Key Screening Software
Requirements Checklist
EC Blocking Regulation Activated Commensurate with First US Wind-down Date on Iran

EC Blocking Regulation Activated Commensurate with First US Wind-down Date on Iran

On August 7th, the European Commission Delegated Regulation (EU) 2018/1100 (1) entered into force. Please see: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018XC0807(01)&from=EN.    This Regulation amends the Annex to Council Regulation (EC) No 2271/96 of 22 November 1996 protecting against the effects of extra-territorial application of legislation adopted by a third country.   In this case, the specific concern as spelled out in my blog post of May 22nd is the U.S. decision to withdraw from the Iranian Nuclear Deal this past May 8, 2018.

The basic principle of the Blocking Statute is that EU operators shall not:

  1. comply with the listed extra-territorial legislation, or any decision, ruling or award (Article 5, paragraph 1); and
  2. fail to inform the European Commission within 30 days of any events arising from listed extra-territorial legislation or actions that affect, directly or indirectly, their economic or financial interests (Article 2, paragraph 1);

The reporting obligation applies to EU directors, managers and other persons with management responsibilities and such reports can be made either directly to the EC or through the competent authorities of the Member States.

The Blocking Statute:
— Nullifies the effect in the EU of any foreign decision, including court rulings or arbitration awards, based on the listed extra-territorial legislation or the acts and provisions adopted pursuant to them (Article 4);

— Allows EU operators to recover damages arising from the application of the listed extra-territorial legislation from the natural or legal persons or entities causing them (Article 6); and

— Allows EU operators to request an authorization to comply with the listed extra-territorial legislation, if not doing so would cause serious harm to their interests or the interests of the EU (Article 5, paragraph 2).

 

 

Trump Issues Executive Order on New Iran Sanctions

Trump Issues Executive Order on New Iran Sanctions

The Trump Administration issued Executive Order 13846 on August 6, 2018 right at the start of the first wind-down period for U.S. persons to begin ceasing business with Iran.   The key parts of the Order impose blocking sanctions relating to support for the Government of Iran’s purchase or acquisition of U.S. bank notes or precious metals; certain Iranian persons; and Iran’s energy,  shipping, and shipbuilding sectors and port operators.

These new sanctions come in two wind-down phases; one starting August 7, 2018; the other starting November 5, 2018.  The Order provides specifically for the Secretary of the Treasury to require U.S. persons to block (including to refuse to transfer, pay, export, withdraw, or otherwise deal in) all property and interests in property that are in, come within or that come within the possession or control of any U.S. person of such designated person.  Please note these are designations referred to as secondary sanctions.   The U.S. Government can impose these latter sanctions even against parties located outside Iran in instances where the following occurs.

“(i) on or after August 7, 2018, the person has
materially assisted, sponsored, or provided financial,
material, or technological support for, or goods or
services in support of, the purchase or acquisition of
U.S. bank notes or precious metals by the Government
of Iran;
(ii) on or after November 5, 2018, the person has
materially assisted, sponsored, or provided financial,
material, or technological support for, or goods or
services in support of, the National Iranian Oil
Company (NIOC), Naftiran Intertrade Company (NICO),
or the Central Bank of Iran;
(iii) on or after November 5, 2018, the person has
materially assisted, sponsored, or provided financial,
material, or technological support for, or goods or
services to or in support of:
(A) any Iranian person included on the list of
Specially Designated Nationals and Blocked
Persons maintained by the Office of Foreign
Assets Control (SDN List) . . . ; or
(B) any other person included on the SDN List
whose property and interests in property are
blocked pursuant to subsection (a) of this
section or Executive Order 13599 . . . ; or
(iv) pursuant to authority delegated by the
President and in accordance with the terms of such
delegation, sanctions shall be imposed on such person
pursuant to section 1244(c)(1)(A) of IFCA* because the
person:
(A) is part of the energy, shipping, or
shipbuilding sectors of Iran;
(B) operates a port in Iran; or
(C) knowingly provides significant financial,
material, technological, or other support to, or
goods or services in support of any activity or
transaction on behalf of a person determined
under section 1244(c)(2)(A) of IFCA to be a
part of the energy, shipping, or shipbuilding
sectors of Iran; a person determined under
section 1244(c)(2)(B) of IFCA to operate a port
in Iran; or an Iranian person included on the
SDN List (other than a person described in
section 1244(c)(3) of IFCA).”

