Embed Size (px)
DESCRIPTION
© Allen & Overy 2015 Introduction
Citation preview
© Allen & Overy 2015 1
Economic Sanctions:A 360-Degree EU and US Perspective
© Allen & Overy 2015
The Speakers
Neyah Van Der AaAssociate, Allen & Overy LLP
Amsterdam+31 20 674 1247
Carol FuchsExecutive Counsel, General Electric
(retired June 2015)(847) 404-4149
Allie CheathamExecutive Director – Compliance Director JPMorgan Chase & Co.
(212) 623-7791 [email protected]
Ken RivlinPartner, Allen & Overy LLP
New York(212) 610-6460
Maura RezendesSenior Counsel, Allen & Overy LLP
Washington, DC(202) 683-3864
© Allen & Overy 2015
Introduction
© Allen & Overy 2015
Targeting: Designated/listed persons
Sectors
Countries/territories
Sensitive products
Sanctions regimes
US
UK
EU
UN
Trade sanctions Travel bans
Financial sanctions Asset freezes
Security Council Resolutions
EU Regulations and Decisions
UK Regulations and Orders
US Statutes, Executive Orders and Regulations
Features:Criminal and civil liability
Extra-territorial effect
Often immediate effect
High compliance costs
© Allen & Overy 2015
Business: Includes foreign banks or branches of foreign banks doing business in the UK
Location: Includes EU banks/branches of EU banks and EU branches of foreign banks
Who can be caught?
EU nationals
Activity anywhere in the world
Activity within the EU/on EU
aircraft/vessels Business in the EU
Legal persons incorporated
/constituted in a Member State
US citizens/permanent
residents
Person or entity located in the USActivity conducted
through the US
“Sanctionable activity” anywhere in
the world
US-incorporated companies (and
foreign subsidiaries for Cuba/Iran)
Facilitation Circumvention
Anti-boycott provisions
© Allen & Overy 2015
Implementa-tion Day
Iran – Evolution Culminating in Vienna Deal
Jan 2014
Adoption Day
April 2015
Nov 2013
Up to 2013
Initiation steps to implement JCPOA commit-ments
P5+1 and Iran agree “key parameters” of a dealIran agrees to reduce its nuclear capability and allow inspections. Certain substantial UN, EU and US sanctions to be lifted when conditions met
Joint Plan of Action (JPOA) agreed between P5+1 and IranP5+1 temporarily suspends a limited scope of sanctions, Iran gives undertakings relating to its nuclear programmeOnly applied to non-US persons
Nuclear proliferation concernsA global concernUN (2006), EU (2007) and US (1979, comprehensive from 1987) sanctions imposedTalks began between Iran and other states
Limited EU sanctions begin to be lifted
JPOA extended to 24 November 2014
July 2014
JPOA extended to June 2015
Nov 2014
July 2015
P5+1 and Iran agree deal – the JCPOAIran agrees to reduce its nuclear capability and allow inspections. Certain substantial UN, EU and US sanctions to be lifted when conditions met
2013 2014 2015 2016?
