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October 18, 2019 |
New U.S. Sanctions Targeting Turkish Government in Response to Military Operations in Syria

Click for PDF On October 14, 2019, the Trump administration authorized new sanctions against the Government of Turkey in response to that country’s recent military incursion into northern Syria, an action the U.S. government condemned as “endangering innocent civilians, and destabilizing the region, including undermining the campaign to defeat ISIS.”[1],[2] Based on that authority, the Treasury Department immediately issued sanctions against Turkey’s Ministry of Energy and Natural Resources and Ministry of National Defense, as well as three senior officials. The Trump administration announced that these sanctions would be accompanied by an increase in steel tariffs and the halt to negotiations over a $100-billion trade deal with Turkey.[3] At the same time, the U.S. Department of Justice indicted Halk Bank, a Turkish financial institution, for evading separate sanctions regarding Iran, among other charges.[4] Three days later on October 17, after Vice President Pence and other senior U.S. officials traveled to Ankara, the Turkish government agreed to a limited five-day ceasefire to allow the withdrawal of Kurds outside a designated “safe-zone.”[5] The resulting joint U.S.-Turkish statement on the ceasefire noted that, once Turkish military operations are paused, “the U.S. agrees not to pursue further imposition of sanctions under the Executive Order of October 14.”[6] However, the military situation in northern Syria remains fluid, as does U.S.-Turkish diplomatic engagement, leaving uncertain the status of this new sanctions regime in the near term. The new sanctions are only the second time[7] that the U.S. Government has sanctioned governmental entities of a G20 country, and the first sanctions that the U.S. Government has issued against the government ministries of a NATO member.[8] The new sanctions are therefore likely to have significant impacts for U.S. and multinational companies doing business in Turkey, particularly those with counterparties in the defense and energy sectors. The Executive Order also authorizes the application of secondary sanctions against foreign financial institutions that continue to do business with listed entities and provides additional authority against individuals who interfere with a potential future peace process in Syria.[9] While the Treasury Department issued a general license allowing U.S. Government employees, grantees, and contractors to conduct the official business of the U.S. government with the listed Turkish entities, this license is unlikely to authorize U.S. company engagement in direct commercial sales of defense articles and services, and other goods and services, to the Ministries of National Defense and Energy and Natural Resources.[10] U.S. companies have until November 13, 2019 to wind down their operations and pre-existing contracts with those Turkish ministries.[11] The Executive Order’s primary authorities, delineated in Section 1, enable the U.S. government to freeze property and assets of current and former Turkish officials, as well as subsets of the Turkish government, that the U.S. Treasury Secretary, in consultation with the State Department, determines are contributing to ongoing instability in the Syrian conflict or committing serious human rights abuses.[12] The scope of the order also extends to those who “materially assist” Turkish entities designated under the sanctions regime and is not limited to material assistance with any specific conduct that prompted the entities’ designation.[13] Pursuant to Section 1, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) immediately designated Turkey’s Ministry of Energy and Natural Resources and Ministry of National Defense to the Specially Designated and Blocked Persons (“SDN”) list.[14] OFAC also designated three senior Turkish officials—Minister of National Defense, Hulusi Akar; Minister of Interior, Suleyman Soylu; and Minister of Energy, Fatih Donmez—to the SDN list.[15] As a result of these designations, U.S. persons are generally prohibited from dealing with the listed Turkish agencies and individuals, and all assets under U.S. jurisdiction owned or controlled by the sanctioned entities will be frozen. However, the scope of this new sanctions regime extends beyond those entities immediately listed. Section 1 of the Executive Order lays the groundwork for persons and entities operating in additional sectors of the Turkish economy to be designated, and Section 2 allows the U.S. Secretary of State to authorize sanctions against anyone responsible for or complicit in disrupting or preventing a potential ceasefire or political solution to the Syrian conflict, including those brokered by the United Nations.[16] Separately, Section 3 of the order allows the U.S. Treasury Secretary to impose sanctions on any foreign financial institution that knowingly facilitates a financial transaction for or on behalf of an entity designated as an SDN pursuant to Section 1.[17] Specifically, the Executive Order authorizes the Secretary of Treasury to prohibit or restrict the opening or maintenance of correspondent or payable-through accounts in the United States.[18] OFAC issued three general licenses providing limited exemptions to compliance with the Executive Order. The first license exempts from the scope of the sanctions regime any interaction with the listed Turkish entities as a result of official business by the U.S. government, its employees, grantees, or contractors.[19] The second license provides for a period of time—from October 14, the date of the sanction’s implementation, to 12:01 a.m. on November 13—for companies to wind down their contracts, operations, and other agreements involving the Ministries of National Defense and Energy and Natural Resources.[20] The third license exempts from compliance certain international organizations affiliated with the United Nations, such as the World Bank and World Health Organization.[21] Given the significant ties between the defense sectors of the U.S. and Turkish governments in particular, we expect that the October 14 sanctions are likely to have significant impacts, both intended and unintended, on the companies involved in these sectors as well as the U.S. and foreign financial institutions that support those relationships. Notably, General License 1 applies only to official U.S. Government engagement with the Turkish ministries and does not cover U.S. entities with direct commercial relationships with the Ministries of National Defense and Energy and Natural Resources, or any entities owned 50% or more by these ministries that are now blocked as a result of their designation. OFAC has not yet issued guidance on the scope of the official business concept, which will be of keen interest to many companies that have invested significantly over decades in Turkey’s defense industrial base in part to support U.S. government foreign military sales. While foreign military sales may be covered by the official business concept, direct commercial sales of defense articles and services may not be. Foreign joint ventures with a U.S. partner and foreign subsidiaries of U.S. companies are not directly subject to the new sanctions regime. However, depending on the specific joint venture arrangements and the business of the foreign subsidiaries, the U.S. joint venture partner or parent company may need to cease supporting any work by November 13, 2019, absent a specific license. ____________________    [1]   Executive Order, Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria (Oct. 14, 2019), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/syria_eo_10142019.pdf.    [2]   Press Release, U.S. Department of the Treasury, Treasury Designates Turkish Ministries and Senior Officials in Response to Military Action in Syria (Oct. 14, 2019), available at https://home.treasury.gov/news/press-releases/sm792.    [3]   Press Release, White House, Statement from President Donald J. Trump Regarding Turkey’s Actions in Northeast Syria (Oct. 14, 2019), available at https://www.whitehouse.gov/briefings-statements/statement-president-donald-j-trump-regarding-turkeys-actions-northeast-syria/.    [4]   Press Release, U.S. Department of Justice, Turkish Bank Charged in Manhattan Federal Court for its Participation in a Multibillion-Dollar Iranian Sanctions Evasion Scheme (Oct. 15, 2019) available at https://www.justice.gov/usao-sdny/pr/turkish-bank-charged-manhattan-federal-court-its-participation-multibillion-dollar.    [5]   Press Release, White House, The United States and Turkey Agree to Ceasefire in Northeast Syria (Oct. 17, 2019), available at https://www.whitehouse.gov/briefings-statements/united-states-turkey-agree-ceasefire-northeast-syria/.    [6]   Id.    [7]   On December 29, 2016, the Obama administration designated as Specially Designated Nationals (“SDNs”) Russia’s Federal Security Services, or Federalnaya Sluzhba Bezopasnosti (FSB) and the Main Intelligence Directorate of the Russian Ministry of Defense, or Glavenoe Razvedyvatel’noe Uprvalenie (GRU), among other associated entities, for their involvement in cyber operations aimed at the 2016 U.S. presidential election, available at https://www.treasury.gov/resource-center/sanctions/ofac-enforcement/pages/20161229.aspx.    [8]   Last year, the Trump administration levied separate sanctions on the Turkish Interior and Justice Ministers over the detention of an American pastor. Press Release, U.S. Department of the Treasury, Treasury Sanctions Turkish Officials with Leading Roles in Unjust Detention of U.S. Pastor Andrew Brunson (Aug. 1, 2018), available at https://home.treasury.gov/news/press-releases/sm453.    [9]   Executive Order at Section 3, Section 2. [10]   General License 1 to Executive Order of October 14, 2019. [11]   General License 2 to Executive Order of October 14, 2019. [12]   Executive Order at Section 1(a). [13]   Id. at Section 1(a)(E). [14]   U.S. Department of the Treasury, Executive Order on Syria-Related Sanctions; Syria-Related Designations; Issuance of Syria-Related General Licenses (Oct. 14, 2019) available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20191014.aspx. [15]   Id. [16]   Executive Order at Section 2(a-c). [17]   Id. at Section 3(a-b). [18]   Id. [19]   General License 1 to Executive Order of October 14, 2019. [20]   General License 2 to Executive Order of October 14, 2019. [21]   General License 3 to Executive Order of October 14, 2019. The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam M. Smith, Chris Timura, Stephanie Connor and Brian Williamson. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s International Trade practice group: United States: Judith Alison Lee – Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk – Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) Marcellus A. McRae – Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura – Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair – Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown – Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole – Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor – Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Henry C. Phillips – Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt – Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Audi K. Syarief – Washington, D.C. (+1 202-955-8266, asyarief@gibsondunn.com) Scott R. Toussaint – Washington, D.C. (+1 202-887-3588, stoussaint@gibsondunn.com) Europe: Peter Alexiadis – Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Nicolas Autet – Paris (+33 1 56 43 13 00, nautet@gibsondunn.com) Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris – London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Sacha Harber-Kelly – London (+44 20 7071 4205, sharber-kelly@gibsondunn.com) Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Steve Melrose – London (+44 (0)20 7071 4219, smelrose@gibsondunn.com) Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Richard W. Roeder – Munich (+49 89 189 33-160, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

October 14, 2019 |
Argentina and Other States Adopt Currency Restrictions, Raising Potential Investment Treaty Claims

Click for PDF On September 1, 2019, Argentina introduced a number of new restrictions on foreign currency transactions, reversing its four-year-old policy that had eliminated such controls. This move follows similar recent capital restrictions imposed by other States. Such regulations may give rise to investment treaty claims by foreign investors.[1] In particular, depending on the circumstances, these measures may violate investors’ rights to (i) the free transfer of funds into and out of the host State; and (ii) fair and equitable treatment. Investors can directly enforce these rights against States via international arbitration. Argentina and Other States Impose Currency Restrictions and Similar Measures In the last few years, a number of States have imposed controls to stem capital outflows. In 2015, for example, Venezuela severely limited the permitted number of currency exchange transactions at the official rate and then set an artificially low Venezuelan bolivar to US dollar exchange rate. This significantly devalued the bolivar, wiping out billions of dollars of value held in monetary assets by multinational companies, while effectively preventing those companies from engaging in currency transactions to mitigate these losses.[2] In June 2019, Tanzania also restricted currency exchanges by imposing new, stricter regulations on foreign exchange bureaus and shutting down around a hundred of them.[3] Most recently, last month, Argentina introduced currency restrictions that may detrimentally impact, among others, foreign companies that maintain investments in Argentina. On September 1, 2019, Argentina issued Decree 609/2019 announcing the new currency controls and mandating that Argentina’s central bank (Banco Central de la República Argentina or “BCRA”) establish the relevant guidelines and regulations.[4] Subsequently, the BCRA issued Communication “A” 6770, describing the specific exchange procedures to be implemented and how they will operate in practice.[5] The decree and BCRA communication, inter alia, require (i) exporters to convert foreign currency obtained into Argentine pesos; and (ii) both companies and individuals to obtain BCRA authorization before either purchasing foreign currency on the local foreign exchange market, or transferring funds abroad in certain situations.[6] Moreover, to access the local foreign exchange market, companies and individuals are now required to submit an affidavit detailing the nature of the relevant transactions and affirming compliance with the new rules.[7] Additionally, the regulations require companies and other legal entities to obtain authorization from the BCRA before transferring dividends or profits abroad[8] or accessing the local currency exchange market for purchases of certain instruments.[9] These currency restrictions will remain in effect through December 31, 2019. Such Measures May Violate Investment Protections As explained in an earlier alert Gibson Dunn released in respect of the measures imposed by Venezuela in 2015,[10] the currency restrictions described above may violate obligations these States owe to foreign investors. In particular, many investment treaties contain a free transfer provision pursuant to which State Parties guarantee that investors from the other State Parties can freely transfer their investments and/or funds relating to that investment, typically without delays and at the exchange rate prevailing at the time of the transfer request. This includes investment treaties entered into by Venezuela, Argentina, and Tanzania. For example, the Argentina-US bilateral investment treaty provides at Article V that “[e]ach Party shall permit all transfers related to an investment to be made freely and without delay into and out of its territory.”[11] The Tanzania-UK bilateral investment treaty states at Article 6 that “[e]ach Contracting Party shall in respect of investments guarantee to nationals or companies of the other Contracting Party the unrestricted transfer of their investments and returns.”[12] Arbitral tribunals have found that the free transfer guarantee is a “fundamental” and “essential element” of investment treaties,[13] and that currency control restrictions which “effectively imprison the investors’ funds” violate this guarantee.[14] Thus, if the measures introduced by Argentina and other States prevent a foreign investor from, inter alia, re-patriating profits earned from its investment, these States may have breached their free transfer obligations. Moreover, many investment treaties (including those entered into by the States referenced above) oblige State Parties to treat investments of investors from the other State Parties fairly and equitably.[15] Tribunals have found that conduct that violates the free transfer guarantee may also breach the fair and equitable treatment standard.[16] Thus, there may be multiple bases upon which a foreign investor can hold these States accountable for damage such measures have caused to their investments. *    *    * Gibson Dunn lawyers have extensive experience advising clients on investment treaty arbitration, including in the context of currency restrictions and breaches of the free transfer guarantee contained in investment treaties. If you have any questions about how your company is impacted by capital controls or currency restrictions in markets where it is operating, we would be pleased to assist you. __________________________ [1] States who are party to Bilateral Investment Treaties with Argentina include:  Australia, Austria, Belgium, Canada, China, Costa Rica, Croatia, Czech Republic, Denmark, Finland, France, Germany, Italy, Korea, Mexico, Netherlands, Panama, Peru, Philippines, Poland, Portugal, Russia, Spain, Sweden, Switzerland, U.K., U.S.A., and Vietnam. [2] Gibson Dunn, Venezuela’s Currency Regulations May Violate Investment Treaty Protections, 25 February 2015, https://www.gibsondunn.com/venezuelas-currency-regulations-may-violate-investment-treaty-protections/. [3] Reuters, Tanzania issues new rules to tighten foreign currency exchange controls, 25 June 2019, https://www.reuters.com/article/tanzania-currency/tanzania-issues-new-rules-to-tighten-foreign-currency-exchange-controls-idUSL4N23W2KT. [4]   Presidencia de la Nación, “Mercado Cambiario – Deuda Pública,” Decreto No. 34.187, Boletín Oficial, 1 September 2019 [5]   Banco Central de la República Argentina, “Exterior y Cambios. Adecuaciones,” Comunicación “A” 6770, 1 September 2019. [6]   Id. [7]   Id. at ¶ 18. [8]   Id. at ¶ 10. [9]   These include debt instruments, investments, financial derivatives, loan grants to non-residents, deposits, currency hoarding, and transfers among residents. Id. at ¶ 5. [10] Gibson Dunn, supra note 2. [11]   Argentina-U.S. BIT, Art. V. [12]   Tanzania-U.K. BIT, Art. 6. [13]   See Continental Casualty Company v. Argentine Republic, ICSID Case No. ARB/03/9, Award, 5 September 2008, ¶ 239. [14]   See Biwater Gauff (Tanzania) Limited v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008, ¶ 735. [15]   See, e.g., Argentina-U.S. BIT, Art. II(2) (“Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law.”); Tanzania-U.K. BIT, Art. 2(2) (“Investments of nationals or companies of each Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Contracting Party.”). [16]   See AES Corporation and Tau Power B.V. v. Republic of Kazakhstan, ICSID Case No. ARB/10/16, Award, 1 November 2013, ¶ 425. The following Gibson Dunn lawyers assisted in the preparation of this client update: Cyrus Benson, Penny Madden, Jeffrey Sullivan, Matthew McGill, Rahim Moloo, Charline Yim, Ankita Ritwik, Philip Shapiro and Sydney Sherman. Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s International Arbitration practice group, or the following: Cyrus Benson – London (+44 (0) 20 7071 4239, cbenson@gibsondunn.com) Penny Madden – London (+44 (0) 20 7071 4226, pmadden@gibsondunn.com) Jeffrey Sullivan – London (+44 (0) 20 7071 4231, jeffrey.sullivan@gibsondunn.com) Matthew D. McGill – Washington, D.C. (+1 202-887-3680, mmcgill@gibsondunn.com) Rahim Moloo – New York (+1 212-351-2413, rmoloo@gibsondunn.com) Charline O. Yim – New York (+1 212-351-2316, cyim@gibsondunn.com) Ankita Ritwik – Washington, D.C. (+1 202-887-3715, aritwik@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

October 4, 2019 |
Gibson Dunn Ranked in the 2020 UK Legal 500

The UK Legal 500 2020 ranked Gibson Dunn in 15 practice areas and named seven partners as Leading Lawyers.  The firm was recognized in the following categories: Corporate and Commercial: Corporate Tax Corporate and Commercial: Equity Capital Markets – Mid-Large Cap Corporate and Commercial: EU and Competition Corporate and Commercial: M&A: upper mid-market and premium deals, £500m+ Corporate and Commercial: Private equity: transactions – high-value deals (£250m+) Dispute Resolution: Commercial Litigation Dispute Resolution: International Arbitration Dispute Resolution: Public International Law Human Resources: Employment – Employers Projects, Energy and Natural Resources: Oil and Gas Public Sector: Administrative and Public Law Real Estate: Commercial Property – Hotels and Leisure Real Estate: Commercial Property – Investment Real Estate: Property Finance Risk Advisory: Regulatory Investigations and Corporate Crime The partners named as Leading Lawyers are Sandy Bhogal – Corporate and Commercial: Corporate Tax; Steve Thierbach – Corporate and Commercial: Equity Capital Markets; Ali Nikpay – Corporate and Commercial: EU and Competition; Philip Rocher – Dispute Resolution: Commercial Litigation; Cyrus Benson – Dispute Resolution: International Arbitration; Jeffrey Sullivan – Dispute Resolution: International Arbitration; and Alan Samson – Real Estate: Commercial Property – Investment and Real Estate: Property Finance. Claibourne Harrison has also been named as a Rising Star for Real Estate: Commercial Property – Investment. The guide was published on September 26, 2019. Gibson Dunn’s London office offers full-service English and U.S. law capability, including corporate, finance, dispute resolution, competition/antitrust, real estate, labor and employment, and tax.  Our lawyers advise international corporations, financial institutions, private equity funds and governments on complex and challenging transactions and disputes. Our London corporate practice is at the forefront of cross-border M&A, financing and joint venture transactions, including advising clients seeking to access U.S. and European capital markets.  Team members handle major domestic and multi-jurisdictional commercial cases before English, EU and Commonwealth courts, and have a wealth of experience in taking complex matters to trial.  Gibson Dunn’s London office was founded more than 30 years ago.  Our dynamic team includes many dual-qualified lawyers with extensive language skills.

