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On Tuesday, June 8 in Pillsbury’s London office, Pillsbury and the Eurasia Group hosted the first event in their Sanctions & Market Opportunities Series entitled “Iran Sanctions, Investment and Trade: Preparing for Divergent Outcomes.”

During the event, panelists discussed the likelihood for a final agreement related to Iran’s nuclear program and the eventual easing of international sanctions.  Panel members also discussed the current U.S. and EU sanctions regime and what may change in the event of an agreement or if talks fall apart.  As part of these discussions, the panel detailed the U.S. congressional review process that will occur in event of an agreement and how this process is impacting the negotiations and may hinder sanctions relief.

The audience of senior European business leaders received several key takeaways, including: Continue reading →

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[Originally appeared in Bloomberg BNA]

Envelopes of cash. Vote rigging. Wiretapped recordings in 5-star hotel rooms. A dramatic early morning police raid coordinated between the FBI and Swiss law enforcement. An episode of the Sopranos? No, but it is a day in the life of FIFA.

Last week’s revelation of widespread corruption in the world of international soccer was shocking on many levels, but it should serve as a stark reminder to those engaged in international business that the U.S. government will prosecute crimes that occur largely outside the United States and will build a case over decades to do it.

For more, click here.

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The leaders of the G7 met for two days of discussions in Elmau, Southern Germany on 7 and 8 June 2015.

High on the agenda was the issue of Russian targeted EU and US sanctions over Moscow’s role in support of Ukrainian rebels.

Russia has already been excluded from what was formerly known as G8 following its annexation of Crimea in 2014.

Following talks between President Obama and German Chancellor Merkel in Elmau, reportedly over a traditional Bavarian meal of sausages and beer, the White House issued a statement confirming: “The duration of sanctions should be clearly linked to Russia’s full implementation of the Minsk agreements and respect for Ukraine’s sovereignty”. Continue reading →

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Today the State Department issued a press release announcing that the Secretary of State has finalized the removal of Cuba from the official U.S. list of state sponsors of terrorism, effective May 29:  http://www.state.gov/r/pa/prs/ps/2015/05/242986.htm.

Although this is an important step forward, it does not automatically eliminate any of the current U.S. sanctions.  Many of the sanctions, in fact, were “codified” (that is, converted from regulations to statute) by Congress through the Cuban Liberty and Democratic Solidarity Act of 1996.  Moreover, the export control restrictions for Cuba are in part maintained under an older law – the Trading with the Enemy Act of 1917 – that is unrelated to the requirements for countries designated as state sponsors of terrorism.  The President has authority to relax some aspects of the embargo without Congressional approval – as demonstrated by his prior liberalizing measures – but there are a number of ambiguities in the relevant statutes and it is difficult to predict how aggressive the President will be in moving forward without seeking legislation.

The situation requires careful monitoring, and companies should not assume that any existing sanctions will be quickly repealed.

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Companies legitimately employing tools to test how vulnerable their computers and networks may be to cyber-attacks should take note of strict new export controls that may be on the horizon.  Specifically, on May 20, 2015, the Commerce Department Bureau of Industry and Security (BIS) proposed to establish controls on the export of cybersecurity items, which would require a license for all countries except Canada and generally make license exceptions unavailable.  Currently, certain of these items are controlled as encryption items because of their information security functionality, but exporters who believe their items are subject to the encryption controls should exercise caution, to avoid a situation in which they export and then learn after the fact that BIS actually believes the items are subject to the new cybersecurity controls.  Comments to the proposed rule are due by July 2015, but it may prove difficult to strike the right balance between preventing cybersecurity items from falling into the wrong hands to conduct cyberattacks and allowing companies legitimate access to them so they can test their cyber defenses.

For more details on the proposed rule and its potential impacts, please see our recent cybersecurity client alert.

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U.S., EU and other sanctions and export control regimes continue to target the Russian defense and energy sectors, restricting access to both military and dual use items. This creates demand pressure on the Russia side and as a result potential added compliance risk for exporters. Companies often ask “what are we expected to do try and prevent our exports from going inadvertently to prohibited end users and end uses?”

On May 18, 2015, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) released guidance on due diligence practices for exporters to prevent unauthorized exports to Russia, amidst express concerns of front companies and intermediaries making transshipments to Russia in violation of the Export Administration Regulations (“EAR”).  In particular, the guidance focuses on exports of (a) National Security or “NS”-controlled items and (b) military end-use or end-user controlled items–which both require a license for Russia–to countries with less restrictive licensing requirements.

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On May 13, 2015 Senator Lisa Murkowski, Chair of the Senate Committee on Environment and Natural Resources, introduced the Energy Supply and Distribution Act of 2015 (S.1312), which if enacted would lift the crude oil export ban.

Co-sponsored with Sen. Heidi Heitkamp (D-ND) and twelve Republicans, the bill would permit exports of domestically produced crude oil without a Federal license “notwithstanding any other provision of law” (other than crude oil stored in the Strategic Petroleum Reserve), except to countries subject to U.S. sanctions. The bill would direct the Secretary of Energy to develop a standard definition of the term “condensate” and would express the sense of the Congress that processed condensate is a petroleum product.

