Sanctions

U.S. sanctions law

Sanctions

China’s One Belt One Road Could Disrupt U.S. Legal Dominance

The OBOR, even if partially successful, would, as many analysts and commentators have noted, alter the global trade landscape, if not “shake up” the global economic order in place since the end of World War II. Less discussed (except, for example, in this 2015 MassPoint Occasional Note) is one likely secondary effect of the OBOR and other trade and finance initiatives that are not centered on the U.S. dollar or the Bretton Woods system: the likely curtailment of the global reach of U.S. law.

Anti-Corruption

IRAN AFTER PARTIAL SANCTIONS RELIEF AND U.S. ELECTIONS

MassPoint PLLC, with the American Bar Association Section of International Law and Bryan Cave LLP, are sponsoring a program entitled “Iran After Partial Sanctions Relief and U.S. Elections: Legal, Risk, and Practical Issues for Business.” Hdeel Abdelhady, who wrote and organized the program, will serve as moderator.

Doing Business in the United States

Do State Regulators Have Authority to Enforce OFAC Sanctions?

The enforcement of OFAC-administered sanctions by a state agency—even against banks by a banking regulator operating in a dual banking system—raises fundamental constitutional and other legal questions. Chief among them is the overarching question of whether U.S. states have authority to directly or effectively enforce OFAC-administered sanctions, particularly independently and prior to enforcement by competent federal authorities—namely OFAC. This question and some of the legal issues and policy and practical considerations appertaining to it are discussed in detail in a forthcoming publication. This document provides a summary preview of some of the key legal issues discussed in that publication. Additional summary previews may be provided separately.

Sanctions

Non-Dollar Trade Could Curtail the Global Reach of U.S. Sanctions and Other Laws

American economic and financial heft facilitates the extraterritorial reach of U.S. law. For example, global transactions that are denominated in U.S. dollars and processed through the U.S. financial system “touch” the United States, come within its jurisdiction and create a jurisdictional nexus to foreign parties, property and events associated with those transactions.

Sanctions

U.S. Sectoral Sanctions Targeting Russian Financial Services: OFAC Directive 1

Among those added to the SSIL on July 30 are the Russian Direct Investment Fund (RDIF) and other entities identified by OFAC as being owned 50% or more by Russian state development bank Vnesheconombank (VEB). VEB itself was added to the SSIL on July 16, 2014, the same day on which OFAC first issued Directive 1, the relevant financial services sanctions implementing measure discussed in detail below (as applicable to the VEB-owned entitles and generally). The July 30 action is significant more for its likely practical impact, rather than its immediate legal meaning. This is so because the relevant VEB-owned entities, while not previously listed on the SSIL, have nevertheless been subject to Sectoral Sanctions since July 16, 2014.[iii] The VEB’s sanctioned status as of July 16, 2014 was imputed to its owned entities on the same day by operation of OFAC’s “50% Rule,” which attaches to entities owned 50% or more by one or more SSIL entities (individually or in the aggregate) the sanctions status of their owner(s), even if such owned entities are not separately listed on the SSIL. The 50% Rule significantly expands the potential scope of Sectoral Sanctions and corresponding compliance obligations. Effectively, the 50% Rule requires parties to determine, at every link in the ownership chain (vertically and horizontally), whether one or more SSIL entities (alone or in the aggregate) directly or indirectly owns 50% or more of a relevant entity. This can be particularly burdensome where corporate structures are complex and/or opaque.

Russia Sanctions

OFAC Directive 1: Financing, Debt & Equity Prohibitions

On July 30, 2015, the Office of Foreign Assets Control (OFAC) made explicit the sanctioned status of certain entities operating in Russia’s financial services sector by adding them to the Sectoral Sanctions Identifications List (SSIL).The SSIL identifies parties subject to U.S. Sanctions targeting specific sectors of the Russian economy (Sectoral Sanctions) within the framework of Ukraine/Russia-related sanctions adopted in response to events in Ukraine. Currently Russia’s financial services, defense, and energy sectors are targeted. Nevertheless, they may encounter legal, commercial, or reputational risk in the context of current or planned business with or involving a sanctioned entity, whether listed on the SSIL (or another sanctions list) or sanctioned as a matter of law (such as under the 50% Rule).

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