September 24, 2019 |
UK Supreme Court Decides Suspending UK Parliament Was Unlawful

Click for PDF The UK’s highest court has today ruled (here) that Prime Minister Boris Johnson’s decision to suspend (or “prorogue”) Parliament for five weeks, from September 9, 2019 until October 14, 2019, was unlawful. The Supreme Court, sitting with eleven justices instead of the usual five, unanimously found “that the decision to advise Her Majesty to prorogue Parliament was unlawful because it had the effect of frustrating or preventing the ability of Parliament to carry out its constitutional functions without reasonable justification”. It is a well-established constitutional convention that the Queen is obliged to follow the Prime Minister’s advice. The landmark Supreme Court ruling dealt with two appeals, one from businesswoman Gina Miller and the other from the UK Government. Mrs Miller was appealing a decision of the English Divisional Court that the prorogation was “purely political” and not a matter for the courts. The UK Government was appealing a ruling of Scotland’s Court of Session that the suspension was “unlawful” and had been used to “stymie” Parliament. A link to the full judgment is here. A key question before the Court, therefore, was whether the lawfulness of the Prime Minister’s advice to Her Majesty was “justiciable”, i.e. whether the court had a right to review that decision or whether it was purely a political matter. The Court held that the advice was justiciable: “The courts have exercised a supervisory jurisdiction over the lawfulness of acts of the Government for centuries”. The next question was on the constitutional limits of the power to prorogue. The Court decided that prorogation would be unlawful if it had the effect of “frustrating or preventing, without reasonable justification, the ability of Parliament to carry out its constitutional functions as a legislature and as the body responsible for the supervision of the executive”. The Court stated that it was not concerned with the Prime Minister’s motive; the key concern was whether there was good reason for the Prime Minister to prorogue as he did. The subsequent question related to the effect of the prorogation. The Supreme Court held that the decision to prorogue Parliament prevented Parliament from carrying out its constitutional role of holding the government to account and that, in the “quite exceptional” surrounding circumstances, it is “especially important that he [the Prime Minister] be ready to face the House of Commons.” The Court held that it was “impossible for us to conclude, on the evidence which has been put before us, that there was any reason – let alone a good reason – to advise Her Majesty to prorogue Parliament for five weeks”. The final question was on the legal effect of that finding and what remedies the Court should grant. The Court declared that as the advice was unlawful, the prorogation was unlawful, null and of no effect; Parliament had not been prorogued. The Supreme Court’s judgment further explained that “as Parliament is not prorogued, it is for Parliament to decide what to do next.” Almost immediately after judgment was handed down, it was announced that both the House of Commons and House of Lords will resume sitting tomorrow, Wednesday September 25, 2019. Prime Minister’s Questions – usually scheduled for each Wednesday that Parliament is in session – will not take place due to notice requirements. The UK Government has pledged to “respect” the judgment and the Prime Minister plans to return to the UK from New York, where he is due to address the U.N. General Assembly. Shortly before Parliament was prorogued, a new law was passed requiring the Prime Minister to seek an extension to the current October 31 deadline for the UK to leave the EU unless Parliament agreed otherwise (European Union (Withdrawal) (No. 2) Act 2019). The Government has asserted that this legislation is defective and continues to insist that the UK will leave the EU on October 31, 2019. The Supreme Court’s judgment does not directly affect the position in respect of the October 31 deadline. This client alert was prepared by Patrick Doris, Anne MacPherson, Charlie Geffen, Ali Nikpay and Ryan Whelan in London. We have a working group in London (led by Patrick Doris, Charlie Geffen, Ali Nikpay and Selina Sagayam) addressing Brexit related issues.  Please feel free to contact any member of the working group or any of the other lawyers mentioned below. Ali Nikpay – Antitrust ANikpay@gibsondunn.com Tel: 020 7071 4273 Charlie Geffen – Corporate CGeffen@gibsondunn.com Tel: 020 7071 4225 Sandy Bhogal – Tax SBhogal@gibsondunn.com Tel: 020 7071 4266 Philip Rocher – Litigation PRocher@gibsondunn.com Tel: 020 7071 4202 Jeffrey M. Trinklein – Tax JTrinklein@gibsondunn.com Tel: 020 7071 4224 Patrick Doris – Litigation; Data Protection PDoris@gibsondunn.com Tel:  020 7071 4276 Alan Samson – Real Estate ASamson@gibsondunn.com Tel:  020 7071 4222 Penny Madden QC – Arbitration PMadden@gibsondunn.com Tel:  020 7071 4226 Selina Sagayam – Corporate SSagayam@gibsondunn.com Tel:  020 7071 4263 Thomas M. Budd – Finance TBudd@gibsondunn.com Tel:  020 7071 4234 James A. Cox – Employment; Data Protection JCox@gibsondunn.com Tel: 020 7071 4250 Gregory A. Campbell – Restructuring GCampbell@gibsondunn.com Tel:  020 7071 4236 © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

September 20, 2019 |
Proposed CFIUS Regulations: The U.S. Remains Open for Business … but Read the Fine Print

Click for PDF On September 17, 2019, the U.S. Department of the Treasury issued over 300 pages of proposed regulations to implement the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), legislation that expanded the scope of inbound foreign investment subject to review by the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”). FIRRMA expanded—subject to the promulgation of these implementing regulations—the Committee’s jurisdiction beyond transactions that could result in foreign control of a U.S. business. The Committee’s jurisdiction will now include non-passive but non-controlling investments, direct or indirect, in U.S. businesses involved in specified ways with critical technologies, critical infrastructure, or sensitive personal data (referred to as “TID U.S. businesses” for technology, infrastructure, and data) and certain real estate transactions. The comment period will conclude on October 17, 2019, and as required by FIRRMA, the final regulations will become effective no later than February 13, 2020. To date, only certain provisions of FIRRMA have been fully implemented. In late 2018, CFIUS launched a pilot program to require mandatory filings in higher risk “critical technology” investments. For the past year, the pilot program has served as a regulatory laboratory for the Committee—allowing it to experiment with the use of a short-form “declaration” and better assess the issues that arise in non-controlling but non-passive investments. Notably, the pilot program will remain in place for the foreseeable future, and the new proposed regulations will implement the remainder of the Committee’s expanded authority under FIRRMA. Other developments are still to come—including the publication of a list of excepted foreign countries from which certain investors will receive less scrutiny. Key developments are described below. Covered Investments No Changes to the Critical Technologies Pilot Program. The proposed regulations leave the existing pilot program for critical technologies untouched. Notably, “critical technologies” is defined to include certain items subject to export controls and other existing regulatory schemes, as well as emerging and foundational technologies controlled pursuant to the Export Control Reform Act of 2018 (“ECRA”). Throughout the summer, several political and non-political leads at the Department of Commerce reported that we can expect new emerging technologies to be identified under specific Export Administration Regulations export control classification numbers (“ECCNs”) within weeks. However, no new emerging technologies ECCNs have been identified since Commerce issued its advanced notice of proposed rule-making (“ANPRM”) on the subject last fall. Commerce has also noted that it plans to release an additional ANPRM focused on foundational technologies in the coming weeks. Identification of Critical Infrastructure Sectors. CFIUS may review transactions related to U.S. businesses that perform specified functions—owning, operating, manufacturing, supplying, or servicing—with respect to critical infrastructure across subsectors such as telecommunications, utilities, energy, and transportation. Relying in part on the definition provided in the USA Patriot Act of 2001, the new regulations define “critical infrastructure” to include physical or virtual systems or assets the destruction or incapacitation of which would have a debilitating impact on U.S. national security. Previously, President Obama used this definition to identify 16 critical infrastructure sectors meriting special protection and assistance. CFIUS is more specific in its new regulations, listing 28 particular types of “covered investment critical infrastructure” that require additional investment protection. This list, provided in an Appendix to the new regulations, includes a range of technology and assets—from producers of certain steel alloys to industrial control systems used by interstate oil pipelines with specified diameters. However, only U.S. businesses that perform the specific functions matched to each particular type of infrastructure are TID U.S. businesses. For example, companies providing physical or cyber security to a crude oil storage facility would be TID U.S. businesses, but those that provide fencing around the facility or commercially available off-the-shelf cyber security software to the facility are not. The new proposed regulations also provide specific definitions for the listed “covered investment critical infrastructure” functions. Definition of “Sensitive Personal Data.” CFIUS may review transactions related to U.S. businesses that maintain or collect sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security. “Sensitive personal data” is defined to include ten categories of data maintained or collected by U.S. businesses that (i) target or tailor products or services to sensitive populations, including U.S. military members and employees of federal agencies involved in national security, (ii) collect or maintain such data on at least one million individuals, or (iii) have a demonstrated business objective to maintain or collect such data on greater than one million individuals and such data is an integrated part of the U.S. business’s primary products or services. The categories of data include types of financial, geolocation, and health data, among others. Genetic information is also included in the definition regardless of whether it meets (i), (ii), or (iii). Excepted Investors from Excepted Foreign States. Under the new regulations, certain foreign investors with ties to “excepted foreign states” will receive preferential treatment with respect to the review of covered investments. The proposed regulations create an exception from covered investments (but not transactions that could result in control) for investors based on their ties to certain countries identified as “excepted foreign states,” and their compliance with certain laws, orders, and regulations (including U.S. sanctions and export controls). An investor’s nationality is not dispositive—the proposed regulations identify criteria that a foreign person must meet in order to qualify for excepted investor status. Among these, investors cannot qualify for and may lose their excepted status if they are parties to settlement agreements with OFAC or BIS, or are debarred by the Department of State, for sanctions or export control violations. This will have a significant impact on foreign companies who run afoul of U.S. sanctions and export control regulations—the potential loss of this status for respondents might have the unintended effect of deterring disclosures to OFAC and BIS by those concerned about the loss of excepted investor status. A list of factors will be posted on the Department of the Treasury’s website outlining what the Committee will consider when making a determination on whether certain investors from a foreign state will be excepted from CFIUS scrutiny. Such factors will include whether the state has established and is effectively utilizing a robust process to assess foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security. The proposed regulations indicate that excepted states will be identified by the CFIUS Chairperson with the agreement of two-thirds of the voting members of the Committee, beginning two years after the effective date of the final rule (most likely February 2022). At the outset, the foreign state exception will likely apply to allies with whom the United States shares intelligence data under the multilateral UKUSA Agreement—Australia, Canada, New Zealand and the United Kingdom. Mandatory Filing Requirement. The proposed regulations implement FIRRMA’s requirement for mandatory declarations for certain transactions where a foreign government has a substantial interest, in addition to the mandatory filing requirement for certain investments in U.S. critical technology companies under the pilot program. The submission of a declaration is not required with respect to investments by qualified investment funds.Notably, a majority of the declarations filed under the pilot program have been pushed into the standard review process, meaning that the streamlined “light” filing actually resulted in a longer review process for the parties involved. Anecdotal evidence suggests that fewer than 10 percent of cases filed under the pilot program have been decided on the basis of the short-form declaration alone, despite a relatively low volume of filings. Numerous transactions have required the submission of the full notice, and it has been difficult for the intelligence community to complete their full assessment within the allocated 30 days. Real Estate Transactions FIRRMA expanded the scope of transactions subject to CFIUS review to include the purchase or lease by a foreign person of real estate that “is, located within, or will function as part of, an air or maritime port…”; “is in close proximity to a United States military installation or another facility or property of the United States Government that is sensitive for reasons relating to national security;” “could reasonably provide the foreign person the ability to collect intelligence on activities being conducted at such an installation, facility, or property; or;” “could otherwise expose national security activities at such an installation, facility, or property to the risk of foreign surveillance.” Although FIRRMA sought to codify the Committee’s standard practice of examining such risks, it punted on the task of defining such terms. As a result, the proposed regulations resolve a number of uncertainties in FIRRMA with respect to how national security risks associated with real estate transactions will be ascertained. Property Rights that Trigger CFIUS Review. The proposed regulations clarify that—subject to certain exceptions for single housing units and real estate in urbanized areas—real estate transactions subject to the Committee’s review include the purchase or lease by, or a concession to, a foreign person of certain real estate in the United States that affords the foreign person three or more of the following property rights: to physically access; to exclude; to improve or develop; or to affix structures or objects. Covered Real Estate. Coverage is focused on transactions in and/or around specific airports, maritime ports, and military installations. The relevant military installations are listed by name and location in an appendix to the proposed regulations. The relevant airports and maritime ports are on lists published by the Department of Transportation. Notably, such real estate will include properties located within “close proximity” of any military installation identified in Appendix A, parts 1 and 2, “extended range” of any military installation identified in part 2, and any county or geographic area identified in connection with a military installation set forth in part 3 of Appendix A. Definition of “Close Proximity” and “Extended Range.” The proposed rule defines close proximity as “the area measured outward from the boundary of the relevant installation or other facility or property.” The close proximity definition applies with respect to most of the military installations described in the proposed rule and in particular, those identified in the list in parts 1 and 2 of Appendix A. “Extended range” is defined as “the area that extends 99 miles outward from the outer boundary of close proximity” but, where applicable, “no more than 12 nautical miles seaward from the coastline of the United States.” The extended range definition applies with respect to military installations described in part 2 of Appendix A. Exceptions for Certain Investors and Foreign States. The proposed rule sets forth a narrow definition of excepted real estate investor in the interest of protecting national security, in light of increasingly complex ownership structures, and to prevent foreign persons from circumventing CFIUS’s jurisdiction. Thus, the criteria specified in § 802.216 require that a foreign person have a substantial connection (e.g., nationality of ultimate beneficial owners and place of incorporation) to one or more particular foreign states in order to be deemed an excepted real estate investor. Note that foreign persons who have violated, or whose parents or subsidiaries have violated, certain U.S. laws will lose their excepted investor status under these provisions. Urban Cluster Exception. FIRRMA requires that real estate in “urbanized areas,” as defined by the Census Bureau in the most recent U.S. census, be excluded from CFIUS’s real estate jurisdiction except as otherwise prescribed by the Committee in regulations in consultation with the Secretary of Defense. The urbanized area exclusion applies to covered real estate everywhere except where it is in “close proximity” to a military installation or another sensitive facility or property of the U.S. Government as listed in appendix A, or is, is within, or will function as part of, an airport or maritime port. Intersection of Real Estate and Other Covered Transactions or Investments. The proposed regulations clarify that real estate transactions that are also subject to CFIUS’s existing and proposed regulations regarding control transactions and non-controlling investments involving U.S. businesses should be analyzed under those regulations. No Mandatory Filing Requirement. The transactions described in the proposed rule on real estate are not subject to a mandatory declaration requirement. As a general matter, parties to a covered real estate transaction will decide whether to file a notice voluntarily or submit a declaration to CFIUS. CFIUS Filings Voluntary Short Form Declarations as Alternative to Notice. The proposed regulations provide a short-form declaration as an alternative to the Committee’s traditional voluntary notice. To date, declarations have only been available under the pilot program. Declarations will allow parties to submit basic information regarding a transaction that should generally not exceed five pages in length. The Department of the Treasury will accept declarations submitted by parties using a standard template form which will be available on the Department of the Treasury’s website by the time the final regulations become effective. The Committee will have 30 days to assess a covered transaction that is the subject of a declaration (as opposed to the 45-day initial review period available for notices). No Fees to Date. The Department of the Treasury will publish separate proposed regulations regarding fees at a later date. 5 p.m. Eastern Deadline.  The new regulations impose a 5 p.m. EST filing deadline—a seemingly small point that could have a substantial impact in a cross-border deal involving players in multiple time zones. Regulatory Framework The proposed regulations would replace the current regulations found at part 800 of title 31 of the Code of Federal Regulations (31 C.F.R. part 800) and implement the changes that FIRRMA made to CFIUS’s jurisdiction and process with respect to transactions that could result in foreign control of any U.S. business, as well as certain non-controlling “other investments” that afford a foreign person certain access, rights, or involvement in certain types of U.S. businesses. These proposed regulations would establish a new part 802 of title 31 of the C.F.R. and implement the authority FIRRMA provided to CFIUS to review the purchase or lease by, or concession to, a foreign person of certain real estate in the United States. The proposed regulations do not at this time modify the regulations currently at 31 C.F.R. part 801, which set forth the scope of, and procedures for, a pilot program to review certain transactions involving foreign persons and critical technologies. CFIUS continues to evaluate the pilot program. The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Jose Fernandez, Adam M. Smith, Stephanie Connor, Chris Timura and R.L. Pratt. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s International Trade practice group: United States: Judith Alison Lee – Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk – Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) Marcellus A. McRae – Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura – Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair – Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown – Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole – Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor – Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Henry C. Phillips – Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt – Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Audi K. Syarief – Washington, D.C. (+1 202-955-8266, asyarief@gibsondunn.com) Scott R. Toussaint – Washington, D.C. (+1 202-887-3588, stoussaint@gibsondunn.com) Europe: Peter Alexiadis – Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Nicolas Autet – Paris (+33 1 56 43 13 00, nautet@gibsondunn.com) Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris – London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Sacha Harber-Kelly – London (+44 20 7071 4205, sharber-kelly@gibsondunn.com) Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Steve Melrose – London (+44 (0)20 7071 4219, smelrose@gibsondunn.com) Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Richard W. Roeder – Munich (+49 89 189 33-160, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

September 16, 2019 |
Financial Times Recognizes Gibson Dunn at the European Innovative Lawyer Awards 2019

The Financial Times named Gibson Dunn a standout firm at the European Innovative Lawyer Awards 2019. The firm was recognised in the Innovation in the Rule of Law and Access to Justice category for London associate Ryan Whelan’s work leading the legal and political campaign in the UK against “upskirting.” The awards were presented on September 12, 2019. Gibson Dunn actively encourages robust participation in pro bono matters.  We believe that lawyers have a special ability and duty to help ensure meaningful access to the justice system for everyone.  We are dedicated to the idea that the most vulnerable in our society receive a fair opportunity to receive legal representation in times of need. Whether protecting constitutional rights, working on behalf of the LGBTQ community, spearheading anti-human trafficking efforts, battling slumlords, fighting on behalf of domestic violence victims, advocating on behalf of veterans, or engaging in extensive efforts on behalf of the immigrant community, our lawyers have provided access to justice for those who could not otherwise afford it. The uniting force behind our pro bono work has been – and continues to be – a shared commitment to protecting the Constitution, upholding the rule of law, and providing access to justice for all.

