would become mandatory after one year of the report’s issuance.


Continue Reading Financial Institutions Spared, for Now, from Secondary Sanctions after Treasury Department Issues ‘Null Report’ Under Section 5(b) of the Hong Kong Autonomy Act

On November 30, 2020, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the addition of Chinese company CEIEC to its list of Specially Designated Nationals and Blocked Persons (SDN List), pursuant to Executive Order 13692, for “its role in undermining democracy in Venezuela.”  OFAC also issued General License 38 authorizing certain wind-down activities with CEIEC, as well as an FAQ regarding the designation and general license.

According to Treasury, CEIEC, also known as China National Electronic Import-Export Company, has over 200 offices and subsidiaries worldwide.  CEIEC explains on its website, https://www.ceiec.com/About, that it is a “close partner of many foreign government[s], military and security department[s], to help them fulfill their mission of securing citizen’s confidence to health, safety, economic growth and public governance.”

In the press release announcing CEIEC’s addition to the SDN List, Treasury explained that the designation is due to the company’s involvement in “actions or policies that undermine democratic processes or institutions” in Venezuela.  For example, Treasury stated that CEIEC provided “software, training, and technical expertise to Venezuela[n] government entities, which was then used against the people of Venezuela.”


Continue Reading OFAC Adds Chinese Tech Company CEIEC to SDN List, Issues General License 38 Authorizing Wind-Down Activities

The US executive and legislative branches are ratcheting up pressure on companies to address forced labor in their supply chains. The US Department of Homeland Security’s Customs and Border Protection agency (CBP) has in recent months announced a series of Withhold Release Orders (WROs) and a Finding following investigations into forced labor. Additionally, the US

In this advisory, members of our Sanctions and Export Control team provide a preliminary assessment of the expected policy approach of President-elect Biden’s administration to major US sanctions programs, including China and Hong Kong, Russia, Iran, Cuba, Venezuela, Syria, North Korea, and Sudan sanctions programs.

While specific steps to be taken will be revealed in

On November 17, 2020, OFAC issued Venezuela General License 8G, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities.”  General License 8G extends the pre-existing authorization for US persons to engage in certain transactions and activities involving the Venezuelan state-owned oil company PdVSA through 12:01 a.m. eastern daylight time, June 3, 2021, for Chevron, Halliburton, Schlumberger, Baker Hughes, and Weatherford International.  These are some of the most significant petroleum companies with US connections operating in Venezuela.  Aside from extending the expiration date – which had been December 1, 2020 – General License 8G is substantively the same as general License 8F, which it replaces.

Specifically, General License 8G authorizes US persons to engage in transactions and activities “ordinarily incident and necessary to the limited maintenance of essential operations, contracts, or other agreements” for the above-mentioned companies and their subsidiaries that –

  1. are for safety or the preservation of assets in Venezuela;
  2. involve PdVSA or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest; and
  3. were in effect prior to July 26, 2019.


Continue Reading OFAC Issues Updated General License 8G Extending Authorization of Transactions with PdVSA for Five Petroleum Companies