Phase 1 lifting of sanctions
© Allen & Overy 2015
Sept 2014
April 2015
Dec 2014
July/Aug 2014
March 2014
Russia and the situation in Ukraine
7
Minsk agreement compliance crucialEuropean Union leaders agree to continue sanctions to at least the end of 2015 when complete implementation of the Minsk ceasefire agreement is required. A formal vote on the extension will take place in July. UK Queen’s Speech 27 May 2015 reinforces this approach
Clarification of existing sanctions and extension of sanctions in relation to Crimea and Sevastopol
Sanctions extended and Russia targetedMost significantly Regulation 833. Russia’s access to EU capital markets, dual-use goods and technology, arms imports, and energy sector goods and related services, is restricted
First sanctions imposedDestabilisation in UkraineIndividuals sanctioned
Sanctions targeting Russia expandedAccess to loans and credit is restricted. Oil & gas and military sector are specifically targeted. Rosneft, Transneft and Gazprom Neft, amongst others, are named
Russia takes further actionRussia releases list of 89 banned European senior individuals and legislates to enable designation of foreign NGO’s as undesirable, therefore exposed to civil and criminal penalties. This action follows Russia’s August 2014 ban on food and agriculture imports
May 2015
June 2015
The EU respondsThe EU Parliament restricts access of Russian diplomats and other representatives, and suspends its engagement with the EU-Russia Parliamentary Cooperation Committee
© Allen & Overy 2015
Sept 2014
June 2015
Dec 2014
July 2014
March 2014
Russia and the situation in Ukraine
8
President Obama states that sanctions will continue until the Minsk agreement ceasefire goes into full effect
Further Executive Order issued Sanctioning those involved in the situation in CrimeaTerritorial sanctions targeting CrimeaUkraine Freedom Support Act enacted
Sectoral sanctions imposedFour Directives issuedRussian financial institutions and companies operating in the energy and defense sectors targetedRestrictions on providing debt or equity and providing oil and gas sector goods, services or technologyNew sanctions list created – the Sectoral Sanctions Identifications List
First sanctions relating to the situation in Ukraine imposedDestabilisation in UkraineThree Executive Orders issued. Targeted individuals and entities include Russian officials, those operating in certain Russian business sectors, including the financial sector, and those thought to be involved in events in Ukraine
Additions made to the Sectoral Sanctions Identifications List and the SDN List under the Ukraine-Russian Executive Orders
July 2015
© Allen & Overy 2015 9
Russia and the situation in Ukraine: sanctions imposed
EU sanctions– Asset freezes and travel bans– Crimea/Sevastopol:
comprehensive restrictions– Russia: restrictions on debt and
capital raising; trade restrictions on dual-use goods and oil/gas technologies; restrictions on support for oil and infrastructure projects
US sanctions– Travel bans and asset freezes on designated persons– Sector-based restrictions on providing new debt, and in some
cases equity, to designated companies and/or supporting Russian oil projects. Sectors include financial services, energy, metals and mining, engineering and defense.
– Comprehensive territorial sanctions targeting Crimea– Several general licenses relating to, e.g., derivatives,
telecommunications in Crimea
© Allen & Overy 2015
Cuba: certain US sanctions are being lifted
Jan 2015
March 2015
Mid 2013
45 individuals and entities removed from the US sanctions listOFAC announces that this was to remove out of date listings only
Talks begin in secret between Cuba and the US
OFAC amends the Cuban Assets Control RegulationsTravel restrictions to Cuba are eased, limit on remittances to Cuba raised, US financial institutions are allowed to open accounts at Cuban financial institutions, certain transactions with Cuban nationals outside of Cuba are authorized, a number of activities including in relation to telecoms, financial services, trade and shipping are allowed.
US announces that it will restore diplomatic relations with CubaThe US intention is to “engage and empower Cuban people” Prisoner releases announcedCertain sanctions will be easedCuba’s listing as a State Sponsor of Terrorism is to be reviewed There will be an “honest and serious debate” about lifting the U.S. embargo
Dec 2014
May 2015
Cuba is removed from the list of state sponsors of terrorismCongress did not blocked the move
US further amends the Cuban Assets Control Regulations and Export Administration Regulations Travel, telecom, and internet related sanctions are all further eased.
Sept 2015
© Allen & Overy 2015
US
Cuba: sanctions and recent changes
Comprehensive trade embargo
Targets: Cuban government, all Cuban nationals and businesses
Prohibition on dealings in any property anywhere in the world in which Cuba or a Cuban national has or had an interest
EU blocking statute (and others)
Recent changes
New general licenses for certain activities
Limited relaxation to allow certain telecoms and remittance activities
Certain dealings by US foreign subsidiaries with Cuban nationals permanently resident outside Cuba now allowed