August 22, 2019 |
The Singapore Convention on Mediation and the Path Ahead

Click for PDF On August 7, 2019, forty-six State Parties, including the United States, China, India, and South Korea,[1] signed the United Nations Convention on International Settlement Agreements Resulting from Mediation, also known as the “Singapore Convention on Mediation.”[2] The Convention aims to promote the use of mediation to resolve cross-border commercial disputes by enhancing the enforceability of international mediated settlement agreements. Mediation can be an effective means for disputing parties to resolve their dispute efficiently and creatively. It seeks to achieve a practical outcome based on the disputing parties’ underlying motivations. Historically, there has been one significant barrier to settling international disputes through mediation: if a party to a mediated settlement agreement defaults on its obligations, the non-defaulting party must turn to litigation, arbitration, or any other method contemplated by the settlement agreement to enforce the agreement like it would any other contractual obligation. This can be costly and time-intensive, particularly if enforcement requires cross-border proceedings or the defaulting party has acted to obstruct the enforcement process. For example, a settlement agreement may require litigation in a particular jurisdiction, but the defaulting party may have transferred its assets to another jurisdiction after signing the settlement. In this situation, the non-defaulting party will need to pursue litigation in multiple jurisdictions. The Convention aims to resolve issues with cross-border enforcement by making mediated settlement agreements directly enforceable by the courts of all State Parties to the Convention.[3] Specifically, the Convention allows parties to the settlement agreement to invoke those agreements before the courts of State Parties to establish that the matter has already been resolved via mediation.[4] Once a court in a State Party is presented with a request, it must “act expeditiously” to enforce the settlement agreement.[5] Settlement Agreements Covered by the Singapore Convention on Mediation The Convention applies to any settlement agreement that: (i) resulted from mediation;[6] (ii) is related to a “commercial” dispute;[7] (iii) is in writing;[8] and (iv) is “international” in character. In order for the settlement agreement to be “international,” at least two parties to the settlement agreement must have their places of business in different countries, or the State Party with which the settlement agreement is most closely connected, or in which it must be performed, must be different from the parties’ places of business.[9] Notably, the parties to the settlement agreement do not need to be nationals of, or have their places of business in, the State Parties to the Convention. The Convention does not apply if a settlement agreement (i) has been concluded or approved in the course of a court proceeding and is enforceable as a judgment in that State; or (ii) is enforceable as an arbitral award.[10] State Parties may also restrict the Convention’s applicability by entering two types of reservations. First, a State Party may exclude application to settlement agreements to which the State Party or its governmental agencies are party.[11] Second, a State Party may restrict application of the Convention to settlement agreements only to the extent parties have expressly agreed to apply it.[12] Thus, when negotiating a mediated settlement agreement, it may be prudent to expressly agree to the Convention’s application.[13] Enforcement of Settlement Agreements under the Singapore Convention on Mediation In order to enforce a settlement agreement under the Convention, a party must provide to the court with jurisdiction the signed settlement agreement and evidence that the settlement agreement resulted from mediation.[14] Such evidence could include the mediator’s signature on the agreement or a document signed by the mediator confirming there was a mediation.[15] State Parties to the Convention may refuse to enforce mediated settlement agreements on the following limited, prescribed grounds: (i) a party to the agreement was under some incapacity; (ii) the agreement is null and void, inoperative or incapable of being performed under the law that governs it; (iii) the agreement is not binding or is not final; (iv) the agreement has been subsequently modified; (v) the obligations under the agreement have been performed, or are not clear or comprehensible; (vi) granting relief would be contrary to the terms of the settlement agreement; (vii) there was a serious breach by the mediator of standards applicable to the mediator or the mediation without which breach the party resisting enforcement would not have entered into the settlement agreement; (viii) the mediator failed to disclose to the parties circumstances that raise justifiable doubts as to the mediator’s impartiality or independence, and this had a material impact or unduly influenced one of the parties to enter into the settlement agreement; (ix) granting relief would be contrary to the public policy of the State Party; or (x) the subject matter of the dispute is not capable of settlement by mediation under the law of the State Party.[16] In practice, parties objecting to the enforcement of a settlement agreement may seek to interpret these grounds broadly. For example, the Convention does not define what qualifies as a “serious breach” of standards applicable to the mediator or mediation.[17] However, these grounds are similar to those in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”),[18] which seek to preserve procedural propriety and prevent abuse. Courts have generally construed the New York Convention grounds for challenging arbitral awards narrowly, and we would expect them to take a similar approach with respect to settlement agreements subject to scrutiny under the Singapore Convention on Mediation.[19] Current Status of the Singapore Convention on Mediation The Convention will enter into force six months after three signatories deposit instruments of ratification with the United Nations.[20] This will likely be achieved relatively soon given that forty-six countries have already signed the Convention. Its terms will then apply to qualifying settlement agreements concluded after its entry into force in the State Party where enforcement is sought.[21] A United Nations Commission on International Trade Law (“UNCITRAL”) working group has also issued a corresponding Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation.[22] The Model Law is intended to assist State Parties with legislation to implement the Convention, much like UNCITRAL’s Model Law on International Commercial Arbitration aimed to bolster the implementation of the New York Convention. Implications for Cross-Border Dispute Resolution Mediation is generally faster and less expensive than other forms of dispute resolution. It also tends to preserve commercial relationships to a greater degree than other forms of dispute resolution where there are clear winners and losers. Proponents of the Singapore Convention on Mediation hope that, by offering increased certainty with respect to enforcement of mediated settlement agreements, the Convention will provide the same boost to mediation that the New York Convention provided to arbitration. As parties gain confidence in the increased enforceability of mediated settlement agreements as a result of the Singapore Convention on Mediation, they should consider mediation as an alternative or supplement to other forms of dispute resolution. And mediation can be used as an effective tool at any stage of a dispute. For example, mediation may be appropriate for parties in bifurcated proceedings after a merits award is issued but before the remedies have been determined. In this context, mediation would offer the parties a mechanism for agreeing upon a remedy that is acceptable to all involved. In short, the Singapore Convention on Mediation gives companies an additional reason to consider the role of mediation in an overall dispute resolution strategy. And in the event of a successful mediation, companies must structure their mediated settlement agreements to take full advantage of the Convention. * * * Gibson Dunn lawyers have extensive experience advising clients on international dispute resolution, including international mediation processes. If you have any questions about how your company is impacted by or could take advantage of the Singapore Convention on Mediation, we would be pleased to assist you. ______________________    [1]   The complete list of signatories is available here: https://treaties.un.org/Pages/showDetails.aspx?objid=080000028054826c&clang=_en. It includes Afghanistan, Belarus, Benin, Brunei, Chile, China, Colombia, Congo, Democratic Republic of Congo, Eswatini, Fiji, Georgia, Grenada, Haiti, Honduras, India, Iran, Israel, Jamaica, Jordan, Kazakhstan, Laos, Malaysia, Maldives, Mauritius, Montenegro, Nigeria, North Macedonia, Palau, Paraguay, Philippines, Qatar, Republic of Korea, Samoa, Saudi Arabia, Serbia, Sierra Leone, Singapore, Sri Lanka, Timor-Leste, Turkey, Uganda, Ukraine, USA, Uruguay, and Venezuela.    [2]   The complete text of the Singapore Convention on Mediation is available here: https://uncitral.un.org/sites/uncitral.un.org/files/singapore_convention_eng.pdf.    [3]   See Singapore Convention on Mediation, Article 3(1).    [4]   See Singapore Convention on Mediation, Article 3(2).    [5]   See Singapore Convention on Mediation, Article 4(5).    [6]   Under the Convention, “mediation” is defined broadly to encompass any process “whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person or persons . . . lacking the authority to impose a solution upon the parties to the dispute.” Singapore Convention on Mediation, Article 2(3).    [7]   The Convention specifically excludes from its scope disputes arising from transactions entered into for “personal, family or household purposes,” or if the settlement agreements relate to “family, inheritance or employment law.” Singapore Convention on Mediation, Article 1(2).    [8]   A settlement agreement will be in writing under the Convention if “its content is recorded in any form,” including “electronic communication if the information contained therein is accessible so as to be useable for subsequent reference.” Singapore Convention on Mediation, Article 2(2).    [9]   See Singapore Convention on Mediation, Article 1(1). Under the Convention, “[i]f a party has more than one place of business, the relevant place of business is that which has the closest relationship to the dispute resolved by the settlement agreement, having regard to the circumstances known to, or contemplated by, the parties at the time of the conclusion of the settlement agreement.” Alternatively, “[i]f a party does not have a place of business, reference is to be made to the party’s habitual residence.” Singapore Convention on Mediation, Article 2(1). [10]   See Singapore Convention on Mediation, Article 1(3). [11]   See Singapore Convention on Mediation, Article 8(1)(a). [12]   See Singapore Convention on Mediation, Article 8(1)(b). [13]   The Convention also permits parties to opt-out by expressly stipulating this in their settlement agreement. See Singapore Convention on Mediation, Article 5(1)(d). [14]   See Singapore Convention on Mediation, Article 4(1). [15]   See Singapore Convention on Mediation, Article 4(1)(b). [16]   See Singapore Convention on Mediation, Article 5. [17]   Singapore Convention on Mediation, Article 5(1)(e). [18]   See New York Convention, Article 5. [19]   See Gary Born, International Arbitration: Cases and Materials 3427 (2d ed. 2015). [20]   See Singapore Convention on Mediation, Article 14(1). [21]   See Singapore Convention on Mediation, Article 9. [22]   Available here: https://undocs.org/en/A/RES/73/199. Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s International Arbitration practice group, or the following: Cyrus Benson – London (+44 (0) 20 7071 4239, cbenson@gibsondunn.com) Penny Madden – London (+44 (0) 20 7071 4226, pmadden@gibsondunn.com) Jeffrey Sullivan – London (+44 (0) 20 7071 4231, jeffrey.sullivan@gibsondunn.com) Rahim Moloo – New York (+1 212-351-2413, rmoloo@gibsondunn.com) Charline O. Yim – New York (+1 212-351-2316, cyim@gibsondunn.com) Zachary A. Kady – New York (+1 212-351-5305, zkady@gibsondunn.com) Marryum Kahloon – New York (+1 212-351-3867, mkahloon@gibsondunn.com) Ankita Ritwik – Washington, D.C. (+1 202-887-3715, aritwik@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

August 15, 2019 |
Gibson Dunn Lawyers Recognized in the Best Lawyers in America® 2020

The Best Lawyers in America® 2020 has recognized 158 Gibson Dunn attorneys in 54 practice areas. Additionally, 48 lawyers were recognized in Best Lawyers International in Belgium, Brazil, France, Germany, Singapore, United Arab Emirates and United Kingdom.

August 13, 2019 |
Getting the Deal Through: Appeals 2019

Washington, D.C. partner Mark Perry and Los Angeles partner Perlette Jura are the contributing editors of “Appeals 2019,” a publication examining Appellate law and procedure between jurisdictions around the globe, published by Getting the Deal Through in June 2019.  Perry and Jura are the authors of the “Global Overview” and the “United States” chapters of the book, and London partners Patrick Doris and Doug Watson and associate Daniel Barnett are the authors of the “United Kingdom” chapter.

August 7, 2019 |
New U.S. Sanctions Targeting Venezuelan Government

Click for PDF On August 5, 2019, the Trump administration imposed new sanctions on the Government of Venezuela by freezing the property and assets of the regime of Venezuelan President Nicolás Maduro as well as those who provide it with “material support.” Issued on the eve of a major international conference on the Venezuelan political crisis in Lima, Peru, the August 5 Executive Order was at first mistakenly characterized in some news reports as a complete “embargo” on Venezuela. In reality, this latest measure is more limited in scope, consisting of a set of sanctions against the Government of Venezuela—and not the country of Venezuela as a whole. Individuals and entities unaffiliated with the Government of Venezuela generally remain unsanctioned and transactions that have no nexus to the Venezuelan government generally remain unrestricted. In terms of its direct impact, the Executive Order’s reach is also blunted somewhat by the fact that Venezuela’s most economically significant actor, the state-owned oil company Petróleos de Venezuela, S.A. (“PdVSA”), was already sanctioned earlier this year, as were Venezuela’s central bank and several of the country’s larger state-affiliated financial institutions. What this latest measure does is fill in the gaps to cover all remaining elements of the Government of Venezuela. As with the previously-imposed sanctions, however, exceptions abound. On August 6, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued 13 new general licenses and amended 12 previous general licenses to authorize U.S. persons to continue engaging in a range of narrowly defined transactions involving Venezuela’s government. These exceptions are designed to mitigate the impact of U.S. sanctions on the Venezuelan opposition, civil society and multinational companies. In our assessment, the principal significance of the Government of Venezuela being designated lies in the fact that many companies, and financial institutions in particular, are now likely to become even more reluctant to engage in transactions with any nexus at all to the country. While U.S. sanctions against Caracas are still not nearly as broad as those targeting several other countries, we expect that—at least over the near term—many parties will apply to Venezuela-related transactions the same level of scrutiny and concern typically reserved for dealings with Cuba and other comprehensively sanctioned jurisdictions. In fact, the designation of the Government of Venezuela may turn out to be of limited practical significance since so many companies and financial institutions have already made the decision to withdraw from the country. Some companies that have previously received specific licenses from OFAC to undertake certain transactions involving Venezuela have decided not to request an extension when those specific licenses expired. Background As we previously reported, OFAC formally designated Venezuela’s state-owned oil company, PdVSA, to the Specially Designated Nationals and Blocked Persons (“SDN”) List on January 28, 2019, sending shockwaves through global markets. On April 17, 2019, OFAC designated Venezuela’s Central Bank, effectively cutting it off from the U.S. financial system. These designations represented a dramatic escalation of U.S. sanctions targeting Venezuela, which include restrictions on certain debt and equity of the Government of Venezuela; the country’s gold, oil and financial sectors; and those who engage in corrupt conduct involving the Venezuelan government. Key Points Not an Embargo. Although some initial media reports (incorrectly) characterized the new sanctions as a total “embargo” or “blockade” on Venezuela, the action was in reality more circumspect—amounting to an extension of existing U.S. sanctions to the remainder of Venezuela’s embattled government. OFAC quickly confirmed that U.S. persons may continue to transact with Venezuelan persons that are not affiliated with the Government of Venezuela and that are not otherwise subject to U.S. sanctions. See OFAC, Frequently Asked Question (“FAQ”) No. 680 (Aug. 6, 2019). That said, as a practical matter, the designation of the Government of Venezuela will likely cause risk-averse financial institutions and other key counterparties to become even more reluctant to engage in otherwise lawful transactions involving Venezuela. Sanctions for “Material Support.” The new Executive Order also explicitly provides for the possibility that non-U.S. persons may themselves be sanctioned if they are found to have “materially assisted, sponsored, or provided financial, material, or technological support for, or services to or in support of” the Government of Venezuela. Critically, Executive Order 13850—the authority pursuant to which PdVSA and its subsidiaries were sanctioned on January 28, 2019—already provided for the possibility that individuals and entities may be designated for providing material support to PdVSA and its subsidiaries, a reality which OFAC had underlined in a recent Frequently Asked Question. See Exec. Order 13850, 83 Fed. Reg. 55243 (Nov. 1, 2018); OFAC, FAQ No. 672 (June 6, 2019). In that sense, the new Executive Order simply extends the possibility of an individual or entity being designated for providing “material support” to transactions and activities involving all arms of the Venezuelan state. By suggesting that non-U.S. persons can be subject to sanctions, the United States is seeking to discourage companies from other countries—principally Russia and China—from propping up the Maduro regime. Indeed, the day after the Executive Order was issued, White House National Adviser John Bolton in a speech in Lima, Peru raised the possibility of sanctioning Russian and Chinese individuals and entities that help the Maduro regime maintain its grip on power. Secondary Sanctions. Also, despite what some of the media reported, this new Executive Order does not provide for “secondary sanctions” (of the type seen in Iran, North Korea and Russia). Rather, the Executive Order merely underlines that parties can be designated on a material support basis if they provide support to any person or entity on the SDN List. As noted, that was already the case. Moreover, even though the entire Government of Venezuela is now blocked under the Executive Order, not all components of the Venezuelan government appear by name on the SDN List. Wind-down Period Until September 4, 2019. A new General License 28 provides a wind-down period before elements of these new sanctions take effect. The authorization provided in this license permits U.S. persons to continue engaging, until September 4, 2019, in activities that are “ordinarily incident and necessary to the wind down of operations, contracts, or other agreements involving the Government of Venezuela,” provided that those agreements were in effect before August 5, 2019. As in other recent instances in which OFAC has provided a wind-down period along with new designations, the precise scope of activities permitted by this license is uncertain. However, it likely does not authorize U.S. persons to increase their engagement with the Government of Venezuela. Instead, this general license effectively establishes a grace period within which U.S. persons may conclude, terminate or withdraw from current arrangements with the Venezuelan government before facing sanctions exposure. Exemptions for Venezuelan Opposition. A new General License 31 permits U.S. persons to transact with (i) the opposition-controlled Venezuelan National Assembly and its members, staff, and appointees or designees; (ii) Venezuela’s Interim President, Juan Guaidó, and his appointees, designees, ambassadors and staff; and (iii) persons that Guaidó has appointed to the board of directors or as executive officers of a Venezuelan government entity. Standard Exemptions. Most of the newly-issued general licenses permit U.S. persons to engage in the same type of activities that are commonly allowed even with respect to jurisdictions that are subject to comprehensive sanctions (e.g., Cuba, Iran, North Korea, Syria and the Crimea region). On August 6, 2019, OFAC issued numerous general licenses that make certain transactions a bit easier to undertake (or at least provide a greater degree of regulatory certainty with respect to those transactions). OFAC issued general licenses covering, among other things, transactions that involve the Venezuelan government and that are associated with telecommunications/mail; technology allowing internet communication; medical services; registration and defense of intellectual property; support for non-governmental organizations; transactions related to port and airport operations; overflight payments; and personal maintenance of U.S. persons inside Venezuela. Each of these licenses—although limited by their own terms—provides clear avenues to engage in specific transactions associated with that particular issue. For example, U.S. persons are permitted to continue engaging in activities ordinarily incident and necessary to the operation or use of ports or airports in Venezuela under new General License 30. General Licenses The various OFAC general licenses implicating Venezuela that were in effect before the latest Executive Order was issued on August 5 generally still remain in effect today. See OFAC, FAQ No. 681 (Aug. 6, 2019). The amended licenses extend existing authorizations to cover transactions that would otherwise have been restricted by the new Executive Order. These amended authorizations include the following: General License 2A authorizes transactions involving new debt or new equity issued by, or securities sold by, CITGO Holding, Inc. or its subsidiaries, provided that no other Government of Venezuela entity is involved in the transaction. The license was expanded to cover transactions involving PDV Holding, Inc., as well. General License 3F exempts certain bonds, listed in an annex, from the prohibition on transactions involving Venezuelan bonds or the new, broader restrictions on dealing with the Government of Venezuela. General License 4C authorizes certain transactions involving the export or reexport to Venezuela of agricultural commodities (including food), medicine or medical devices. General License 7C permits U.S. persons to engage in certain transactions with PDV Holding, Inc., CITGO Holding, Inc., or their subsidiaries. General License 8C authorizes certain named energy and oilfield services companies to engage in certain transactions with or involving the Government of Venezuela until October 25, 2019. General License 9E authorizes U.S. persons to continue engaging in any dealings in debt (including certain listed bonds, promissory notes and other receivables) in which PdVSA owns a 50 percent or greater interest, provided that the debt was issued prior to August 25, 2017 and that any divestment or transfer of any U.S. person holdings are to a non-U.S. person. General License 10A permits U.S. persons in Venezuela to purchase refined petroleum products for personal, commercial or humanitarian uses from PdVSA or from any entity in which PdVSA owns a 50 percent or greater interest and now to engage with the Government of Venezuela in transactions necessary for the purchase of such refined petroleum products. General License 13C continues to authorize U.S. persons to engage in transactions involving Nynas AB or its subsidiaries that would otherwise be prohibited (except payments to or for the benefit of a blocked person, which must be placed into a blocked account). General License 15B continues to authorize certain listed banks or payment service providers to engage in transactions involving listed Venezuelan banks until March 22, 2020. General License 16B continues to authorize transactions ordinarily incident and necessary to maintaining, operating or closing accounts of U.S. persons in certain Venezuelan banks. General License 18A continues to authorize certain transactions involving Integración Administradora de Fondos de Ahorro Previsional, S.A. General License 20A authorizes transactions and activities involving the Government of Venezuela that are for the official business of an expanded list of international organizations. Taken together, these new and amended licenses provide several clear avenues for continued engagement in specific transactions with the Government of Venezuela, further contradicting early reports of the comprehensiveness of these new sanctions. However, relying on these authorizations requires careful consideration of their many limitations and conditions, some of which remain open to interpretation. As a result, these authorizations may ultimately do little to persuade companies that are already reluctant to engage in any business with Venezuela to take the risk of engaging even in these authorized transactions. The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam M. Smith, Jose Fernandez, Chris Timura, Stephanie Connor, R.L. Pratt and Scott Toussaint. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s International Trade practice group: United States: Judith Alison Lee – Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk – Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) Marcellus A. McRae – Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura – Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair – Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown – Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole – Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor – Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Henry C. Phillips – Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt – Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Audi K. Syarief – Washington, D.C. (+1 202-955-8266, asyarief@gibsondunn.com) Scott R. Toussaint – Washington, D.C. (+1 202-887-3588, stoussaint@gibsondunn.com) Europe: Peter Alexiadis – Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Nicolas Autet – Paris (+33 1 56 43 13 00, nautet@gibsondunn.com) Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris – London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Sacha Harber-Kelly – London (+44 20 7071 4205, sharber-kelly@gibsondunn.com) Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Steve Melrose – London (+44 (0)20 7071 4219, smelrose@gibsondunn.com) Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Richard W. Roeder – Munich (+49 89 189 33-160, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

July 26, 2019 |
New UK Prime Minister – what has happened?

