We've written before on the new sanctions regimes introduced by the EU, UN and the U.S (link to past blog). This is an update on sanctions imposed against Libya and Syria. Attached to this briefing is an updated table of sanctions targets. To view the entire alert please click here.
The last eighteen months have seen numerous new sanctions regimes introduced by the EU, UN and the U.S. Reed Smith has issued a series of Client Alerts already this year as and when new or changed sanctions regimes have been introduced. Amongst the energy and commodity trading and the shipping communities, there has naturally been a heavy focus on Iranian, Ivory Coast and Libyan sanctions. It is important to understand, however, that there are now a whole host of countries facing sanctions from the EU, UN and U.S. Whilst the sanctions position is fast moving, we thought it sensible to draw all of these together in one place.
To view the entire alert please click here.
This post was written by Matthew J. Thomas.
US and EU sanctions continue to escalate on Iran and Syria, catching an ever-broadening group of global targets, as detailed in this latest update. While the EU continues to add dozen of names to its lists of blocked parties, the US today began imposing secondary sanctions on non-Iranian companies that allegedly have provided investment and assistance to Iran's refined petroleum sector.
This post was written by Matthew J. Thomas.
"Have you seen these new Mideast sanctions? I don't think we can go ahead with our contracts there. Can we just cancel them?"
This common dilemma is at the heart of a new Reed Smith Client Alert discussing the application of sanctions-based contract cancellation clauses. Use of such clauses was examined recently by the Court of Appeals of England and Wales in Arash Shipping Enterprises Co. Ltd. v. Groupama Transport, a case involving international shipping, insurance, and new sanctions on Iran.
The alert also gives an update on the latest round of trade sanctions against Syria, both by the US and the EU. Given developments there, we expect the sanctions landscape to continue to evolve.
For everyone out there contracting with the State of California -- here is a quick heads up. Remember way back in 2010 when Congress passed the Comprehensive Iran Sanctions, Accountability, and Divestment Act? Well, it turns out that California has decided to take advantage of the Divestment part. The Iran Contracting Act of 2010 requires the state to create a list of "persons" who "invest" in Iran. If a person makes it onto the list, they are prohibited from contracting or renewing a contract with California state and local governments. Contractors are encouraged to be on the lookout for communication from California indicating that the state plans on listing them. After all, the only evidence needed to list a person is "credible information available to the public."
For more of the fine print, exceptions, and defenses check out this Reed Smith Client Alert.
This post was written by Daniel Kadar.
A new French law, published on March 30, 2011, allows, among other things, the French Data Protection Authority, the CNIL, to give more publicity to sanctions it imposes.
Prior to this reform, the French data protection authority could only publicize its rulings on its website and on “Légifrance”, the French official website for law. Publication in other media was only possible when a data processor had been sanctioned for having acted in bad faith.
From now on, the CNIL is allowed to order the publication of pronounced sanctions in newspapers and other media, whether or not the data processor involved has acted in bad faith.
This reform took place only two weeks after the CNIL issued a €100.000 fine against GOOGLE in the GOOGLE STREET VIEW case.
At that time, given the absence of bad faith on GOOGLE’s part, the CNIL could only publish the sentence on its website and on “Légifrance”.
We believe this change will significantly increase publicity about the CNIL’s sanctions, thereby dissuading wrongdoing.
This post was written by Joelle E.K. Laszlo.
In response to the increasingly grave political, commercial, and humanitarian turmoil that Libya has endured in the recent weeks, the international community has combined forces in an effort to subdue Muammar Qadhafi’s brutal regime. The United Nations Security Council has called its Member States to enact, among other initiatives, trade sanctions targeted against not only Qadhafi and his close associates, but also against the entire Libyan Government.
