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May 2, 2018 |
Lisa Alfaro Named Among Top Latin America Women Lawyers

Latinvex named São Paulo partner Lisa Alfaro to its 2018 Latin America’s Top 100 Female Lawyers list in the Energy and FCPA & Fraud categories. The list recognizes “the top 100 female lawyers specializing in Latin America among international law firms.” The list was published on May 2, 2018.

March 15, 2018 |
Key 2017 Developments in Latin American Anti-Corruption Enforcement

Click for PDF In 2017, several Latin American countries stepped up enforcement and legislative efforts to address corruption in the region.  Enforcement activity regarding alleged bribery schemes involving construction conglomerate Odebrecht rippled across Latin America’s business and political environments during the year, with allegations stemming from Brazil’s ongoing Operation Car Wash investigation leading to prosecutions in neighboring countries.  Simultaneously, governments in Latin America have made efforts to strengthen legislative regimes to combat corruption, including expanding liability provisions targeting foreign companies and private individuals.  This update focuses on five Latin American countries (Mexico, Brazil, Argentina, Colombia, and Peru) that have ramped up anti-corruption enforcement or passed legislation expanding anti-corruption legal regimes.[1]  New laws in the region, coupled with potentially renewed prosecutorial vigor to enforce them, make it imperative for companies operating in Latin America to have robust compliance programs, as well as vigilance regarding enforcement trends impacting their industries. 1.    Mexico Notable Enforcement Actions and Investigations In 2017, Petróleos Mexicanos (“Pemex”) disclosed that Mexico’s Ministry of the Public Function (SFP) initiated eight administrative sanctions proceedings in connection with contract irregularities involving Odebrecht affiliates.[2]  The inquiries stem from a 2016 Odebrecht deferred prosecution agreement (“DPA”) with the U.S. Department of Justice (“DOJ”).[3]  According to the DPA, Odebrecht made corrupt payments totaling $10.5 million USD to Mexican government officials between 2010 and 2014 to secure public contracts.[4]  In September 2017, Mexico’s SFP released a statement noting the agency had identified $119 million pesos (approx. $6.7 million USD) in administrative irregularities involving a Pemex public servant and a contract with an Odebrecht subsidiary.[5] In December 2017, Mexican law enforcement authorities arrested a former high-level official in the political party of Mexican President Enrique Peña Nieto.[6]  The former official, Alejandro Gutiérrez, allegedly participated in a broad scheme to funnel public funds to political parties.[7]  While the inquiry has not yet enveloped the private sector like Brazil’s Operation Car Wash investigation, the prosecution could signal a new willingness from Mexican authorities to take on large-scale corruption cases.  The allegations are also notable due to their similarity to the allegations in Brazil’s Car Wash investigation.  In both inquiries, funds were allegedly embezzled from state coffers for the benefit of political party campaigns. Legislative Update Mexico’s General Law of Administrative Responsibility (“GLAR”)—an anti-corruption law that provides for administrative liability for corporate misconduct—took effect on July 19, 2017.  The GLAR establishes administrative penalties for improper payments to government officials, bid rigging in public procurement processes, the use of undue influence, and other corrupt acts.[8]  The law reinforces a series of Mexican legal reforms from 2016 that expanded the scope of the country’s existing anti-corruption laws and created a new anti-corruption enforcement regime encompassing federal, state, and municipal levels of government.  Among the GLAR’s most significant changes are provisions that target corrupt activities by corporate entities and create incentives for companies to implement compliance programs to avoid or minimize corporate liability. The GLAR applies to all Mexican public officials who commit what the law calls “non-serious” and “serious” administrative offenses.[9]  Non-serious administrative offenses include the failure to uphold certain responsibilities of public officials, as defined by the GLAR (e.g., cooperating with judicial and administrative proceedings, reporting misconduct, etc.).[10]  Serious administrative offenses include accepting (or demanding) bribes, embezzling public funds, and committing other corrupt acts, as defined by the GLAR.[11]  The GLAR also applies to private persons (companies and individuals) who commit acts considered to be “linked to serious administrative offenses.”