Click for PDF Boris Johnson has won the Conservative leadership race and is the new Prime Minister of the UK. Having been supported by a majority of Conservative MPs, this week the former mayor of London won a 66% share (92,153 votes) in the ballot of Conservative party members. Although there is some criticism of the fact that the new Prime Minister has been elected by such a narrow constituency, it is the case that most political parties in the UK now select their leaders by way of a members ballot. As things stand, the UK is due to leave the European Union (EU) at 23:00 GMT on 31 October 2019. Boris Johnson’s new Cabinet, and the 17 related departures, has set a new tone of determination to leave the EU by that date with or without a deal – “no ifs or buts”. Although only 12 of the 31 members of the new Cabinet originally voted to leave the EU, these “Brexiteer” MPs now dominate the senior Cabinet positions. The newly elected President of the European Commission, Ursula von der Leyen, has however indicated she is willing to support another extension to Brexit talks. In Parliament the Conservatives govern in alliance with the Northern Irish DUP and can only stay in power with the support of the House of Commons. Following defections earlier in the year and the recent suspension of a Conservative MP facing criminal charges, the Government now has an overall working majority of only two MPs (and if, as expected, the Conservatives lose a by-election on 1 August, the Government’s working majority will fall to one). A number of the members of Prime Minister May’s Government who resigned before Boris Johnson took office have made it clear that they will do everything they can to prevent the UK leaving without a deal including voting against the Government. There is therefore a heightened prospect of a general election. This theory is supported by the appointment as Special Adviser to the Prime Minister of political strategist Dominic Cummings who was the chief architect of the campaign to leave the EU in 2016. There has been some debate about whether the new Prime Minister would prorogue Parliament (effectively suspending it) to prevent it stopping a no deal Brexit. That would undoubtedly trigger a constitutional crisis but, despite the rhetoric, it feels like an unlikely outcome. Indeed Parliament recently passed a vote to block that happening. It is difficult to tell where the mood of the House of Commons is today compared to earlier in the year when Prime Minister May’s deal was voted down three times. Since then both the Conservative and Labour parties suffered significant losses in the EU election in May. The new Brexit Party which campaigned to leave made significant gains, as did the Liberal Democrats who have a clear policy to remain in the EU. The opinion polls suggest that, if an election was called today, no party would gain overall control of the House of Commons. It is just possible, however, that some MPs on both sides of the House who previously voted against the May deal would now support something similar, particularly to avoid a no-deal exit from the EU. It may be the case that Boris Johnson, who led the campaign to leave the EU, is the last chance those supporting Brexit have to get Brexit through Parliament. If he fails then either a second referendum or a general election will probably follow. It is not clear what the result of a second referendum would be but it is likely that Labour, the Liberal Democrats and the SNP would all campaign to remain. The EU has consistently said that it will not reopen Prime Minister May’s Withdrawal Agreement although the non-binding political declaration is open to negotiation. The so-called “Irish backstop” remains the most contentious issue. The backstop is intended to guarantee no hard border between Ireland and Northern Ireland but Boris Johnson is concerned it could “trap” the UK in a customs union with the EU. Boris Johnson claims that technology and “trusted trader schemes” means that checks can be made without the need for a hard border. Others, including the EU, remain to be convinced. Parliament has now gone into recess until 3 September 2019 and then, mid-September, there will be another Parliamentary break for the two week party conference season. The Conservative Party Conference on 29 September – a month before the UK’s scheduled exit from the EU – will be a key political moment for the new Prime Minister to report back to the party supporters who elected him. Finally, it is not clear what “no deal” really means. Even if the UK leaves without adopting the current Withdrawal Agreement, it is likely that a series of “mini deals” would be put in place to cover security, air traffic control, etc. A new trading agreement would then still need to be negotiated to establish the ongoing EU-UK relationship. And the issue of the Northern Irish border will still need to be resolved. This client alert was prepared by Charlie Geffen, Ali Nikpay and Anne MacPherson in London. We have a working group in London (led by Patrick Doris, Charlie Geffen, Ali Nikpay and Selina Sagayam) addressing Brexit related issues.  Please feel free to contact any member of the working group or any of the other lawyers mentioned below. Ali Nikpay – Antitrust ANikpay@gibsondunn.com Tel: 020 7071 4273 Charlie Geffen – Corporate CGeffen@gibsondunn.com Tel: 020 7071 4225 Sandy Bhogal – Tax SBhogal@gibsondunn.com Tel: 020 7071 4266 Philip Rocher – Litigation PRocher@gibsondunn.com Tel: 020 7071 4202 Jeffrey M. Trinklein – Tax JTrinklein@gibsondunn.com Tel: 020 7071 4224 Patrick Doris – Litigation; Data Protection PDoris@gibsondunn.com Tel:  020 7071 4276 Alan Samson – Real Estate ASamson@gibsondunn.com Tel:  020 7071 4222 Penny Madden QC – Arbitration PMadden@gibsondunn.com Tel:  020 7071 4226 Selina Sagayam – Corporate SSagayam@gibsondunn.com Tel:  020 7071 4263 Thomas M. Budd – Finance TBudd@gibsondunn.com Tel:  020 7071 4234 James A. Cox – Employment; Data Protection JCox@gibsondunn.com Tel: 020 7071 4250 Gregory A. Campbell – Restructuring GCampbell@gibsondunn.com Tel:  020 7071 4236 © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

July 24, 2019 |
Digital Services Taxes May Violate Investment Treaty Protections

Click for PDF Recent tax measures adopted, or contemplated, by States which target foreign investors may violate investment treaty obligations, including national treatment, and fair and equitable treatment obligations. These investment treaties give foreign investors the right to pursue claims directly against the State for such breaches. The most recent example is France’s Digital Services Tax (“DST”).[1] The French Senate passed a bill adopting the DST on July 11, 2019, and the President of France, Emmanuel Macron, is expected to sign the bill into law in the coming days. The law, once it comes into force, will impose a 3% tax on total annual revenues generated by certain companies that provide digital services to, or targeted at, users in France. Taxable digital services include: (i) making available a digital interface through which users can come into contact with other users, or purchase goods and services; and (ii) services provided to advertisers who are able to place targeted advertisements to French users on the digital interfaces. The DST will be imposed on companies that: (i) earn an annual global revenue of €750 million or more from taxable digital services; and (ii) earn an annual revenue from French users of €25 million or more from taxable digital services. The tax will be applied retrospectively, with tax liability calculations beginning on January 1, 2019. According to preliminary reports, the DST will impact approximately 30 companies, many of which are based in jurisdictions that are entitled to investment treaty protection.[2] These reports suggest that the DST will predominately impact companies headquartered outside of France in countries including the United States, China, Japan, and Germany. In response to the DST, on July 10, 2019, the United States Trade Representative (“USTR”) announced the initiation of an investigation under Section 301 of the Trade Act of 1974. The USTR observed that, “[t]he structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain U.S.-based technology companies.”[3] Other States have adopted, or are considering the adoption of, similar taxation regimes. The General Court of the European Union recently upheld the validity of a similar tax placed by Hungary on advertising revenue, finding that Hungary’s tax was not illegal “State aid” pursuant to Article 107(1) of the Treaty on the Functioning of the European Union (“TFEU”).[4] However, the prohibition in Article 107(1) of the TFEU is distinct from the obligations Hungary owes to foreign investors pursuant to its investment treaties. Some of these obligations are discussed in further detail below in the context of France’s DST, but equally exist in Hungary’s investment treaties. France’s DST, and other similar taxes, may violate investment treaty protections The DST, and other similar taxation regimes, may violate investment treaty protections owed by these States to certain foreign investors who invest in-country, where there is an applicable investment treaty. For example, with respect to France, there are over two dozen such treaties, including treaties with China, Singapore, Mexico, and Russia. In addition, through its membership in the European Union, France is party to trade agreements with countries including Japan and South Korea. The right to national treatment Investment treaties commonly include a protection that requires the host State to treat investments of foreign investors no less favorably than it treats domestic investors in “like circumstances.”[5] Arbitral tribunals considering the meaning of “like circumstances” have found that this has “a wide connotation” that requires an assessment of whether “a non-national investor complaining of less favourable treatment is in the same ‘sector’ as the national investor. . . . [this] includes the concepts of ‘economic sector’ and ‘business sector.’”[6] In the context of taxation that targets or has a disproportionate impact on foreign investors, arbitral tribunals have held, that where “the adverse effects of [a] tax were felt exclusively by [foreign] producers and suppliers . . . to the benefit of [national] producers” this is sufficient to establish that the treatment is less favorable and therefore a breach of the State’s treaty obligation.[7]  Arbitral tribunals have added that “[d]iscrimination does not cease to be discrimination, nor to attract the international liability stemming therefrom, because it is undertaken to achieve a laudable goal or because the achievement of that goal can be described as necessary.”[8] With respect to the DST, several French politicians, in advocating for the enactment of the DST, have stated publicly that the DST is designed to target large foreign multinational companies.[9]  In addition, the DST has been structured in such a way that the adverse impact will be felt almost exclusively by foreign investors. As a consequence, it is questionable whether France is complying with its obligation to provide national treatment under various investment treaties to which it is Party. The right to fair and equitable treatment Most investment treaties also include a protection granting investors the right to fair and equitable treatment by host States. This includes a right to “protection of [a foreign investor’s] legitimate expectations, protection against arbitrary and discriminatory treatment, transparency and consistency.”[10] A significant number of investment treaties require the host State to treat the investments of a foreign investor fairly and equitably.[11] Arbitral tribunals have held that this obligation prohibits host States from exercising legislative power in an “arbitrary or discriminatory manner” or from “disguis[ing] measures targeted against a protected investor under the cloak of general legislation.”[12] Given the targeted purpose and impact of taxation regimes like the DST, foreign investors who are impacted by such measures may arguably have a claim that host State has breached its fair and equitable treatment obligation by discriminating against foreign investors. * * * France’s new DST demonstrates just one example of where investment treaty protections might be invoked by foreign investors to pursue arbitration directly against the state in which they have invested. Investment treaties can offer important protections to foreign investors operating in markets that present significant political and legal risks. Gibson Dunn lawyers have extensive experience advising clients on structuring their investments to take advantage of investment treaties or in disputes against States for breaches of investment treaties. If you have any questions about how your company can take advantage of such protections, or if you think your company has an investment treaty claim based on France’s DST or other similar tax measures, we would be pleased to assist you. _____________________________    [1]   See here.    [2]   See here.    [3]   See here.    [4]   Hungary v European Commission, ECLI:EU:T:2019:448, Judgment of the EU General Court (27 June 2019), here.    [5]   See, e.g., China-France BIT, Article 4 (“Sans préjudice de ses dispositions légales et réglementaires, chaque Partie contractante applique sur son territoire et dans sa zone maritime aux investisseurs de l’autre Partie, en ce qui concerne leurs investissements et activités lieés à ces investissements, un traitement non moins favorable que celui qui est accordé à ses investisseurs.”) (“Without prejudice to its legal and regulatory provisions, each Contracting Party shall apply in its territory and in its maritime area to investors of the other Party, in respect of their investments and activities related to such investments, treatment no less favorable than that which is granted to its investors.”) (unofficial English translation).    [6]   S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award, 13 November 2000, ¶ 250.    [7]   Corn Products International Inc. v. United Mexican States, ICSID Case No. ARB(AF)/04/1, Decision on Responsibility, 15 January 2008, ¶ 138; Occidental Exploration and Production Company v. Republic of Ecuador, LCIA Case No. UN3467, Final Award, 1 July 2004, ¶ 177.    [8]   Corn Products International Inc. v. United Mexican States, ICSID Case No. ARB(AF)/04/1, Decision on Responsibility, 15 January 2008, ¶ 142; Quiborax S.A. and Non Metallic Minerals S.A. v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Award, 16 September 2015, ¶ 253.    [9]   See here. [10]   Crystallex International Corporation v Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award, 4 April 2016, ¶ 543. [11]   See, e.g., Singapore-France BIT, Article 2 (“Les investissements des nationaux ou sociétés de chacune des Parties contractantes bénéficieront en tout temps d’un traitement juste et équitable et il leur sera accordé protection et sécurité sur le territoire de l’autre Partie.”) (“The investments of nationals or companies of either Contracting Party shall at all times be accorded fair and equitable treatment and shall be accorded protection and security in the territory of the other Party.”) (unofficial English translation). [12]   Rusoro Mining Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/12/5, Award, 22 August 2016, ¶ 525. Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s International Arbitration practice group, or the following: Cyrus Benson – London (+44 (0) 20 7071 4239, cbenson@gibsondunn.com) Penny Madden – London (+44 (0) 20 7071 4226, pmadden@gibsondunn.com) Jeffrey Sullivan – London (+44 (0) 20 7071 4231, jeffrey.sullivan@gibsondunn.com) Rahim Moloo – New York (+1 212-351-2413, rmoloo@gibsondunn.com) Eric Bouffard – Paris (+33 (0) 1 56 43 13 00, ebouffard@gibsondunn.com) Jérôme Delaurière – Paris (+33 (0) 1 56 43 13 00, jdelauriere@gibsondunn.com) Charline O. Yim – New York (+1 212-351-2316, cyim@gibsondunn.com) Marryum Kahloon – New York (+1 212-351-3867, mkahloon@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 19, 2019 |
The EU Introduces a New Sanctions Framework in Response to Cyber-Attack Threats