S.1312 follows the bill introduced in the House of Representatives by Rep. Joe Barton (R-TX) last February, which would prohibit any official of the Federal Government from imposing or enforcing any restriction on the export of crude oil.

Both bills seek to cut through the layers of legislation and regulation implementing statutes enacted in the 1970’s that have prohibited exports of domestically produced crude oil except in limited circumstances, such as section 103 of the Energy Policy and Conservation Act, section 28(u) of the Mineral Leasing Act of 1920 and section 28 of the Outer Continental Shelf Lands Act.

Although these statutes give the President authority to lift export restrictions by means of specific authorizations or national interest determinations, the Administration has chosen not to expand the types of permitted transactions but has allowed the Commerce Department (which implements the Export Administration Regulations) to continue to license transactions such as swaps and exchanges in accordance with previously established policy. Preempting Sen. Murkowski’s focus on condensates, the Commerce Department late last year issued FAQ’s clarifying the circumstances under which processed condensate would be considered a refined product not subject to definition of crude oil and therefore not subject to the ban. A number of companies have since received commodity jurisdiction determinations for condensates. Continue reading →

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Congress is currently fiercely debating whether to grant the President fast track trade authority, allowing to him to finalize free trade agreements with the EU and a dozen Pacific Rim trading partners. While this debate caused President Obama to join with Republicans to overcome the objections of trade-skeptic Democrats, the coming debate over the U.S. Export-Import Bank will divide the Republican Party along sharply ideological lines that threaten the very existence of the Ex-Im Bank.

Small, medium, and large U.S. businesses that rely on the bank to underwrite their exports may soon be confronted with the loss of a major source of commercial support. Furthermore, it appears that the bank is already placing limits on its operations in case it is forced to wind down. John Hardy, president of the Coalition for Employment through Exports, an advocacy group representing the interests of U.S. businesses, has claimed that the Ex-Im bank is already refusing to support export deals over $100 million. Continue reading →

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Eurasia Group

The United States, UK, France, Germany, China and Russia announced in early April the parameters for a Joint Comprehensive Plan of Action regarding Iran’s Nuclear Program. However, a final agreement will not occur—if it occurs at all—until June 2015.

Savvy companies are planning now for either a potential relaxation of sanctions or a collapse of the process and the introduction of new, more severe sanctions policies impacting business.

The Eurasia Group and Pillsbury invite you to join us for a morning seminar on Iran sanctions, the current state of negotiations, likely outcomes and potential market opportunities. We will also discuss the current international sanctions regimes and the political developments in the United States impacting the future of U.S.-Iran relations.

This event is the first in a series organized by Pillsbury and the Eurasia Group to help businesses plan for changes in the legal regimes affecting international trade. Future events will examine changes impacting Russia, Cuba and Myanmar.

9 June 2015
09:00 – 11:00

Pillsbury’s London office
Level 21, Tower 42
25 Old Broad Street
London EC2N 1HQ

Schedule
09:00 – Registration and breakfast
09:30 – Seminar and Q&A session
11:00 – Networking

Topics include:

  • Eurasia Group’s forecast on the outcome of negotiations
  • Pillsbury’s assessment of evolving U.S., UK, EU and UN Iran sanctions: what they are, what may change, and when
  • What can companies do now to prepare for the successful conclusion of talks
  • What would the failure of negotiations mean
  • The impact the U.S. Congress may have on any outcome

Speakers:
Cliff Kupchan, Chairman, Eurasia Group
Nancy Fischer, Partner, Pillsbury
Aaron Hutman, Counsel, Pillsbury
Steven Farmer, Counsel, Pillsbury
Matthew Oresman, Counsel, Pillsbury
For further information, please contact Vera Kapysh at vera.kapysh@pillsburylaw.com / 44(0)207 847 9545.

REGISTER NOW

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On Friday, May 8, the Senate overwhelmingly approved the Iran Nuclear Agreement Review Act, which would give Congress a role in approving any agreement with Iran concerning its nuclear program. The Senate approved the bill 98-1, with Sen. Tom Cotton (R-AK) the only dissenting vote. The House of Representatives could vote on the legislation as early as this week.

As discussed in a previous post, on April 2, 2015 representatives of the United States, Great Britain, France, Germany, China and Russia (collectively, the “P5+1” countries) announced that they had agreed with Iran on the Parameters for a Joint Comprehensive Plan of Action. The parties now have until June 30, 2015 to reach a final agreement. One of the major open issues is what sanctions on Iran would be removed and when. Complicating this negotiation, especially following passage of the Iran Nuclear Agreement Review Act, is President Obama’s authority to lift U.S. sanctions on his own authority.

Under the legislation passed by the Senate, Congress would have 30 days to review the agreement and the proposed sanctions relief plan (longer under certain circumstances). Congress may then enact a joint resolution in favor of the agreement, enact a joint resolution opposing the agreement, or take no action. If Congress approves the agreement or takes no action, the President may then grant sanctions relief in line with the authority that currently exists under relevant statutes. If Congress votes to disapprove of the agreement, the President can veto the joint resolution and, if Congress fails to override the veto, he can still move forward with sanctions relief. However, if that veto is overridden by a 2/3 vote of both houses of Congress, then the President would be prohibited from lifting sanctions. Continue reading →