In affirming this concerted stance against Qadhafi, President Obama put into force an Executive Order Blocking Property and Prohibiting Certain Actions Related to Libya (“the Order”) on February 25, 2011. The Order immediately blocks the assets of and prohibits the provision of goods or services (including humanitarian donations) to: the Libyan Government and its agencies, instrumentalities, and controlled entities; the Central Bank of Libya; and Qadhafi and those closely associated with him. The Order further provides for the blocking of assets of anyone determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be a senior official of the Libyan Government; a child or agent of Qadhafi; a spouse, dependant child, or agent of any of Qadhafi’s children named in the Order; or in any way responsible for or materially involved in “the commission of human rights abuses related to political oppression in Libya.”
On the day the Order was signed, aside from adding the designated Qadhafi family members to the Specially Designated Nationals List (each with a sizeable list of aliases), the Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued a general license authorizing transactions with Libyan Government –owned or –controlled financial institutions organized under the laws of a country other than Libya. On February 26th, the State Department’s Directorate of Defense Trade Controls announced the immediate suspension of all licenses it had issued for exports to Libya, and advised that no exemption in the International Traffic in Arms Regulations may be used to export defense articles and services to Libya until further notice (forthcoming in the Federal Register). Shortly thereafter, OFAC issued a second general license on March 1, 2011 authorizing the provision of and payment for goods and services to Libya’s diplomatic missions to the United States and the United Nations (limited to items to support official business and for employee personal use).
The Order, which actively blocks an estimated $30 billion, was described by the White House as “the most rapid and forceful sanctions” ever, and has already caused considerable commercial backlash. For instance, Morgan Stanley, in complying with the OFAC sanctions, has been left with no alternative but to entirely cease its operations in Libyan oil trade. Other members of the U.S. business community have expressed their concern and continue to seek authorization to provide measures of safety, welfare, and support of their employees and contractors who remain in Libya by paying their salaries and for other routine taxes, fees, benefits, goods and services associated with their employment. As developments with respect to Libya’s political and commercial climate become alarmingly unpredictable, investors and other potential stakeholders should remain aware of the situation at hand and should also exercise a heightened level of prudence, particularly with respect to transactions that may implicate the Libyan government or its agencies, instrumentalities or controlled entities.
Acting alongside the U.S, other nations and coalitions have recently demonstrated their united opposition against Qadhafi with sanctions of their own. A Reed Smith Shipping Alert addressing the measures taken by the U.S., the United Nations, and the European Union is available here.
This post was co-authored by Reed Smith Intern Henry R. Barnes.
This post was written by Richard Waite.
The UK's main competition authority, the OFT, appears to be gearing itself up to make greater use of its powers to target individuals involved in anti-competitive practices in the UK.
Individuals have faced the threat of enforcement action in the UK since 2003, in the form of disqualification of directors and, in relation to cartel activity, fines and prison sentences of up to five years. However, to date, such sanctions have only been imposed in one case - and that being the Marine Hose case where the individuals admitted their guilt as part of a plea bargain with U.S. prosecutors.
The OFT has now issued new guidance relating to its power to apply to the court for competition disqualification orders (CDOs) to be made against UK company directors. A successful application will result in a director of a company involved in anti-competitive arrangements, including abuse of dominance, being banned from acting as a company director in the UK for up to 15 years. One of the key changes to the OFT's approach reflected in the new guidance is that it no longer distinguishes between the level of involvement of the director in the infringing activity. So, the OFT may now be likely to apply for a CDO where a director ought to have known about an infringement, as well as where the director him/herself was directly involved in the infringing conduct. In other changes, the guidance now envisages CDO applications where there has not yet been a prior OFT decision or where the undertaking has not been fined. However, a proposal to leave open the possibility of CDO applications in some cases where a company had applied for leniency was dropped due to concerns that it would undermine the leniency system.
The difficulties encountered so far in bringing successful cartel offence prosecutions (see for example the recent collapse of the trial against three British Airways executives), may partially explain why the OFT seems to be turning its attention to director disqualification as potentially an easier way to target senior individuals. The OFT has never used these powers before, however, by publishing new strengthened guidance, it looks to be sending a message that it is intending to be more active in this area. New guidelines on their own will obviously have no effect unless they are put into practice, so it will be interesting to see how long it is before these powers are tested and how successful they prove. The OFT may well be waiting for a straightforward case where a director has been directly involved in a serious infringement in order to ensure its first CDO application is a success.