Click for PDF In a previous client alert, we highlighted a recent U.S. sanctions regime aimed at deterring threats of election interference[1], which further expanded the U.S. menu of cyber-related sanctions.[2]  Across the Atlantic, as a step forward that demonstrates its voiced determination to enhance the EU’s cyber defense capabilities[3], on May 17, 2019, the EU established a sanctions framework for targeted restrictive measures to deter and respond to cyber-attacks that constitute an external threat to the EU or its Member States.[4]  The new framework is expounded in two documents, Council Decision (CFSP) 2019/797 and Council Regulation 2019/796. The newly-introduced framework is significant for two reasons.  First, the framework enables the EU to implement unilateral cyber sanctions, a move that expands the EU’s sanctions toolkit beyond traditional areas of sanctions, such as sanctions imposed due to terrorism and international relations-based grounds.[5]  Second, it represents a major, concrete measure that arose out of the EU’s continued interest in developing an open and secured cyberspace and amid concerns for malicious use of information and communications technologies by both State and non-State actors.  From the alleged plot by Russia to hack the Organization for the Prevention of Chemical Weapons in the Hague in April last year[6] to the cyber-attack on the German Parliament early this year[7], European leaders have been very concerned about future cyber-attacks on EU Member States.  In particular, in light of the European Parliament election that took place on May 23-26, 2019, the framework equips the EU with a potent economic instrument to punish cyber-attacks more ably and directly on a unified front.[8] Modality for Establishing the List of Sanctioned Parties Under the new framework, persons, entities and bodies subject to sanctions will be listed in the Annex to the Council Decision (CFSP) 2019/797 (“Annex I”).  With a view to ensure greater consistency in the listing of sanctioned parties, the European Council has the sole authority to establish and amend Annex I as needed, and is to review Annex I “at regular intervals and at least every 12 months.”[9]  The Council will review its decision in light of observations or substantial new evidence presented to it. External Threats with a “Significant Effect” The framework applies to “cyber-attacks with significant effect, including attempted cyber-attacks with a potentially significant effect, which constitutes an external threat to the Union or its Member States.”[10]  To be external, it suffices, among other ways, that the attack originates from outside the Union, uses infrastructure outside the Union, or is with the support, at the direction of or under the control of a person outside the Union.[11]  The kinds of conduct considered as cyber-attacks include unauthorized access to and interference with IT systems, as well as data interference and interception.  The Council’s approach to assessing the “significant effect” is by and large result-oriented, focusing, inter alia, pursuant to Article 3 of the Council Regulation, on “(a) the scope, scale, impact or severity of disruption caused . . . (d) the amount of economic loss caused . . . (e) the economic benefit gained by the perpetrator [or]. . . (f) the amount or nature of data stolen or the scale of data breaches. . . .”[12] Expansive Reach of the Framework Under the framework, sanctioned persons and entities are those who are responsible for the cyber-attack, and those who attempted, or provided “financial, technical or material support” to, or otherwise involved in the cyber-attack (e.g. directing, encouraging, planning, and facilitating the attack).[13] It is also noteworthy that although the framework primarily targets attacks against Member States and the Union itself, sanctions measures under the framework can also be applied to cyber-attacks with a significant effect against “third States or international organisations,” if sanctions measures are deemed “necessary to achieve common foreign and security policy (CFSP) objectives.”[14]  As an initiative to deter cyber-attacks in general, the subjects of cyber-attacks covered under this framework are also expansive, ranging from critical infrastructure to the storage of classified information, as well as essential services necessary for the maintenance and operation of essential social and economic activities, and government functions, including elections.[15] Sanctions Measures under the Framework The primary restrictive measures under the framework are asset freeze and travel ban.  Generally, all funds and economic resources “belonging to, owned, held or controlled by” the sanctioned person or entity will be frozen.[16]  Furthermore, “no funds or economic resources shall be made available directly or indirectly to or for the benefit of” the sanctioned party.[17] In broad terms, these EU financial sanctions are similar to a sanctions attendant to designation  on the U.S. Specially Designated Nationals And Blocked Persons List. Comparison with the U.S. Sanctions Regime for Cyber Attacks In the U.S., besides the country-specific programs, the major source of authority for cyber-related sanctions is Executive Order 13694, titled “Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities” (“E.O. 13694”) signed into effect by President Barack Obama on April 1, 2015.[18]  The recently promulgated Executive Order 13848 on “Imposing Certain Sanctions in the Event of Foreign Interference in a United States Election” (“E.O. 13848”) by President Donald Trump adds a further emphasis on threats of election interference via cyber means.[19] In comparison, the latecomer EU sanctions framework is by and large similar both in terms of the conduct it seeks to deter and parties potentially subject to sanctions.  Like the U.S. sanctions program, the EU framework covers a wide range of significant interferences and expressly highlights interference with “public elections or the voting process” as one of the enumerated predicate cyber-attacks.[20]  Much like the U.S. program’s focus on “significant” “malicious cyber-enabled activities,” the focus of the EU framework on “willfully carried out” cyber-attacks “with significant effect” gives the European Council substantial flexibility and discretion in its determination of what arises to the level of a sanctionable conduct.[21]  In terms of parties covered, both E.O. 13694 (and subsequent E.O. 13848) and the EU framework sanction persons and entities who are responsible for the attack as well as those who are agents, or complicit by providing material assistance, in the commission of the cyber-attack. It is important to note that the EU framework expressly permits imposition of sanctions on parties whose conduct is against a “third [non-Member] States or international organizations”, insofar the EU satisfies itself that the sanctions are necessary to achieve CFSP objectives, namely the EU’s Union-level foreign policy objectives.[22]  In comparison, in the U.S. E.O. 13694, the possibility of imposing sanctions for cyber-attacks against a third party seems to be alluded to by the language “threat to the . . . foreign policy . . . of the United States.”[23]  Given the recentness of the framework, it is unclear as to the extent to which the EU would exercise its right under this provision, and no other countries have yet commented on this.  Nonetheless, it is encouraging that both regimes leave open the possibility of sanctions based on cyber-attacks targeting third states. Conclusion & Implications The new framework established by the European Council represents a significant  effort by  the EU to stiffen its response to cyber-attacks.  The framework has broadened EU sanctions both in substance and in scope.  To the extent that the EU framework is comparable to the current U.S. cyber-related sanctions program, the EU framework reflects greater synchronization between the EU and the U.S. on the sanctions front.  For the time being, no name has been added to Annex I yet.  However, as the list grows in the future, businesses should closely assess their existing business relationships with other companies and pay greater attention in their onboarding compliance due diligence efforts.  On the other hand, as the decision to list and delist a sanctioned party is reserved for the European Council, there is likely to be greater transparency and legal predictability for compliance purposes. ______________________ [1] See our client alert dated Sep. 25, 2018 entitled U.S. Authorizes Sanctions for Election Interference,  https://www.gibsondunn.com/us-authorizes-sanctions-for-election-interference/, for an analysis of E.O. 13848. [2] See Judith Lee, Cybersecurity Sanctions: A Powerful New Tool, LAW 360 (Apr. 02, 2015), https://www.gibsondunn.com/wp-content/uploads/documents/publications/Lee-Cybersecurity-Sanctions-A-Powerful-New-Tool-Law360.pdf, for an analysis by our Washington D.C. partner Judith Lee on the Obama-era executive order that forms the bulk of the current U.S. cyber-related sanctions program. [3] See Council Press Release 301/19, Declaration by the High Representative on behalf of the EU on respect for the rules-based order in cyberspace (Apr. 12, 2019), https://www.consilium.europa.eu/en/press/press-releases/2019/04/12/declaration-by-the-high-representative-on-behalf-of-the-eu-on-respect-for-the-rules-based-order-in-cyberspace/. [4] Council Press Release 367/19, Cyber-attacks: Council is now able to impose sanctions (May 17, 2019), https://www.consilium.europa.eu/en/press/press-releases/2019/05/17/cyber-attacks-council-is-now-able-to-impose-sanctions/. [5] See Erica Moret and Patryk Pawlak, European Union Institute for Security Studies, Brief, The EU Cyber Diplomacy Toolbox: towards a cyber sanctions regime?, p. 2 (Jul. 12, 2017), https://www.iss.europa.eu/content/eu-cyber-diplomacy-toolbox-towards-cyber-sanctions-regime. [6] Joe Barnes, UK Plays Pivotal Role In EU’s New Cyber-Attack Sections Regime – ‘This Is Decisive Action’, Express (May 17, 2019), https://www.express.co.uk/news/uk/1128512/UK-news-EU-cyber-attack-section-regime-European-Council-latest-update. [7] Thorsten Severin, Andrea Shalal, German Government under Cyber Attack, Shores Up Defenses, Reuters (Mar. 1, 2018), https://www.reuters.com/article/us-germany-cyber/german-government-under-cyber-attack-shores-up-defenses-idUSKCN1GD4C8. [8] See Natalia Drozdiak, EU Agrees Powers to Sanction, Freeze Assets Over Cyber-Attacks, Bloomberg (May 17, 2019), https://www.bloomberg.com/news/articles/2019-05-17/eu-agrees-powers-to-sanction-freeze-assets-over-cyber-attacks. [9] Council Regulation 2019/796 of May 17, 2019, concerning restrictive measures against cyber-attacks threatening the Union or its Member States, preamble, art. 13, O.J. L 129I , 17.5.2019, p. 1–12, http://data.europa.eu/eli/reg/2019/796/oj (hereinafter “Council Regulation 2019/796”). [10] Council Decision (CFSP) 2019/797 of 17 May 2019, concerning restrictive measures against cyber-attacks threatening the Union or its Member States, art. 1(1), O.J. L 129I , 17.5.2019, p. 13–19, http://data.europa.eu/eli/dec/2019/797/oj (hereinafter “Council Decision 2019/797”). [11] Id. art. 1(2). [12] Id. art. 3.  The same language is also reflected in Council Regulation 2019/796, art. 2. [13] Council Decision 2019/797, supra note 10, art. 4. [14] Council Regulation 2019/796, supra note 9, art. 1(6). [15] Council Decision 2019/797, supra note 10, art. 1(4). [16] Id. art. 5(1). [17] Id. art. 5(2). [18] See supra note 2 for an analysis of the Executive Order.  See also Exec. Order No. 13694, 80 Fed. Reg. 18,077 (Apr. 2, 2015), https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cyber_eo.pdf, subsequently amended by Executive Order 13757 of December 28, 2016. [19] See supra note 1.  See also Exec. Order No. 13848, 83 Fed. Reg. 46,843 (Sep. 12, 2018), https://www.federalregister.gov/documents/2018/09/14/2018-20203/imposing-certain-sanctions-in-the-event-of-foreign-interference-in-a-united-states-election. [20] Council Decision 2019/797, supra note 10, art. 1(4)(c). [21] See Judith Lee, supra note 2. [22] CFSP objectives, as the Council Decision notes, can be found in relevant provisions of Article 21 of the Treaty on European Union.  A relevant excerpt of article 21 of the Treaty on European Union: The Union shall define and pursue common policies and actions, and shall work for a high degree of cooperation in all fields of international relations, in order to: (a) safeguard its values, fundamental interests, security, independence and integrity; (b) consolidate and support democracy, the rule of law, human rights and the principles of international law; (c) preserve peace, prevent conflicts and strengthen international security, in accordance with the purposes and principles of the United Nations Charter, with the principles of the Helsinki Final Act and with the aims of the Charter of Paris, including those relating to external borders; (d) foster the sustainable economic, social and environmental development of developing countries, with the primary aim of eradicating poverty; (e) encourage the integration of all countries into the world economy, including through the progressive abolition of restrictions on international trade; (f) help develop international measures to preserve and improve the quality of the environment and the sustainable management of global natural resources, in order to ensure sustainable development; (g) assist populations, countries and regions confronting natural or man-made disasters; and (h) promote an international system based on stronger multilateral cooperation and good global governance. Consolidated Version Of The Treaty On European Union, art. 21, O.J. C 326, 26.10.2012, p. 13–390, available online at http://data.europa.eu/eli/treaty/teu_2012/oj. [23] Compare Exec. Order No. 13694, supra note 18, sec. 1(a)(ii)(A), with Council Decision 2019/797, supra note 10, art. 1(6). The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam Smith, Patrick Doris, Michael Walther, Nicolas Autet and Richard Roeder. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s International Trade or Privacy, Cybersecurity and Consumer Protection practice groups: United States: Judith Alison Lee – Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk – Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) Alexander H. Southwell – Co-Chair, Privacy, Cybersecurity & Consumer Protection Practice, New York (+1 212-351-3981, asouthwell@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) Marcellus A. McRae – Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura – Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair – Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown – Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole – Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor – Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Henry C. Phillips – Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt – Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Audi K. Syarief – Washington, D.C. (+1 202-955-8266, asyarief@gibsondunn.com) Scott R. Toussaint – Washington, D.C. (+1 202-887-3588, stoussaint@gibsondunn.com) Europe: Ahmed Baladi – Co-Chair, Privacy, Cybersecurity & Consumer Protection Practice, Paris (+33 (0)1 56 43 13 00, abaladi@gibsondunn.com) Peter Alexiadis – Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Nicolas Autet – Paris (+33 1 56 43 13 00, nautet@gibsondunn.com) Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris – London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Sacha Harber-Kelly – London (+44 20 7071 4205, sharber-kelly@gibsondunn.com) Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Steve Melrose – London (+44 (0)20 7071 4219, smelrose@gibsondunn.com) Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Richard W. Roeder – Munich (+49 89 189 33-160, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

May 20, 2019 |
Citing a National Emergency, the Trump Administration Moves to Secure U.S. Information and Communications Technology and Service Infrastructure

Click for PDF On Wednesday, May 15, 2019, the Trump Administration took two separate, but related moves toward securing the information and communications technology and services (ICT) infrastructure of the United States.[1]  The first was the issuance of an executive order (“ICT EO”), declaring a national emergency with respect to the ICT supply chain.  The second was the imposition by the Secretary of Commerce’s Bureau of Industry and Security (“BIS”) of new restrictions on the exports of technology, software, and hardware to Chinese multinational telecommunications equipment and consumer electronics manufacturer Huawei Technologies Co., Ltd. (“Huawei”) and its affiliates worldwide.  While the first action establishes only a general framework for implementing regulations designed to end what the EO calls “foreign adversary” involvement in ICT networks in and linked to the United States, the second action has known, immediate, and significant impacts on those doing business with Huawei and any of its 68 named affiliates in 26 countries.  And while only the second move explicitly impacts a Chinese company, both moves are significant escalations in the current U.S.-China trade war. Less than two business days after the effective date of its export ban on Huawei, the Trump Administration took an action that illustrates just how far reaching its export ban will be. BIS issued a Temporary General License, issued on May 20, 2019, to allow exports to continue that support Huawei and its listed affiliates in four categories of transactions. ICT EO – Securing the ICT Supply Chain The ICT EO gives the Secretary of Commerce the power to prohibit U.S. persons from acquiring, importing, transferring, installing, dealing in, or using any ICT when the transaction involves any foreign person property or interest in property, and the Secretary of Commerce determines that (1)     the ICT is designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary, and (2)     the transaction (a)   poses an undue threat of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of ICT in the United States, (b)   poses an undue risk of catastrophic effects on the security or resiliency of the U.S. critical infrastructure or digital economy, or (c)   otherwise poses a risk to the national security of the United States or the security and safety of U.S. persons. These broad criteria lay the groundwork for U.S. agencies to regulate transactions both inside and outside of the United States, especially considering the cybersecurity threats involving ICT infrastructure outside of the United States.  The ICT EO defines “foreign adversary” as “any foreign government or foreign non-government person engaged in a long‑term pattern or serious instances of conduct significantly adverse to the national security of the United States or security and safety of United States persons.”[2] The ICT EO diverges from past practice involving trade in two significant ways.  First, rather than imposing sanctions on U.S. persons conducting business in particular countries or with particular persons, the ICT EO focuses on a wide range of transaction types, regardless of location, that could impact the ICT infrastructure of the U.S. whenever U.S. persons and foreign person property or property interests are involved.  Second, and in contrast with typical U.S. sanctions executive orders, the long list of agencies referenced in the ICT EO suggests that whatever regulatory framework is developed to implement the order will involve significant interagency collaboration and cross-agency functions.  The ICT EO specifically foresees the involvement of nine named agencies and offices including the Treasury, State, Defense, Justice, and Homeland Security Departments, the United States Trade Representative, the Director of National Intelligence, the General Services Administration (GSA), and the Federal Communications Commission.[3] Many of these departments and agencies already exercise authorities that safeguard aspects of the U.S. ICT infrastructure.  For example, Treasury’s Committee on Foreign Investment in the United States already has authority to block controlling and certain non-controlling investments by foreign persons in the U.S. companies that supply, build, service and manage the ICT infrastructure.[4]  Similarly, the GSA and DoD already have authority under the National Defense Authorization Act for FY 2019 to prohibit procurement from a list of ICT companies Congress has deemed threats to U.S. national security and from contractors that rely on them for their ICT infrastructure.[5]  Notwithstanding this, the EO’s language gives broad authority to the Secretary of Commerce to create an entirely new regulatory framework that could impose new import, export, use, and other transaction-based licensing requirements. Under the ICT EO, potential prohibitions can be imposed on transactions involving “any acquisition, importation, transfer, installation, dealing in, or use of any [ICT] . . . by any person, or with respect to any property, . . . in which any foreign country or a national thereof has any interest” that is initiated, pending or will be completed as of and after May 15, 2019.[6]  Given this broad remit, the new transaction-based licensing requirements may take many forms, including the blocking and forced unwinding of ongoing transactions, bans on the import of ICT items from particular countries and persons, and controls on U.S. person involvement (including both natural and legal persons) in ICT transactions abroad that involve foreign adversary ICT and that could impact U.S. ICT infrastructure, U.S. critical technology or digital economy, or U.S. national security. Entity List Designation Alongside the ICT EO, the Secretary of Commerce announced a more specific action targeting Huawei and 68 non-U.S. affiliates.  Specifically, the Secretary announced the decision of the End-User Review Committee (“ERC”)[7], which is chaired by BIS, to add Huawei and its named affiliates to the Entity List.[8]  Entities are added to the Entity List if and when the ERC deems them to pose a significant risk of involvement in activities contrary to the national security or foreign policy interests of the United States.  The principal consequence of being added to the Entity List is the imposition of export licensing requirements for shipments to that foreign company. The impact of this new end-user licensing requirement can vary depending on the more specific lines BIS draws around the items to which the licensing requirement will apply.  For example, some Entity List entries only prohibit the unlicensed export of items described on the Commerce Control List or under specific Export Control Classification Numbers to those identified.  In the Huawei case, however, BIS took the most extreme position.  Under the terms of an official draft of the Federal Register Notice for the EL listing made public on May 16, 2019, BIS announced its plan to require a license for all items subject to the Export Administration Regulations (EAR), even “EAR 99” commodities, software and technology, to Huawei and that it would review license applications for all such exports with a policy presumption of denial.[9] The ERC’s cited basis for its finding that Huawei and its affiliates have been or could be involved in activities that are contrary to the national security or foreign policy interests of the U.S. is a Superseding Indictment in the U.S. District Court for the Eastern District of New York of Huawei which includes among its 13 counts two charges that Huawei knowingly and willfully conspired and caused the export, reexport, sale and supply, directly and indirectly, of goods, technology and services from the United States to Iran and the government of Iran without authorization from the Office of Foreign Assets Control (OFAC).[10]  BIS also noted that Huawei’s Iran-based affiliate is alleged to have conspired with others “to impair, impede, obstruct, and defeat, through deceitful and dishonest means, the lawful government operations of OFAC.”[11] The issuance of the ICT EO and Huawei’s EL listing coincide with a stall in the U.S.-China trade talks, and some may view these actions as creating leverage for the conclusion of a trade agreement between the countries.  Regardless, the EL listing, in particular, will have immediate and significantly disruptive effects on Huawei’s supply chain.  Any Huawei supplier or vendor, including several major U.S. companies, is now required to apply for BIS licenses to transfer any item subject to the EAR to Huawei and its affiliates, and many of Huawei’s customers are likely to experience associated repair and support disruption in their ICT infrastructure and services. Just how disruptive these new export licensing requirements will be became immediately clear in a subsequent action by BIS on May 20, 2019.[12]  Less two full business days after the effective date of its EL listing, BIS granted a 90-day temporary license (through August 19, 2019) that partially suspends the effects of the EL listing.  The general license will allow Huawei and its listed affiliated to continue receiving exports—subject  to any prior applicable licensing requirements—associated with four categories of transactions.  These include: (1)     exports necessary to maintain and support existing and fully operational networks and equipment, including software updates and patches, provided they are made pursuant to legally-binding contracts and agreements entered into on or before May 16, 2019; (2)     exports necessary to provide service and support, including software updates or patches, to existing Huawei handsets that were available to the public on or before May 16, 2019; (3)     disclosure to Huawei and the listed affiliates, of information regarding security vulnerabilities in items owned, possessed, or controlled by them when related to the process of providing ongoing security research critical to maintaining the integrity and reliability of existing and currently fully operational networks and equipment, as well as handsets; and (4)     exports incident to the engagement with Huawei and the listed affiliates necessary for the development of 5G standards by duly recognized standards bodies. Exporters that make use of the general license to export, reexport, or transfer items to Huawei must prepare a certification statement explaining how the export, reexport, or transfer fits within the scope of the general license and maintain that certification as a record for five years. [1]   President Donald J. Trump, Executive Order on Securing the Information and Communications Technology and Services Supply Chain, May 15, 2019 (available at https://www.whitehouse.gov/presidential-actions/executive-order-securing-information-communications-technology-services-supply-chain/). [2]   ICT EO, § 3(b). [3]   ICT EO, § 1(a). [4]   31 C.F.R. Parts 800 and 801. [5]   John S. McCain National Defense Authorization Act for Fiscal Year 2019, Public Law No. 115-232, § 889 (2018). [6]   ICT EO, § 1(a). [7]   The ERC is composed of representatives from the Departments of Commerce, State, Defense, Energy, and Treasury. [8]   15 C.F.R. § 744.16. [9]   Department of Commerce, BIS, Addition of Entities to the Entity List, May 16, 2019, (available at https://s3.amazonaws.com/public-inspection.federalregister.gov/2019-10616.pdf).  Note that this is an unpublished version that is not scheduled to be published in the Federal Register until May 21, 2019. [10]   Id. at 3–4. [11]   Id. at 4. [12]   Department of Commerce, BIS, Temporary General License, May 20, 2019, (available at https://s3.amazonaws.com/public-inspection.federalregister.gov/2019-10829.pdf).  Note that this is an unpublished version that is not scheduled to be published in the Federal Register until May 22, 2019. The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam M. Smith, Christopher Timura, and Laura Cole. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s International Trade practice group: United States: Judith Alison Lee – Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk – Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) M. Kendall Day – Washington, D.C. (+1 202-955-8220, kday@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) Marcellus A. McRae – Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura – Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair – Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown – Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole – Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor – Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Henry C. Phillips – Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt – Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Audi K. Syarief – Washington, D.C. (+1 202-955-8266, asyarief@gibsondunn.com) Scott R. Toussaint – Palo Alto (+1 650-849-5320, stoussaint@gibsondunn.com) Europe: Peter Alexiadis – Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris – London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Sacha Harber-Kelly – London (+44 20 7071 4205, sharber-kelly@gibsondunn.com) Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Steve Melrose – London (+44 (0)20 7071 4219, smelrose@gibsondunn.com) Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Richard W. Roeder – Munich (+49 89 189 33-160, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