Persons subject to U.S. jurisdiction engaging in certain categories of authorized activities will be allowed to establish and maintain a physical presence, such as an office, retail outlet, or warehouse, in Cuba
US banks now allowed to set up correspondent accounts – low uptake
Increased interest: new licences granted for travel to Cuba - ferry service US-Cuba and direct flights
© Allen & Overy 2015
Fokker Iran sanctions
accord rejected as too
lenientBloomberg5 February 2015
Enforcement making the headlines
Barclays fined $298m
over sanctions breach
The Financial Times
17 August 2010
BNP Paribas ‘to pay $9bn over sanctions breach’The Telegraph23 June 2014
Schlumberger unit to pay
$233 million in Iran-sanctions caseBloomberg 25 March 2015
Photo: Art Konovalov / Shutterstock.com
PayPal to pay $7.7 million
to U.S. over alleged sanctions violationsBloomberg 25 March 2015
Dutch aerospace company Fokker hit with $21 million fine in
sanctions case
The Washington Post
5 June 2014
Commerzbank to pay $1.45bn for US banking
violationsThe BBC 12 March 2015
US charges four companies and five people over alleged tech
exports to IranReuters17 April 2015
© Allen & Overy 2015
Facilitation
Predominantly Banks
Combined settlements
Appetite for higher fines
Enforcement
20192
1100
137
1200
269
2012
2013
2014
2011
2015
2010
Amount ($m) Number27
21
16
2723
11
2012
2013
2014
2011
2015
2010
Trend
US enforcement
United StatesOFAC – an executive branch agency, part of the U.S. Department of the TreasuryPenalties – civil penalties, criminal penalties and imprisonment, forfeiture of funds or property
United Kingdom and European UnionPenalties – in the UK, an unlimited fine and imprisonment up to 7 years
Other Member States enforcement mechanisms and penalties will vary
© Allen & Overy 2015
Sanctions issues: the corporate perspective
Evolving nature of sanctions
M&A and sanctions
Not just sanctions
(money laundering
etc)
Control of third parties
(eg distributers Avoidance
risks Subsidiary operations
Debt and capital market negotiations
and restrictions
Reach of US
sanctionsInternal
compliance programs
Training (etc)
© Allen & Overy 2015
Sanctions – In House Counsel Considerations
Know the rules
Obtain information from multiple sources.
Use reliable outside counsel (US & non-US) that posts news
promptly.
Read source documents—don’t rely on interpretations of others.
Make sure you have latest information - landscape can
change daily.Establish jurisdictional reach.
When does US jurisdiction apply?
Understand applicability to entities owned/controlled by sanctioned persons/entities.
Participate
Listen during government calls
Attend trade association meetings/conference calls
Ask questions
Benchmark with other companies
ImplementCommunicate internally—both
up to the top and down; be clear, concise and current.
Make sure facilitation restrictions are clearly
understood. Often counter-intuitivePost internally-prepared FAQs
and flowcharts
Establish and document robust procedures
Conduct training geared to different internal audiences;
post materials
Audit
Incorporate sanctions restrictions into corporate M&A
programs
© Allen & Overy 2015
Evaluate Potential Impact Beyond Applicable Legal Requirements
16
Evaluate reputational concerns
• Establish company policy that could be more restrictive than law.• Recognize that policy changes may be limited by facilitation restrictions
Act as good corporate citizen; evaluate what would make government happy/unhappy; push government to make applicable to all
In some cases, assume US jurisdiction?
Include protective language in bids, quotes, contracts, etc.
Anticipate next steps - “look around corners”
© Allen & Overy 2015
Sanctions issues: the lender perspective
Application of highest
jurisdictional standards
Risk assessment
and due diligence
Compliance & maintenance Materiality &
knowledge qualifiers Cure period?
Use of proceeds covenantsRemedies
Undertakings
LSTA note
Reps and warranties
Response from
corporates Currency flips
Engagement with EU and
US regulators
No consistent market practice
in loan documents
LMA position
US enforcement
driving behaviour
© Allen & Overy 2015
Market developments
No dealings with/for benefit of sanctions target
No investigations (etc) No evasion
No activity which could trigger designation
Not sanctions target
Compliance with laws/sanctions
laws
Representations and warranties
Considered deal by dealNo consistent market
practice yetIncreasingly common
Repetition
(a) None of the [Obligors] is:
(i) a Restricted Party;
(ii) in breach of applicable Sanctions; or
(iii) to its knowledge, the subject of any claim, proceeding, formal notice or formal investigation by any enforcement authority concerning any actual or alleged breach of Sanctions.
© Allen & Overy 2015
Market developments
No activity that could trigger breach by the borrower or any finance party
Appropriate controls and safeguards
Information covenants
Source of repayment fundsUse of proceeds
Compliance with laws/sanctions
laws
Undertakings
IllegalityEoD
Practical issues
(a) No [Obligor] shall use any proceeds of the Loan in a manner that:
(i) is a breach of applicable Sanctions; and/or
(ii) causes a breach of applicable Sanctions by any
[Finance Party].
© Allen & Overy 2015 20
These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources.
Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings.