This post was written by Anne Borkovic.
After months of intense global negotiations, and facing increased sanctions from the United States, the EU, and the United Nations, what is life like in Iran? As expected, Iranians are experiencing increased gas prices, and the Iranian Revolutionary Guard is having some financing difficulties. Some of the more interesting effects, though, are the ban on mullets and fatwa against puppies.
In July, Iran’s Ministry of Culture and Islamic Guidance announced a ban on certain “decadent Western” hair styles for men, including the mullet. The full catalog of acceptable styles was presented at the Modesty and Veil Festival. Some interesting concessions were made – including allowing a modest amount of hair gel and a goatee – but mullets, pony tails, and elaborate spikes are out.
This past week, the Ministry announced a ban on advertising that promotes pets, pet care, and pet food in response to a June fatwa against pets from Ayatollah Shirazi, because pet owners were “blindly imitating the West.” He explained that “Many people in the West love their dogs more than their wives and children,” and that the devotion to pets would result in “evil outcomes.”
While it is unclear whether the ban on mullets and puppy food advertising will change Iran’s stance regarding nuclear power, we are interested to see what the Ministry will do in response to the June announcement from prayer leader Hojjat ol-eslam Kazem Sediqi that "Many women who do not dress modestly lead young men astray and spread adultery in society which increases earthquakes.”
This post was written by Anne Borkovic.
Who knew that gecko was mixed up with such unsavory characters? On June 3, 2010, the U.S. Treasury, Office of Foreign Assets Control (“OFAC”) announced that GEICO General Insurance Company paid $11,000 to settle allegations that, from approximately September 2006 to June 2007, it provided a car insurance policy to an individual listed on the Specially Designated Nationals (“SDN”) List as a narcotics kingpin. The alleged violations involved premium payments totaling $2,265. OFAC’s brief announcement specifies that the settlement amount reflects OFAC’s consideration that GEICO screens its customers against a version of the SDN List updated only annually, but is taking measures to improve its procedures.
The announcement also specifies that the base penalty for the alleged violations was $11,000. This combined with the penalty calculation procedures in OFAC’s penalty guidelines indirectly confirms that the case was likely not voluntarily disclosed. The imposition of a base penalty also indirectly confirms that OFAC did not pursue egregious or “willful” violation penalties in this case. However, it also indicates that OFAC considered the case significant enough to pursue a monetary penalty rather than only issue a cautionary letter or formal finding of a violation.
Many companies struggle with the need to screen customers against the continually-updated SDN List, as well as the Denied Parties, Unverified, Entity, and Debarred Lists. Companies with more standard business models – order placement, shipment, -- can take advantage of screening software, including automatic updates of the lists and friendly interfaces, to screen each order for shipment. However, many companies have such a high volume of customers, international locations, and non-traditional structures, that even implementing a procedure to use the software would require significant changes to the business process.
Unfortunately, even with robust processes, there are no safe harbors available for screening transactions to ensure that the customer is not included on a list. The GEICO enforcement action demonstrates that even one slip in the screening can result in an administrative investigation and civil money penalty. It also shows that OFAC is willing to undertake enforcement actions in industries with less traditional distribution models.
This post was written by Leigh Hansson and Michael Grant.
On July 1, 2010, President Barack Obama, preceded by Congressional voting signaling overwhelming support, signed into law the Comprehensive Iran Sanctions Accountability and Divestment Act ("Act"). The Act is an effort by the United States to hinder what appears to be Iran's intent to develop nuclear weapons. Action by the United States comes at a time when several countries are modifying their sanction policies in response to Iran's actions. In recent weeks, the United Nations, the European Union, and the United Kingdom, among others, have all enacted resolutions or sanctions directed at Iran. While many elements of the Act must be implemented by regulations, and are therefore unknown at this time, this article summarizes the major changes that are now known.
To view the entire alert, please click here.
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