May 10, 2019 |
Iran Steps Back from Nuclear Deal as Trump Administration Increases Sanctions Pressure

Click for PDF May 8, 2019, was the one-year anniversary of the U.S. decision to withdraw from the 2015 Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (“JCPOA”), and it was eventful.  The day began with Iranian President Hassan Rouhani announcing that Iran would immediately suspend compliance with JCPOA limits on enriched uranium and heavy water, with further suspensions to occur in 60 days unless assurances are made that Iran will receive promised economic benefits in the oil and banking sectors.  Later that day, the Trump administration imposed new sanctions relating to the iron, steel, aluminum, and copper sectors of the Iranian economy.  These new sanctions are the latest in what the White House is calling the “most powerful maximum pressure campaign ever witnessed.”[1] The pressure campaign has indeed ramped up in the past month.  First, on April 8, the U.S. State Department designated the Islamic Revolutionary Guard Corps as a foreign terrorist organization—marking the first time an arm of a foreign government has received such a designation.  Next, on April 22, the Trump administration declined to renew sanctions waivers that allowed certain countries to import Iranian oil.  Then, on May 3, the administration declined to renew two sanctions waivers—one allowing Iran to store excess heavy water produced in the uranium enrichment process, and another allowing Iran to trade away its enriched uranium. The ramifications of these recent events are global in scale.  Iran will likely see its recession deepen, as new U.S. restrictions threaten two pillars of its export economy:  crude oil and industrial metals.  Given that Iran has been increasingly pushed into a corner, it is no surprise that the country has threatened to violate its JCPOA commitments in hopes of relief.  So far, the signatories still in the deal—China, France, Germany, Russia, and the United Kingdom—have not taken concrete action in response, but that may change if Iran follows through with its threats.  In the meantime, Iran’s main customers, which include China and India, will need to find alternative trade partners or else face consequences under U.S. sanctions laws.  These recent developments also complicate bilateral trade talks between the United States and China, which have stalled this week.  Finally, given that the Trump administration has not shied away from using economic sanctions as a political tool, we could see waivers of sanctions liability under Iran sanctions used as a bargaining chip. We discuss below these recent developments, in the order in which they occurred.  To understand the lead-up to these events, please see the many client alerts we have published on the constantly evolving state of Iran sanctions—the most recent being our 2018 Year-End Sanctions Update. Designation of the IRGC as an FTO  On April 8, the Treasury Department designated the Islamic Revolutionary Guard Corps (“IRGC”), an official part of Iran’s government, as a foreign terrorist organization (“FTO”).[2]  The IRGC has already been designated and blocked under various sanctions programs—including those relating to counterterrorism.  What is surprising here is that the FTO label has, until now, been exclusively used on non-state actors such as Al-Qaeda or the Islamic State of Iraq and Syria (“ISIS”). While the new legal ramifications are two-fold, we do not expect these changes to have a significant impact on U.S. and non-U.S. person decisionmaking as to whether to engage the IRGC and its many associated entities in business transactions.  First, due to the FTO designation, IRGC members can be excluded from entering the United States by virtue of their affiliation.[3]  Second, any person who knowingly provides material support or resources to the IRGC can be criminally prosecuted or subject to civil enforcement for doing so under separate FTO authorities.[4]  Prior to this new designation however and subject to both criminal and civil enforcement, no U.S. person or non-U.S. person whose transactions had a nexus to the United States could do business with the IRGC without OFAC authorization.  Moreover, non-U.S. persons were also already potential targets for designation themselves or of secondary sanctions for doing business with the IRGC and its associated entities.  Given these already existing sanctions, it is unclear whether the largely duplicative enforcement powers the administration has gained through the designation outweigh the concern expressed by some that the IRGC’s FTO designation will increase the risk to U.S. servicepersons by, among other things, shutting down communication channels that might be helpful in the United States’ fight against ISIS.[5]  It remains to be seen whether the EU decides to expand the reach of the EU Blocking Statute to counter the FTO designation. Non-Renewal of Iran Oil Waivers As part of its withdrawal from the JCPOA, the Trump administration re-imposed the possibility of secondary sanctions on importers of Iranian oil last November.  To cushion the blow, temporary waivers[6] of those sanctions were granted to eight jurisdictions:  China, India, South Korea, Japan, Italy, Greece, Taiwan, and Turkey.[7]  Our contemporary analyses of the temporary waivers, also known as Significant Reduction Exceptions (“SREs”), can be found here and here.  Those waivers expired on May 2, 2019. Ahead of the expiration date, on April 22, 2019, Secretary of State Michael Pompeo announced that no further SREs would be issued,[8] a surprising move in light of reports that some State officials had promised additional waivers.[9]   In his statement, Pompeo assured the public that global oil markets would continue to be well supplied in the absence of waivers, citing productive discussions with Saudi Arabia, the United Arab Emirates, and other major oil producers.[10] The expiration of the SREs has little effect on Taiwan, Italy, and Greece, which reportedly ceased importing oil from Iran long before Pompeo’s announcement.[11]  The other SRE recipients, on the other hand, continued to purchase Iranian oil in early 2019; in fact, China increased its purchases, cementing its status as Iran’s biggest customer.[12]  China’s foreign ministry representative spoke out against the non-renewal decision, expressing opposition to the Trump administration’s “unilateral sanctions” and urging it to avoid “wrong moves” relating to Iran oil controls.[13]  Turkey’s foreign minister made a similar statement, also characterizing the Iran oil sanctions as “unilateral.”[14] At this early stage, it is unclear what practical effects the expiration of the SREs will have.  For example, can the countries with expired SREs continue to take delivery of already-purchased Iranian oil, or use money already set aside to make additional purchases?  These questions were apparently posed to two senior Department of State officials, but the officials characterized them as “hypothetical” and thus refused to comment.[15]  Another question is whether drawing on Iranian oil from storage will trigger sanctions.  Indeed, China reportedly has 20 million barrels of oil (worth over $1 billion) currently in storage in the northeast port of Dalian.[16] As we have previously outlined, there are still narrow categories of authorized activities, such as those supported by:  (1) General License J-1, allowing non-U.S. persons to fly U.S.-origin civil aircraft into Iran; (2) General License D-1, authorizing U.S. persons to export certain hardware, software, and services incident to personal communications over the Internet; and (3) various humanitarian exceptions allowing the export of agricultural commodities, food, medicine, and medical devices to Iran.  The current SREs support and promote transactions in the third category because, under this regime, payments to Iran for its oil are held in escrow accounts that Iran can only use for the purchase of humanitarian (or otherwise non-sanctioned) goods.[17]  If the expiration of the SREs has the intended effect of depriving Iran of oil revenue, then the country may not have the funds to purchase non-sanctioned goods to the same extent that it has in the past. Non-Renewal of Two Waivers and Shortened Renewals of Five Waivers for Civilian Nuclear Activities On May 3, the State Department announced that five sanctions waivers relating to civilian nuclear projects in Iran would be renewed, but for 90 days rather than the usual 180 days and with an added caveat that any effort starting May 4 to expand the Bushehr nuclear power plant would be subject to sanctions.[18]  Two waivers, however, were not be renewed.  The first waiver allowed Iran to store excess heavy water outside of the country; its expiration will pressure Oman, where Iran’s heavy water is currently stored, to dispose of it.  The second waiver allowed Iran to trade its enriched uranium for natural uranium, which is explicitly authorized by the JCPOA; the end of this waiver will most impact Russia, who has been a key player in these trades. This mixture of renewals and non-renewals reflects the Trump administration’s attempt to apply pressure on Iran without upending the nuclear status quo.  U.S. National Security Adviser John Bolton has reportedly pushed to end the civilian-nuclear-activity waivers completely, while others in the State and Treasury Departments have apparently expressed concern that doing so would threaten non-proliferation efforts.[19]  In any event, the Trump administration’s decision here represents a continued chipping away at Iran’s benefits under the JCPOA. Iran’s Announced Partial Withdrawal from the JCPOA On May 8, while still expressing a commitment to the JCPOA, Iranian President Rouhani announced that Iran would immediately stop complying with the JCPOA’s limits placed on the domestic build-up of enriched uranium and heavy water.[20]  (Indeed, those limits became harder to adhere to once the Trump administration revoked waivers allowing Iran to store or sell off these materials.)  Further, he declared that Iran would suspend compliance with other parts of the JCPOA if its signatories—the United Kingdom, France, Germany, China, and Russia—do not deliver on the economic benefits promised under the JCPOA.  In particular, Rouhani stated he expected the sanctions relief for the oil and banking sectors agreed under the JCPOA to materialize, the two areas hit hardest by U.S. sanctions. For their part, the JCPOA signatories appear to be taking a wait-and-see approach.  In a joint statement, the United Kingdom, France, Germany, and the European Union strongly urged Iran to continue to fully comply with the JCPOA and assured them that legitimate trade with Iran remains a priority, citing the operationalization of “INSTEX”—the special purpose vehicle created in January 2019 to facilitate barter-based trade with Iran.[21]  In the same statement, the European nations also expressed “regret” that the United States had re-imposed sanctions following their withdrawal from the deal, and called for non-signatories to refrain from taking actions that undercut the JCPOA.[22] It would seem that the JCPOA signatories have treated Iran’s May 8 announcement as a statement of intent—as opposed to an immediate violation of the deal—and thus have refrained from retaliatory action.  We will, of course, monitor this situation closely as we approach the 60-day deadline imposed by Rouhani. New Sanctions on Iron, Steel, Aluminum, and Copper On May 8, hours after Iran’s announcement, President Trump signed an executive order authorizing new sanctions relating to the iron, steel, aluminum, and copper sectors of the Iranian economy.[23]  To summarize broadly, blocking sanctions can now be placed on any person who has (1) operated in those sectors; (2) knowingly engaged in a “significant” transaction in those sectors (covered transactions include, among other things, sales, transportation, and marketing); (3) materially supported a person blocked under these sanctions; or (4) been owned or controlled by, or has acted on behalf of, a person blocked under these sanctions.  The new industrial-metals sanctions build upon existing sanctions on “raw and semi-finished metals,” which include aluminum and steel.[24]  Per the May 8 executive order, there will be a wind-down period of 90 days for existing transactions that would violate the industrial-metals sanctions.  Any new business activity in the relevant sectors, however, is immediately sanctionable. Industrial metals account for approximately 10% of Iran’s export economy.  These sanctions will likely help deepen Iran’s economic recession; the country is currently struggling with skyrocketing inflation, rising unemployment, and a currency plummeting in value.  Given that the United States shows no signs of letting up its “maximum pressure campaign,” we are likely to see more sanctions on Iran and, at the same time, more pushback from Iran on its obligations under the JCPOA. [1]    The White House, Statement from President Donald J. Trump Regarding Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran (May 8, 2019), available at https://www.whitehouse.gov/briefings-statements/statement-president-donald-j-trump-regarding-imposing-sanctions-respect-iron-steel-aluminum-copper-sectors-iran/. [2]   Bill Chappell, U.S. Labels Iran’s Revolutionary Guard As A Foreign Terrorist Organization, NPR (Apr. 8, 2019), available at https://www.npr.org/2019/04/08/710987393/u-s-labels-irans-revolutionary-guard-as-a-foreign-terrorist-organization. [3]    See U.S. Dep’t of State, Fact Sheet, Terrorism Designation FAQs (Feb. 27, 2019), available at https://www.state.gov/r/pa/prs/ps/2018/02/278882.htm. [4]    See 18 U.S.C. §§  2339A, 2339B. [5]    Karen DeYoung, Defense, intelligence officials caution White House on terrorist designation for Iran’s Revolutionary Guard, The Washington Post (Feb. 8, 2017), available at https://www.washingtonpost.com/world/national-security/defense-intelligence-officials-caution-white-house-on-terrorist-designation-for-irans-revolutionary-guards/2017/02/08/228a6e4a-ee28-11e6-b4ff-ac2cf509efe5_story.html. [6]    For the statutory basis for those waivers, please see Section 1245(d)(4)(D) of the National Defense Authorization Act for Fiscal Year 2012 (NDAA, P.L. 112-81, signed on Dec. 31, 2011) (22 U.S.C. 8513a). [7]    Ian Talley & Courtney McBride, U.S. to Issue Eight Waivers for Oil Countries Under Iran Sanctions, Wall Street Journal (Nov. 2, 2018), available at https://www.wsj.com/articles/u-s-to-issue-eight-waivers-for-oil-countries-under-iran-sanctions-1541172994. [8]    Press Release, U.S. Dep’t of State, Decision on Imports of Iranian Oil (Apr. 22, 2019), available at https://www.state.gov/secretary/remarks/2019/04/291272.htm. [9]    Jessica Donati, U.S. to End Iran Oil Waivers to Drive Tehran’s Exports to Zero, Wall Street Journal (Apr. 22, 2019), available at https://www.wsj.com/articles/u-s-to-end-iran-oil-waivers-to-drive-tehrans-exports-to-zero-11555898664. [10]    Press Release, U.S. Dep’t of State, Decision on Imports of Iranian Oil (Apr. 22, 2019).  Given the likely effect that this recent announcement will have on oil prices, analysts predict that secondary sanctions relating to the import of Venezuelan oil will likely be delayed.  See, e.g., S&P Global Platts, End of Iran waivers likely to postpone Venezuela secondary oil sanctions: analysts (Apr. 22, 2019), available at https://www.spglobal.com/platts/en/market-insights/latest-news/oil/042219-end-of-iran-waivers-likely-to-postpone-venezuela-secondary-oil-sanctions-analysts. [11]    Edward Wong & Clifford Krauss, U.S. to Clamp Down on Iranian Oil Sales, Risking Rise in Gasoline Prices, N.Y. Times (Apr. 21, 2019), available at https://www.nytimes.com/2019/04/21/us/politics/us-iran-oil-sanctions.html. [12]    Id.; Jessica Donati, U.S. to End Iran Oil Waivers to Drive Tehran’s Exports to Zero, Wall Street Journal (Apr. 22, 2019). [13]    Associated Press, China tells US to avoid ‘wrong moves’ over Iran oil controls (Apr. 24, 2019), available at https://www.seattletimes.com/business/china-tells-us-to-avoid-wrong-moves-over-iran-oil-controls/. [14]    Rishi Iyengar, China buys a lot of Iranian oil, and it’s not happy at all with US sanctions, CNN (Apr. 23, 2019), available at https://www.cnn.com/2019/04/22/energy/china-iran-oil-us-sanctions/index.html. [15]    Matthew Lee, U.S. Says No More Sanctions Waivers for Importing Iranian Oil, Real Clear Politics (Apr. 23, 2019), available here. [16]    Chen Aizhu & Florence Tan, Boxed in: $1 billion of Iranian crude sits at China’s Dalian port, Reuters (Apr. 30, 2019), available at https://www.reuters.com/article/us-china-iran-oil-sanctions/boxed-in-1-billion-of-iranian-crude-sits-at-chinas-dalian-port-idUSKCN1S60HS. [17]    Humeyra Pamuk & Timothy Gardner, U.S. renews Iran sanctions, grants oil waivers to China, seven others, Reuters (Nov. 5, 2018), available here. [18]    U.S. Dep’t of State, Fact Sheet, Advancing the Maximum Pressure Campaign by Restricting Iran’s Nuclear Activities (May 3, 2019), available at https://www.state.gov/r/pa/prs/ps/2019/05/291483.htm. [19]    Nicole Gaouette & Jennifer Hansler, US extends nuclear waivers for Iran, but with limits (May 3, 2019), available at https://www.cnn.com/2019/05/03/politics/us-iran-nuclear-waivers/index.html. [20]    BBC News, Iran nuclear deal: Trump raises pressure with sanctions on metals (May 8, 2019), available at https://www.bbc.com/news/world-middle-east-48204646; EU urges Iran to back down from nuclear escalation (May 8, 2019), available at https://euobserver.com/foreign/144864 [21]    European Union, Joint statement by High Representative of the European Union and the Foreign Ministers of France, Germany and the United Kingdom on the JCPoA (May 9, 2019), available at https://eeas.europa.eu/headquarters/headquarters-homepage/62093/joint-statement-high-representative-european-union-and-foreign-ministers-france-germany-and_en. [22]    Id. [23]    Executive Order Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran of May 8, 2019, available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_eo_metals.pdf. [24]    U.S. Dep’t of Treasury, Frequently Asked Questions Regarding Executive Order (E.O.) Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran of May 8, 2019, available at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#eo_metals. The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam M. Smith, Christopher Timura, Stephanie Connor, Richard Roeder and Audi Syarief. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s International Trade practice group: United States: Judith Alison Lee – Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk – Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) M. Kendall Day – Washington, D.C. (+1 202-955-8220, kday@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) Marcellus A. McRae – Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura – Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair – Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown – Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole – Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor – Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Henry C. Phillips – Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt – Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Audi K. Syarief – Washington, D.C. (+1 202-955-8266, asyarief@gibsondunn.com) Scott R. Toussaint – Palo Alto (+1 650-849-5320, stoussaint@gibsondunn.com) Europe: Peter Alexiadis – Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris – London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Sacha Harber-Kelly – London (+44 20 7071 4205, sharber-kelly@gibsondunn.com) Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Steve Melrose – London (+44 (0)20 7071 4219, smelrose@gibsondunn.com) Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Richard W. Roeder – Munich (+49 89 189 33-160, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

May 9, 2019 |
UK Nationalisation – Investment Treaties can offer opportunities to reorganise now to protect valuations