*ICFA=Iran Freedom and Counter-Proliferation Act of 2012

New Russia Sanctions Arising from Nerve Agent Attack

New Russia Sanctions Arising from Nerve Agent Attack

The Department of State just issued this press release on new Russia sanctions:

“Press Statement

Heather Nauert
Department Spokesperson
Washington, DC
August 8, 2018

Following the use of a “Novichok” nerve agent in an attempt to assassinate UK citizen Sergei Skripal and his daughter Yulia Skripal, the United States, on August 6, 2018, determined under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act) that the Government of the Russian Federation has used chemical or biological weapons in violation of international law or has used lethal chemical or biological weapons against its own nationals.

Following a 15-day Congressional notification period, these sanctions will take effect upon publication of a notice in the Federal Register, expected on or around August 22, 2018.”

The immediate impact of these new sanctions is that any attempt by a U.S. company to obtain an export license on certain items implicating national security concerns will be denied.   Attempts to prove such items will be used for legitimate purposes, with safeguards to protect U.S. national security, will represent a very tough burden of proof.  Sample items include gas turbine engines, electronics, integrated circuits as well as testing and calibration equipment.

The CBW Act will require the imposition of tougher sanctions to be imposed in three months if Russia fails to take corrective measures.  To avoid such sanctions, the U.S. Government would have to find that Russia is:

  • no longer using chemical or biological weapons;
  • providing reliable reassurances that it will not use them in the future; and
  • allowing international inspectors to ensure compliance.

It is unlikely such findings will be forthcoming in the short three months to come.

 

BIS removes ZTE from the Denied Persons List

BIS removes ZTE from the Denied Persons List

The Department of Commerce’s Bureau of Industry and Security’s July 23, 2018 Federal Register notice confirmed ZTE’s removal from the Denied Person’s List.

ZTE made full and timely payment of the assessed $1,000,000,000 penalty (see previous blog post of July 6, 2018).  Moreover, ZTE complied with the escrow requirements respecting the $400,000,000 suspended portion of the civil penalty.  Therefore, BIS terminated the April 15, 2018 Order and removed ZTE from the Denied Persons List.

It will remain to be seen whether ZTE can stay the course of compliance or whether it might yet have another failure.   The stakes are likely high enough now, with painful lessons learned, to hope for continued compliance.   This is particularly so now with the appointed U.S. compliance team in place.

Commerce Permits a General Authorization for Certain Activities with ZTE

Commerce Permits a General Authorization for Certain Activities with ZTE

On July 2, 2018, the Department of Commerce’s Bureau of Industry and Security (BIS) published a General Authorization for certain activities with ZTE.   BIS had previously issued a Denial Order against ZTE on April 15, 2018 for the company’s failure to discipline personnel involved in prior violations of sanctions and export control laws (please the blog post from June 25th with more details).

The General Authorization permits the following through August 1, 2018 [when ZTE is expected to be in full compliance in replacing offending Board and Management personnel).   After August 1st, BIS is expected to lift the Denial Order permanently (assuming ZTE takes its compliance obligations seriously this time around).

All persons, except those located in Country Group E (Cuban, Iran, North Korea, Sudan and Syria), can now undertake:

  1. Continued operation of existing networks and equipment, including software updates and patches, under contracts in force prior to April 15, 2018;
  2. Continued service and support to handsets, including software updates and patches, for ZTE phone models in existence prior to April 15, 2018;
  3. Cybersecurity research and vulnerability disclosures can be made to ZTE where such is critical to maintaining the integrity and reliability of communications networks and equipment; and
  4. BIS authorizes persons to receive payment to or from ZTE for transactions lawful under this authorization.