[12]  These offenses include the following: Bribery of a public official (directly or through third parties)[13]; Participation in any federal, state, or municipal administrative proceedings from which the person has been banned for past misconduct[14]; The use of economic or political power (be it actual or apparent) over any public servant to obtain a benefit or advantage, or to cause injury to any other person or public official[15]; The use of false information to obtain an approval, benefit, or advantage, or to cause damage to another person or public servant[16]; Misuse and misappropriation of public resources, including material, human, and financial resources[17]; The hiring of former public officials who were in office the prior year, acquired confidential information through their prior employment, and give the contractor a benefit in the market and an advantage against competitors[18]; and Collusion with one or more private parties in connection with obtaining improper benefits or advantages in federal, state, or municipal public contracting processes.[19]  Notably, the collusion provisions apply extraterritorially and ban coordination in “international commercial transactions” involving federal, state, or municipal public contracting processes abroad.[20] The GLAR provides administrative penalties for violations committed by both physical persons and legal entities.  Physical persons who violate the GLAR can be subjected to: (1) economic sanctions (up to two times the benefit obtained, or up to approximately $597,000 USD)[21]; (2) preclusion from participating in public procurements and projects (for a maximum of eight years)[22]; and/or (3) liability for any damages incurred by any affected public entities or governments.[23] Legal entities, on the other hand, can be fined up to twice the benefit obtained, or up to approximately $5,970,000 USD, precluded from participating in public procurements for up to ten years, and held liable for damages.[24]  The GLAR also creates two additional penalties for legal entities:  suspension of activities within the country for up to three years, and dissolution.[25]  Article 81 limits the ability to enforce these two stiffer penalties to situations where (1) there was an economic benefit and the administration, compliance department, or partners were involved, or (2) the company committed the prohibited conduct in a systemic fashion.[26]  The GLAR’s penalties for physical and legal persons are administrative, rather than criminal. Under Article 25 of the GLAR, Mexican authorities can take into account a company’s robust compliance “Integrity Program” in determining and potentially mitigating corporate liability under the GLAR.[27]  The law requires the Integrity Program to have several elements, including clearly written policies and adequate review, training, and reporting systems.[28] The GLAR contains a self-reporting incentive that provides for up to a seventy percent reduction of penalties for those who report past or ongoing misconduct to an investigative authority.[29]  As previously noted, the GLAR’s non-monetary sanctions include preclusion from participating in public procurements and projects for up to eight years (for physical persons) or ten years (for companies).[30]  If a person subject to a preclusion sanction self-reports GLAR violations, the preclusion sanction can be reduced or completely lifted by the Mexican authorities.[31]  Requirements for obtaining a reduction of penalties through self-reporting include: (1) involvement in an alleged GLAR infraction and being the first to contribute information that proves the existence of misconduct and who committed the violations; (2) refraining from notifying other suspects that an administrative responsibility action has been initiated; (3) full and ongoing cooperation with the investigative authorities; and (4) suspension of any further participation in the alleged infraction.[32] Notably, other participants in the alleged misconduct who might be the second (or later) to disclose information could receive up to a fifty percent penalty reduction, provided that they also comply with the above requirements.[33]  If a party confesses information to the investigative authorities after an administrative action has already begun, that party could potentially receive a thirty percent reduction of penalties.[34] For a full analysis of the GLAR, see http://www.gibsondunn.com/publications/Pages/Mexico-General-Law-of-Administrative-Responsibility-Targets-Corrupt-Activities-by-Corporate-Entities.aspx. 2.    Brazil Following the success of the massive Operation Car Wash investigation into corruption involving the country’s energy sector, Brazilian regulators launched or advanced inquiries in 2017 impacting companies in the healthcare, meatpacking, and financial industries, among others.  Brazilian authorities have also continued to garner international accolades for their anti-corruption work, with Brazil’s federal prosecution service (“Ministério Público Federal” or “MPF”) winning Global Investigation Review’s “Enforcement Agency or Prosecutor of the Year” award for its 2017 Operation Car Wash efforts.