Click for PDF The political instabilities caused by Brexit raise the possibility that a General Election may be held in the UK sooner than the scheduled 5 May 2022.  Given current political turbulence, the prospect of Labour winning any such snap election can no longer be dismissed.  If this happens, a future Labour government led by Jeremy Corbyn and John McDonnell is expected to consider nationalising a range of assets, including utilities (such as water, rail and energy), the Royal Mail and possibly even certain private finance initiative (PFI) companies.  Nationalising profitable UK companies on this scale  has not happened since the post-WWII 1945 Labour government. How might nationalisation happen? There is not yet much detail on how any nationalisation programme would be carried out.  Industry-specific regulations and arrangements mean that the process will probably differ depending on the sector.  Some businesses – e.g. rail, certain PFI contracts – are run under  time-limited franchises and a Labour government might simply allow these contracts to run their course before bringing them back under government control.  However, other utilities are run under perpetual licences (e.g. regional water franchises in England and Wales were sold, not leased).  Here, the Government would need to impose a compulsory takeover, possibly issuing Government bonds to shareholders in exchange for their shares in the company owning the asset. Valuations It will not be possible to prevent the expropriation of these assets if it is approved by the UK Parliament.  However, a key question will be how the owners of such nationalised assets will be compensated.  Valuing shares is typically complex (especially with unlisted SPV ownership structures).  Labour has suggested valuations would be made on a case by case basis, with a role for Parliament in the process.  There is a concern, however, that Labour may seek to save money by refusing to pay full market value for the expropriated assets, or that the use of Government bonds as consideration may mean that payment is deferred over extremely long periods (some of the stock issued as consideration for the post-WWII nationalisations was not redeemable for 40 years). Valuations that are seen as unfair will inevitably trigger compensation claims by investors.  There are a number of routes to possible claims, such as under the Human Rights Act 1998 and/or the European Convention on Human Rights.  However, investment treaties may offer some investors a better chance of reclaiming the full value of their expropriated investments.  The standard of compensation under most investment treaties is fair market value.  In order to take advantage of an investment treaty, an investor will need to have in place a corporate structure which includes an entity located in a jurisdiction that is party to an investment treaty with the UK to pursue a treaty claim. What is an investment treaty? An investment treaty is an agreement between states that helps facilitate private foreign direct investment by nationals and companies of one state into the other.  Most investment treaties are bilateral (known as “bilateral investment treaties” or “BITs”), but the UK is also a party to the Energy Charter Treaty, which is a multilateral investment treaty with 51 signatories.  The purpose of an investment treaty is to stimulate foreign investment by reducing political risk.  Amongst other things, it is intended to protect an international investor if an asset it owns in the other state is subsequently nationalised without adequate compensation.  Investment treaties generally provide that the overseas investor will receive fair and equitable treatment and that the compensation for any nationalisation will be appropriate and adequate.  There are currently more than 3,200 BITs in force worldwide. The definition of what constitutes an investment is usually quite broad including, for example, security interests, rights under a contract and rights derived from shares of a company. Importantly, most investment treaties provide investors with a right to commence arbitration proceedings and seek compensation if the state has breached its obligations under the treaty (e.g. for failing to provide adequate compensation for a nationalisation).  This means a UK investment treaty could offer an avenue of protection for an overseas investor of a nationalised UK asset.  A list of countries with a UK BIT is here. How to benefit from a UK investment treaty? Some investors in UK assets that may be the subject of nationalisations are considering restructuring their UK investments to take advantage of investment treaties to which the UK is a party.  In some circumstances, this can be achieved by simply including a holding company in the corporate chain which is located in a jurisdiction that has an investment treaty with the UK.  So long as the restructuring is completed before a dispute regarding nationalisation arises, it will be effective.  Therefore, investors who hold UK assets that potentially may be the subject of nationalisation should consider restructuring now. The UK has investment treaties in force with over 100 jurisdictions but not all of them will be suitable for a restructuring.  Investors will want to analyse not only the substance of the UK investment treaty to which the host country is a signatory (some are more rudimentary than others) but also other risk factors.   In particular, investors will want to check the tax treatment of a particular investment vehicle, including making sure that the new company is not obliged under local rules to withhold tax on any interest or dividends.  Equally, some jurisdictions may be considered unattractive because of geopolitical uncertainties or because their courts and professionals have limited business experience.  The costs and governance associated with any possible restructuring would also need to be carefully considered, especially if the restructuring involves a jurisdiction where the new entity will be required to establish a more substantive business presence.  Given all these risks, there are probably only a very small set of  jurisdictions where investors might consider incorporating an entity within their deal structures. Each investment treaty is different and the possible structure will depend on the exact terms of the relevant treaty.  However, in general terms, the restructuring would usually involve the insertion of a new entity incorporated at the top of the corporate structure that holds the UK assets (but below any fund) via a share-for-share exchange with the existing holding entity. Conclusion If a future Labour government seeks to nationalise private assets it is inevitable that claims will be made, particularly regarding the amount of compensation paid to owners.  Although it is not yet clear how a Labour government would assess compensation levels, investors may wish to consider structuring their investments so that they will have the option of using a UK investment treaty for any valuation disputes. This client alert was prepared by London partners Charlie Geffen, Nicholas Aleksander and Jeffrey Sullivan, of counsel Anne MacPherson and associate Tamas Lorinczy. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please feel free to contact the Gibson Dunn lawyer with whom you usually work or any of the following lawyers: Jeffrey Sullivan – International Arbitration jeffrey.sullivan@gibsondunn.com Tel: 020 7071 4231 Sandy Bhogal – Tax SBhogal@gibsondunn.com Tel: 020 7071 4266 Charlie Geffen – Corporate CGeffen@gibsondunn.com Tel: 020 7071 4225 Nicholas Aleksander – Tax NAleksander@gibsondunn.com Tel: 020 7071 4232 Tamas Lorinczy – Corporate tlorinczy@gibsondunn.com Tel: 020 7071 4218 © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

May 6, 2019 |
OFAC Releases Detailed Guidance on Sanctions Compliance Best Practices

Click for PDF On May 2, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) released extensive new guidance regarding what constitutes an effective sanctions compliance program. The document, titled “A Framework for OFAC Compliance Commitments,” is significant in that it represents the most detailed statement to date of OFAC’s views on the best practices that companies should follow to ensure compliance with U.S. sanctions laws and regulations. As described by OFAC, the document is meant to serve as a roadmap for how to prevent sanctions violations from occurring in the first place and, when violations do occur, to provide greater transparency with respect to how OFAC will assess the adequacy of a company’s existing compliance program in determining what penalty to impose. As we described in our 2018 Year-End Sanctions Update, this guidance reflects OFAC’s increasingly aggressive approach to enforcement.  In December 2018, Treasury Under Secretary Sigal Mandelker announced that OFAC intended to outline the hallmarks of an effective sanctions compliance program and described those elements in broad strokes.  The May 2 guidance expands upon those elements and will serve as a key benchmark for the evaluation of sanctions compliance programs going forward. Notably, the OFAC compliance guidance was published on the heels of another compliance-related pronouncement from the U.S. Department of Justice (“DOJ”), as described here.  Taken together, the DOJ and OFAC guidance supports our oft-given warnings against a siloed approach to compliance for multinational companies.  To date, many organizations that developed anti-corruption compliance programs in line with the extensive criteria set forth by the DOJ and the Securities and Exchange Commission (“SEC”) have not benefitted from the same kind of prescriptive guidance with respect to sanctions risks. Five Components of an Effective Sanctions Compliance Program Consistent with longstanding policy, OFAC in its newly published compliance framework continues to take the view that there is no such thing as a “one-size-fits-all” sanctions compliance program, and that a company should generally take a risk-based approach tailored to that company’s particular profile.  Where OFAC breaks new ground is in publishing a detailed framework that—while recognizing that there will be some variability from one organization to the next in terms of the particulars—sets out what OFAC views as the five essential components of any strong sanctions compliance program.  In order, those components are: Management commitment; Risk assessment; Internal controls; Testing and auditing; and Training. In addition to the similarities to the DOJ compliance focus areas, the five OFAC elements loosely correspond to the elements of compliance as articulated by the Financial Crimes Enforcement Network (“FinCEN”) with respect to financial institutions.  Broadly speaking, the new OFAC framework corresponds with the lifecycle of a compliance program—starting with a deep commitment on the part of senior management to creating a culture of compliance backed by sufficient resources.  OFAC then advises that companies conduct a thorough assessment of, among other things, their customers, supply chain, intermediaries, counterparties, products, services and geographic locations to identify potential sources of sanctions-related risk.  To prevent those risks from materializing, OFAC makes clear that it expects companies to develop appropriate internal controls, including policies and procedures designed to detect and report upward potential sanctions violations.  Such policies and procedures should also be regularly tested and updated to address any weaknesses that may be identified.  At the same time, to ensure the program is properly implemented, relevant employees should receive training on the company’s sanctions compliance policies and procedures at regular intervals of no more than a year. Within each of the five components of an effective sanctions compliance program, OFAC also provides concrete examples of best practices that companies are expected to follow.  For example, when conducting a risk assessment, companies are advised to develop an onboarding process for new customers and accounts that includes a sanctions risk rating based on both know-your-customer information provided by the potential counterparty and independent research conducted by the company. Consistent with OFAC’s existing Economic Sanctions and Enforcement Guidelines, when apparent violations do occur, the nature and extent of a company’s compliance program will continue to be a potential aggravating or mitigating factor for purposes of determining what penalty to impose.  With the publication of the new OFAC compliance framework, companies subject to U.S. jurisdiction now have the benefit of a more granular understanding of what policies and procedures will lead OFAC to conclude that their sanctions compliance program is adequate or deficient. Moreover, in recent settlement agreements OFAC has often required companies to certify on an annual basis that they have implemented and maintained an extensive set of sanctions compliance commitments.  Now that OFAC has clearly staked out what it views as the essential components of an effective sanctions compliance program, we assess that such periodic certifications are likely to become a regular feature of OFAC settlements going forward. Ten Common Pitfalls of Sanctions Compliance Programs In addition to spotlighting what it views as the components of an effective sanctions compliance program, OFAC also identifies in an appendix to its new framework common areas where sanctions compliance programs fall short.  Derived from recent OFAC enforcement actions, this section of the framework is designed to alert U.S. and non-U.S. companies to common pitfalls that could cause a company to incur U.S. sanctions liability. OFAC identifies a total of ten common causes of U.S. sanctions violations, including: Lack of a formal OFAC sanctions compliance program; Misinterpreting, or failing to understand the applicability of, OFAC’s regulations; Facilitating transactions by non-U.S. persons; Exporting or re-exporting U.S.-origin goods, technology or services to OFAC-sanctioned persons or countries; Utilizing the U.S. financial system, or processing payments to or through U.S. financial institutions, for commercial transactions involving OFAC-sanctioned persons or countries; Sanctions screening software or filter faults; Improper due diligence on customers and clients; De-centralized compliance functions and inconsistent application of a sanctions compliance program; Utilizing non-standard payment or commercial practices; and Individual liability. These root causes of sanctions violations are best viewed as traps for the unwary.  While many of the above potential causes of U.S. sanctions violations—each discussed at greater length in the framework—will be familiar to sophisticated parties and their counsel, the document nevertheless serves as a useful refresher of the various ways in which companies commonly run afoul of OFAC regulations and may be especially useful for employee training purposes. Recommendations Now that OFAC has finally provided a detailed statement of what it views as sanctions compliance best practices, companies engaging in activities with a U.S. nexus should take this opportunity to carefully review the strengths and weaknesses of their existing sanctions compliance programs.  In particular, companies should use the OFAC framework as a baseline, carefully assess whether their own compliance program contains all of the basic components that OFAC has indicated that it expects to be present, and update their compliance program accordingly.  By taking these simple steps, compliance-minded companies may reduce their risk of incurring U.S. sanctions liability and may also reduce their potential exposure if, despite their best efforts, a violation somehow occurs. The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam M. Smith, M. Kendall Day, Stephanie L. Connor and Scott R. Toussaint. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s International Trade and Anti-Money Laundering Practice Groups: United States: Judith Alison Lee – Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk – Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) M. Kendall Day – Washington, D.C. (+1 202-955-8220, kday@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) Marcellus A. McRae – Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura – Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair – Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown – Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole – Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor – Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Henry C. Phillips – Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt – Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Audi K. Syarief – Washington, D.C. (+1 202-955-8266, asyarief@gibsondunn.com) Scott R. Toussaint – Palo Alto (+1 650-849-5320, stoussaint@gibsondunn.com) Europe: Peter Alexiadis – Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris – London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Sacha Harber-Kelly – London (+44 20 7071 4205, sharber-kelly@gibsondunn.com) Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Steve Melrose – London (+44 (0)20 7071 4219, smelrose@gibsondunn.com) Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Richard W. Roeder – Munich (+49 89 189 33-160, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

May 1, 2019 |
President Trump Ramps Up Cuba Sanctions Changes — Allows Litigation Against Non-U.S. Companies Conducting Business in Cuba

Click for PDF Frustrated by Cuba’s continued support of the Maduro regime in Venezuela, the Trump administration announced on April 17, 2019 that it will permit U.S. individuals and companies to initiate litigation against foreign individuals and companies that have past or present business in Cuba involving property that the Cuban government confiscated in 1959.  The administration made its announcement in a speech delivered by the president’s national security advisor John R. Bolton, who framed the administration’s decision in characteristically colorful rhetoric:  “The ‘troika of tyranny’—Cuba, Venezuela, and Nicaragua —is beginning to crumble…The United States looks forward to watching each corner of this sordid triangle of terror fall.”[1]  The same day, the Trump administration also announced several other significant changes to U.S. policy toward Cuba, including blocking “U-turn” financial transactions to cut off Cuba’s access to dollar-denominated transactions, limiting nonfamily travel to the island, imposing caps on the value of personal remittances, and enforcing visa restrictions regarding alien traffickers of property confiscated by Cuba. I.   Title III of LIBERTAD to Become Effective on May 2, 2019      On April 17, 2019, President Trump lifted long-standing limitations on American citizens seeking to sue over property confiscated by the Cuban regime after the revolution led by Fidel Castro six decades ago. Title III of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996,[2] commonly known as the Helms-Burton Act, authorizes current U.S. citizens and companies whose property was confiscated by the Cuban government on or after January 1, 1959 to bring suit for monetary damages against individuals or entities that “traffic” in that property.  The policy rationale for this private right of action was to provide recourse for individuals whose property was seized by the Castro regime.  As part of the statutory scheme, Congress provided that the President may suspend this private right of action for up to six months at a time, renewable indefinitely.  In the past, Presidents of both parties have consistently suspended that statutory provision in full every six months.  That will change tomorrow, May 2, 2019, when the suspension will be effectively lifted. A.   Background The Trump administration has been moving towards this development for some time.  In November 2018, Bolton stated that the suspension of Title III’s private cause of action would be given a “very serious review.”  The administration’s subsequent renewals of the suspension were increasingly limited in scope and duration.  When the suspension expired in early January 2019, it was renewed for 45 days (far short of the usual six months).[3]  In March 2019, the U.S. State Department announced that it intended to allow U.S. citizens and companies to bring suit in U.S. federal court against entities and sub-entities on the Cuba Restricted List,[4] a U.S. State Department compilation of Cuban entities that the U.S. Government considers to be “under the control of, or act for or on behalf of, the Cuban military, intelligence, or security services personnel.”  The remainder of the suspension was extended another 30 days on March 4, 2019, and then another two weeks on April 3, 2019.[5]  Finally, on April 17, 2019, Secretary of State Michael Pompeo announced that the Title III suspension would not extend past today’s expiration date.[6] B.   Analysis What the suspension of Title III means in practice depends upon the interpretation of a number of key terms.  The term “property” under LIBERTAD is all-encompassing:  it applies to any present, future, or contingent interest in real, personal, or mixed property.  Any “person” that “traffics” in such property is liable to the U.S. citizen whose property was confiscated. LIBERTAD defines “person” as a natural person or entity, including an agency or instrumentality of a foreign state.  The term “traffics” is defined as any person who knowingly and intentionally: (1) sells, transfers, distributes, dispenses, brokers, manages, or otherwise disposes of confiscated property, or purchases, leases, receives, possesses, obtains control of, manages, uses, or otherwise acquires or holds an interest in confiscated property, (2) engages in a commercial activity using or otherwise benefiting from confiscated property, or (3) causes, directs, participates in, or profits from, trafficking [] by another person, or otherwise engages in trafficking [] through another person . . . .[7] On its face, the covered activity here is exceptionally broad.  It is broad enough to capture both direct commercial transactions involving confiscated property and also companies doing business with other companies engaged in such transactions.  Indeed, the “trafficking” definition theoretically captures actors only tangentially tied to the confiscated property.  For example, if the seller of confiscated property uses the proceeds from the sale to then purchase goods unrelated to that property, it would appear that the provider of those goods could be considered a “trafficker.” LIBERTAD exempts certain activities from its trafficking definition.  Specifically, trafficking does not include the delivery of international telecommunications services to Cuba, transactions incident to lawful travel to Cuba, or transactions by a person who is a citizen or resident of Cuba and who is not an official of the Cuban Government or the ruling political party in Cuba. However, these exemptions may only apply to a limited number of the many Title III claims that can reasonably be expected to be filed.  The U.S. Foreign Claims Settlement Commission (“FCSC”) has certified more than 6,000 claims relating to property confiscated by the Cuban government.[8]  Taking into account both certified and uncertified claims, one senior official at the State Department recently estimated that the total potential Title III claims could number as high as 200,000.[9] Companies found liable under Title III may face significant financial consequences.  The statutory scheme allows plaintiffs to choose from multiple methods of calculating damages, including by calculating the current value of the confiscated property or its value when confiscated plus interest.[10]  Plaintiffs can also recover interest, court costs, and attorney fees.  In addition, plaintiffs may recover treble damages for claims certified by the FCSC.  Treble damages are also available if plaintiffs provide advance notice of their claims to prospective defendants and such defendants engage in “trafficking” more than 30 days after such notice has been provided. There are a number of obstacles that Title III plaintiffs face regarding both a finding of liability and recovery on a judgment.  On liability, plaintiffs may file suit at any time during the trafficking of their confiscated property and up to two years after the trafficking has ceased to occur.  This two-year statute of limitations puts pressure on plaintiffs to identify and act on their potential claims quickly.  Moreover, obtaining personal jurisdiction, serving process, and conducting discovery are much more difficult when foreign defendants are involved.  Finally, there are aspects of Title III that may be challenged on colorable constitutional grounds, including the vagueness of the definition of “trafficking,” the extraterritorial and retroactive aspects of the remedy, and the potentially arbitrary and punitive nature of the measure of damages.  The prospects for such challenges will vary depending on the particular facts and circumstances of each case. On recovery, plaintiffs may face a situation where the non-U.S. defendant does not have any property in the United States.  Enforcing a Title III judgment in a foreign jurisdiction may be difficult, particularly where the jurisdiction has a blocking or anti-enforcement statute.  For example, in the European Union, Council Regulation (EC) No. 2271/96 (the “EU Blocking Statute”) provides that any “judgment of a court or tribunal . . . [or] of an administrative authority . . . giving effect, directly or indirectly, to the [Helms-Burton Act] or to actions based thereon or resulting there from, shall [not] be recognized or be enforceable in any manner.”  Indeed, this particular regulation also provides for the “clawback” of any damages that were awarded in a Title III action. II.   Other Announced Changes to Cuba Policy Alongside its decision to allow Title III claims to proceed, Bolton and Secretary of State Mike Pompeo made a number of other announcements that will have a significant impact on those engaged in Cuba-related business and travel.  These include Bolton’s announcement that the United States would once again prohibit U.S. banks from processing so-called “U-Turn” financial transactions.  President Obama had issued a general license permitting these transactions—which involve Cuban interests and originate from, and terminate, outside of the United States—as part of a broader set of sanctions relief issued in advance of his historic visit to Cuba in 2016.  These “U-Turn” transactions enabled Cuban entities doing business with non-U.S. firms to access U.S. correspondent and intermediate banks and therefore to participate in U.S. dollar-denominated global trade.  Upon the revocation of this license, U.S. banks will again be prohibited from facilitating Cuba-related transactions in this regard, and Cuban entities and companies engaged in business there will again be effectively cut off from the U.S. financial system. As previously noted, the administration announced that it planned to impose new restrictions on nonfamily travel to Cuba.  The administration has not yet detailed restrictions on this type of travel, which Bolton described as “veiled tourism.”  However, there are up to a dozen categories of travel that could soon be prohibited without a specific license.  Bolton also announced the U.S. government would reimpose a cap on the amount of remittances that can be sent to Cuba at $1,000 per person per quarter. Finally, Pompeo announced that the administration would begin to enforce restrictions on the issuance of U.S. visas to aliens involved in trafficked property.[11]  Specifically, Title IV of LIBERTAD requires the Secretary of State to deny visas to, and the Attorney General to exclude from the United States, any alien who (1) has confiscated, or has directors or overseen the confiscation of, property a claim to which is owned by a U.S. national, (2) traffics in such property, (3) is a corporate officer, principal, or shareholder with a controlling interest in an entity that has been involved in the confiscation or trafficking of such property, or (4) is a spouse, minor child, or agent of any of the above.[12] III.   Counter-Suits in EU and Canadian Courts The Trump administration’s decision to end the litigation limitations under the Helms-Burton Act may cause a large number of cases to be filed in other jurisdictions and the World Trade Organization to counteract the administration’s move.  On the same day that the Trump administration announced its decision to allow Title III of LIBERTAD to go into effect, Federica Mogerhini, the High Representative of the EU for Foreign Affairs and Security Policy European Union, and Cecilia Malmström, the EU Trade Commission Representative, issued a joint statement that “[t]he EU will consider all options at its disposal to protect its legitimate interests, including in relation to WTO rights and through the use of the EU Blocking Statute.”[13]   As previously mentioned, the EU Blocking Statute prohibits the enforcement of U.S. courts’ judgements relating to LIBERTAD within the EU, and allows EU companies sued in the U.S. to recover any damages through legal proceedings against U.S. claimants in EU courts.  The two EU representatives also joined a statement with Canada’s Minister of Foreign Affairs Chrystia Freeland noting that EU and Canadian law are aligned on these points.[14]  In both statements, the EU and Canadian representatives also threatened to sue the United States at the World Trade Organization in response. IV.   Preparing for the Flood Any company that is now trading or has traded with Cuba during the last two years, or which benefits from trade with other parties who trade with Cuba, is now a potential target for Title III claims.  Given the breadth of covered activity under Title III and the theoretical prospect of steep payouts, companies should take an expansive approach in assessing their own liability risk.  To better understand this risk, companies should inventory the types of direct and indirect commercial activities they engage in which involve Cuba, and ascertain the ownership histories of any property at issue to determine if it was confiscated by the Cuban government.  Companies should also scrutinize the origins of their proceeds, to determine if they stem from confiscated property or traffickers of such property.  Self-assessment will also serve to mitigate reputational risk:  a company sued under Title III may risk relationships with banks, customers, and other business partners who do not want to inadvertently “benefit” from proceeds of confiscated property. We recommend that companies seek advice of counsel to assess the degree of exposure under Title III, identify available legal defenses, and develop strategies for minimizing risk.  To the extent such potential claims are identified, counsel can assist in mapping out potential litigation strategies and monitoring the filing of legal actions in jurisdictions where a court is more likely to find personal jurisdiction over a foreign company defendant in a Title III action. [1]   NPR, Bolton Announces New Crackdown on Cuba, Nicaragua, and Venezuela, Apr. 17, 2019, available at https://www.pbs.org/newshour/politics/watch-live-bolton-to-address-trump-administrations-cuba-policy-shift.  Mr. Bolton’s speech marked the 58th anniversary of the Bay of Pigs invasion, the failed 1961 attempt to overthrow Fidel Castro, Cuba’s then communist leader. [2]   Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, P.L. 104-114, 110 Stat. 785 (1996) (codified at 22 U.S.C. §§ 6021–91) (hereinafter “LIBERTAD”). [3]   U.S. Dep’t of State, Media Note, Secretary’s Determination of 45-Day-Suspension Under Title III of LIBERTAD Act (Jan. 16, 2019), available at https://www.state.gov/r/pa/prs/ps/2019/01/288482.htm. [4]   Most transactions between the United States, or persons subject to U.S. jurisdiction, and Cuba are prohibited.  Under the Obama administration, OFAC relaxed many of its sanctions on Cuba, including certain restrictions on travel and related services.  Soon after assuming office, President Trump reimposed several of the Obama administration’s changes to United States sanctions policy.  Most notably, the Trump administration’s new Cuba policy aimed to keep the Grupo de Administración Empresarial (“GAESA”), a conglomerate run by the Cuban military, from benefiting from the opening in U.S.-Cuba relations.  On November 9, 2017, the U.S. Department of State published the “Cuba Restricted List,” consisting of Cuban entities that the U.S. Government considers to be “under the control of, or act for or on behalf of, the Cuban military, intelligence, or security services personnel.”  The U.S. sanctions on Cuba were also revised to prohibit U.S. persons and entities from engaging in direct financial transactions with entities listed on the Cuba Restricted List.  Since its publication, the State Department has issued periodic updates to the list, including three updates on November 15, 2018, March 9, 2019, and on April 24, 2019.  See 83 FR 57523 (Nov. 15, 2018); 84 FR 8939 (Mar. 9, 2019); 84 FR 17228 (Apr. 24, 2019). [5]   U.S. Dep’t of State, Media Note, Secretary Enacts 30-Day Suspension of Title III (LIBERTAD Act) With an Exception (Mar. 4, 2019), available at https://www.state.gov/r/pa/prs/ps/2019/03/289864.htm;  U.S. Dep’t of State, Media Note, Secretary Pompeo Extends For Two Weeks Title III Suspension with an Exception (LIBERTAD Act) (Apr. 3, 2019), available at https://www.state.gov/r/pa/prs/ps/2019/04/290882.htm. [6]   The White House, Fact Sheets, President Donald J. Trump is Taking a Stand For Democracy and Human Rights in the Western Hemisphere (Apr. 17, 2019), available at https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-taking-stand-democracy-human-rights-western-hemisphere/. [7]   See LIBERTAD, § 4(13). [8]   A database containing decisions rendered by the FCSC on these claims is available at https://www.justice.gov/fcsc/claims-against-cuba. [9]   U.S. Dep’t of State, Special Briefing, Senior State Department Official on Title III of the LIBERTAD Act (Mar. 4, 2019), available at https://www.state.gov/r/pa/prs/ps/2019/03/289871.htm; Reuters, U.S. considering allowing lawsuits over Cuba-confiscated properties (Jan. 16, 2019), available at https://uk.reuters.com/article/uk-usa-cuba/us-considering-allowing-lawsuits-over-cuba-confiscated-properties-idUKKCN1PA308. [10]   See LIBERTAD, § 302(a). [11]   A similar pledge was made in a press document issued by the White House.  See The White House, Fact Sheets, President Donald J. Trump is Taking a Stand For Democracy and Human Rights in the Western Hemisphere (Apr. 17, 2019), available at https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-taking-stand-democracy-human-rights-western-hemisphere/. [12]   See LIBERTAD, § 401(a). [13]   Joint Statement by Federica Mogherini and Cecilia Malmström on the decision of the United States to further activate Title III of the Helms Burton (Libertad) Act (Apr. 17, 2019), available at https://eeas.europa.eu/headquarters/headquarters-homepage/61183/joint-statement-federica-mogherini-and-cecilia-malmstr%C3%B6m-decision-united-states-further_en. [14]   Joint Statement by Federica Mogherini, Chrystia Freeland and Cecilia Malmström on the decision of the United States to further activate Title III of the Helms Burton (Libertad) Act (Apr. 17, 2019), available at https://eeas.europa.eu/headquarters/headquarters-homepage/61181/joint-statement-federica-mogherini-chrystia-freeland-and-cecilia-malmstr%C3%B6m-decision-united_en. The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam M. Smith, Thomas G. Hungar, Christopher T. Timura, Stephanie L. Connor, R.L. Pratt and Audi K. Syarief. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s International Trade and Appellate and Constitutional Law Practice Groups: United States: Judith Alison Lee – Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk – Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) Thomas G. Hungar – Washington, D.C. (+1 202-887-3784, thungar@gibsondunn.com) Marcellus A. McRae – Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura – Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair – Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown – Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole – Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor – Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Henry C. Phillips – Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt – Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Audi K. Syarief – Washington, D.C. (+1 202-955-8266, asyarief@gibsondunn.com) Scott R. Toussaint – Palo Alto (+1 650-849-5320, stoussaint@gibsondunn.com) Europe: Peter Alexiadis – Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris – London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Sacha Harber-Kelly – London (+44 20 7071 4205, sharber-kelly@gibsondunn.com) Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Steve Melrose – London (+44 (0)20 7071 4219, smelrose@gibsondunn.com) Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Richard W. Roeder – Munich (+49 89 189 33-160, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

April 24, 2019 |
CFIUS Developments: Notable Cases and Key Trends

Click for PDF The Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) kicked into high gear this spring with a number of notable cases and developments.  Six key trends have emerged: (1)  CFIUS has forced several companies to divest from U.S. businesses involved in the collection of sensitive personal data or cybersecurity; (2)  The pilot program for mandatory filings of certain critical technology investments has yet to streamline the CFIUS review process, as only a small percentage of pilot program cases have been decided on the basis of the “short-form” declaration (a 5-page alternative to the lengthier 45-page voluntary notice); (3)  CFIUS and its member agencies are increasing staff and resources (including a new office dedicated to detecting transactions that have not been notified); (4)  Mitigation strategies are of critical importance, and CFIUS is encouraging parties to think through such terms when negotiating a deal and to initiate a dialogue with CFIUS regarding proposed mitigation prior to the submission of a notice; (5)  Additional regulations to be published later this year will offer further guidance for investment funds with minority foreign investors (possibly including a “black” and “white” list of countries whose investors may be subject to different levels of scrutiny); and (6)  Large investors may tread carefully with respect to the new rules for non-controlling investments, refraining from appointing board members or exercising the types of governance rights which could trigger CFIUS scrutiny. Background CFIUS is an inter-agency group authorized to review the national security implications associated with foreign acquisitions of or investments in U.S. businesses (“covered transactions”), and to block transactions or impose measures to mitigate any threats to U.S. national security.  Historically, the Committee’s jurisdiction has been limited to transactions that could result in control of a U.S. business by a foreign person.  Recent legislation, the Foreign Investment Risk Review and Modernization Act (“FIRRMA”), expanded the scope of transactions subject to the Committee’s review by granting CFIUS the authority to examine the national security implications of a foreign acquirer’s non-controlling investments in U.S. businesses that deal with critical infrastructure, critical technology, or the personal data of U.S. citizens.  FIRRMA also provided CFIUS with authority to review real estate transactions—including leases, sales, and concessions—involving air or maritime ports or in close proximity to sensitive U.S. government facilities. Emerging Trends (1) Increasing Number of Forced Divestitures The Committee forced divestitures of several investments due to concerns regarding cybersecurity or access to sensitive personal data, suggesting that CFIUS will continue to scrutinize investments in higher risk sectors under the authority granted to it by FIRRMA. Two matters bear note: Kunlun/Grindr.  In late March 2019, the Committee ordered Beijing Kunlun Tech Co. Ltd. (“Kunlun”) to sell its interest in Grindr LLC, a popular dating application focused on the LGBTQ community.  Kunlun, a Chinese technology firm, acquired an approximately 60 percent interest in Grindr in January 2016, and subsequently completed a full buyout of the company in January 2018.  Although CFIUS has not commented publicly, observers have speculated that the action was prompted by concerns over Kunlun’s access to sensitive personal data from Grindr users—such as location, sexual preferences, HIV status and messages exchanged via the Grindr app. iCarbonX/PatientsLikeMe.  CFIUS is forcing the Shenzhen-based iCarbonX to divest its majority stake in PatientsLikeMe, an online service that helps patients find people with similar health conditions.  In 2017, PatientsLikeMe raised $100 million and sold a majority stake to iCarbonX, which was started by genomic scientist Jun Wang.  About 700,000 people use the PatientsLikeMe website to report their experiences with medical conditions.  The company claims to have tens of millions of “data points about disease,” and its partners range from large pharmaceutical companies like Biogen to non-profit health organizations like the International Bipolar Foundation, which uses the site to find patients for clinical studies and research.  The 2017 iCarbonX deal was designed to marry the Chinese company’s artificial intelligence technology for improving health care with PatientsLikeMe’s customers and data sets. (2) Not-So “Expedited” Critical Technology Pilot Program Reviews In late 2018, CFIUS launched a pilot program under which mandatory filings are required for certain types of investments in U.S. critical technology companies.  As of November 10, 2018, non-U.S. companies seeking to acquire control (or, in certain circumstances, a non-controlling stake) in U.S. companies involved in making or designing certain critical technologies related to 27 specific industries must file a mandatory declaration with CFIUS.  In lieu of the lengthy notice that is currently used in voluntary CFIUS filings, the pilot program provides for the submission of “light” or short-form declarations (not to exceed 5 pages).  This filing must be submitted at least 45 days before the expected completion date of the transaction.  The pilot program aimed to provide a streamlined review process, as FIRRMA requires the Committee to respond to a declaration within 30 days by approving the transaction, requesting that the parties file a full written notice, or initiating a further review. Notably, however, a majority of the declarations filed under the pilot program have been pushed into the standard review process, meaning that the streamlined “light” filing actually resulted in a longer review process for the parties involved.  Anecdotal evidence suggests that fewer than 10 percent of cases filed under the pilot program have been decided on the basis of the short-form declaration alone, despite a relatively low volume of filings.  Numerous transactions have required the submission of the full notice, and it has been difficult for the intelligence community to complete their full assessment within the allocated 30 days.  In light of these risks, we continue to advise clients who may qualify for the pilot program to consider submitting the full notice at the outset of the process. The Committee is contemplating the imposition of filing fees for expedited reviews, and expects to publish proposed regulations later this year. (3) Increasing Staff and Resources In late March 2019, the Department of Justice requested a significant budget increase for its national security division to review foreign investments, an effort to increase the resources available to the Committee.  In its proposal for the fiscal year 2020 budget, DOJ requested an increase of $5 million and 21 positions (including 16 attorneys) for its national security division to assist with reviewing CFIUS cases.  At the current budget level, the DOJ employs 13 individuals (including 9 attorneys), which means the national security division is asking to significantly increase its current staff working on CFIUS matters.  Additionally, DOJ requested an increase of $18.3 million—part of which will cover 6 new positions—for the Federal Bureau of Investigation to spend on counterintelligence matters, including work on CFIUS-related cases.  The existing budget and number of positions allocated towards this goal is classified, according to the DOJ.  Last November, the DOJ unveiled its so-called “China Initiative,” which was created to reflect the DOJ’s efforts to counter Chinese national security threats.  The initiative seeks to enforce a full range of laws against espionage, foreign agents and threats to supply chains, as well as to identify U.S. Foreign Corrupt Practices Act cases that involve Chinese companies that compete with American businesses. Furthermore, CFIUS has hired staff to head an office responsible for monitoring the market for covered transactions that had not been notified.  The office is not yet up and running. (4) The Importance of Mitigation It remains critical to think about CFIUS mitigation strategies at the outset of any deal, and to reach out to the Committee before filing the notice to begin a dialogue.  Despite the growing concerns regarding Chinese investments (as demonstrated by the divestitures discussed above), the Committee has approved Chinese deals with appropriate mitigation.  (Notably, Gibson Dunn secured clearance for a Chinese investment in a U.S. semiconductor company in January 2018—the only Chinese-controlled acquisition to be cleared by CFIUS within the statutory period and without mitigation under the Trump administration.) More independent monitors are likely in longer term mitigation agreements, and Treasury is working to build consistency between other U.S. government agencies responsible for the oversight of CFIUS national security agreements. Last year CFIUS imposed a $1 million penalty related to repeated breaches of a 2016 mitigation agreement, including failure to establish requisite security policies and failure to provide adequate reports to CFIUS. Although the penalty was imposed in 2018, it was posted on the Committee’s website in mid-April 2019. (5) More Regulations Are Coming Proposed regulations will be published later this year.  The Committee is taking lessons learned from the pilot program and incorporating them into the new rules. The Committee expects to provide more guidance with regard to what it means to be a foreign person in the context of an investment fund, which may include “black” and “white” lists of countries whose investors will be subject to different levels of scrutiny.  Notably, the Committee recently approved a Chinese investment in a U.S. business through an investment vehicle with a U.S. manager, in keeping with the investment fund carve out set forth in FIRRMA. (6) Cautious Investors Finally, it is worth noting that a number of major foreign investors are treading cautiously with respect to the Committee’s new rules—in some cases, by refraining from appointing board seats despite substantial investments. By contrast, certain Chinese investors are abandoning transactions altogether.  China’s ENN Ecological Holdings Co. recently announced that it had withdrawn its offer for Toshiba’s U.S. liquefied natural gas business because of failure to win approval from CFIUS and shareholders by a specified closing date.  Toshiba announced earlier this month that CFIUS approval had been delayed because of the U.S. government shutdown in early 2019.  Pursuant to FIRRMA, all pending CFIUS reviews were tolled for the duration of the government shutdown. The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Jose Fernandez and Stephanie Connor. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s International Trade practice group: United States: Judith Alison Lee – Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk – Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) Marcellus A. McRae – Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura – Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair – Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown – Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole – Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor – Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Henry C. Phillips – Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt – Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Scott R. Toussaint – Palo Alto (+1 650-849-5320, stoussaint@gibsondunn.com) Europe: Peter Alexiadis – Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris – London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Sacha Harber-Kelly – London (+44 20 7071 4205, sharber-kelly@gibsondunn.com) Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Steve Melrose – London (+44 (0)20 7071 4219, smelrose@gibsondunn.com) Richard W. Roeder – Munich (+49 89 189 33-160, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

April 5, 2019 |
Gibson Dunn Recognized by Global Arbitration Review

Global Arbitration Review ranked Gibson Dunn among the 2019 GAR 30, its annual guide to the world’s top 30 arbitration practices.  GAR noted that the firm’s International Arbitration practice is “outstandingly skilled, fully available [and] capable of adapting efficiently to the evolving dynamics of the case.” The firm’s profile was published on April 5, 2019.