[35]  This award follows a 2016 recognition of the Car Wash Taskforce by Transparency International.[36]  The robust enforcement environment in Brazil is also reflected in this year’s public company disclosures.  In 2017, thirty-four companies disclosed information regarding new or ongoing inquiries involving Brazil, while disclosures regarding other Latin American nations numbered in the single digits.[37] Notable Enforcement Actions and Investigations A.    Operation Car Wash (Operação Lava Jato) Operation Car Wash, the multi-year investigation into allegations of corruption related to contracts with state-owned oil company Petrobras, has remained a focus area for the Brazilian authorities.  The investigation opened four new phases in 2017.  Notably, in October 2017, Judge Sergio Moro—the lead jurist for the investigation—stated at a public event that the Car Wash inquiry was “moving toward the final phase.”[38]  Judge Moro did not, however, provide a potential date for closing the investigation, stating, “a good part of the work is done, but this does not mean that work does not remain.”[39]  To date, Brazilian authorities investigating the Car Wash allegations have obtained 177 convictions, with sentences totaling more than 1,750 years in prison.[40] B.    Operation Zealots (Operação Zelotes) In 2017, Brazilian authorities launched new phases of Operation Zealots, a multi-year investigation into alleged payments to members of Brazil’s Administrative Board of Tax Appeals.[41]  The investigation began as an inquiry into one of the largest alleged tax evasion schemes in the country’s history.  Large companies and banks, including Bradesco, Santander, and Safra, allegedly paid bribes to members of the appeals board in exchange for a reduction or waiver of taxes owed.[42]  Operation Zealots was launched in 2015 and initially implicated companies in the financial sector.  The scope of the investigation has expanded in the last two years to also reach companies in the automobile sector and a Brazilian steel distributor.[43]  Notably, in 2017, a criminal complaint was filed against former Brazilian President Luiz Inácio Lula da Silva alleging that he received payments in exchange for securing tax benefits for automobile companies.[44]  The total amount of evaded taxes through various alleged Operation Zealots schemes is estimated to reach nearly $19 billion BRL (approx. $5.8 billion USD).[45] C.    Operation Weak Flesh (Operação Carne Fraca) In early 2017, the Brazilian Federal Police launched an investigation into the alleged bribery of government food sanitation inspectors called Operation Weak Flesh.[46]  The operation was reported to be one of the largest in the history of the Federal Police, with Brazilian authorities executing 194 search-and-seizure warrants.[47]  Dozens of inspectors are accused of taking bribes in exchange for allowing the sale of rancid products, falsifying export documents, overlooking illicit additives, and failing to inspect meatpacking plants.[48]  Authorities are investigating more than thirty meatprocessing companies, including giants such as JBS S.A. and BRF S.A. D.    Operation Bullish (Operação Bullish) On May 12, 2017, the Federal Police launched Operation Bullish, an investigation into fraud and irregularities in the manner by which Brazil’s National Bank for Economic and Social Development approved investments of over $8 billion BRL (approx. $2.4 billion USD) for the expansion of the Brazilian meatpacking company JBS.[49]  While JBS claims that it did not receive any favors from the bank’s investment arm (“BNDESPar”), Brazil’s Federal Court of Accounts (“TCU”) claims that the bank approved “risky” investments for JBS with inadequate time for analysis.[50]  The Federal Police further claim that although BNDESPar approved funds for a JBS acquisition of a foreign company, the acquisition never occurred and the investment funds were never returned.[51] E.    Operation Mister Hyde (Operação Mister Hyde) Brazilian authorities also continued inquiries in the healthcare space as part of a multi-year investigation into an alleged “Prosthetics Mafia” of doctors and medical instrument suppliers that rigged the bidding process for surgical supplies.  Investigators alleged that in exchange for payments, doctors would identify patients for unnecessary surgeries and ensure that the surgical instruments used in the operations came from a specified provider.[52]  The inquiry stems from a 2015 congressional investigation.  In February 2017, it was reported that three employees from one of the companies under investigation, TM Medical, agreed to plea bargains with the federal authorities.[53] Settlements and Leniency Agreements UTC Engenharia.  In July 2017, UTC Engenharia signed a leniency agreement with the Brazilian government and agreed to pay $574 million BRL (approx. $175 million USD), including a fine, damages, and unjust enrichment.[54]  UTC signed the agreement with Brazil’s Comptroller General of the Union (“CGU”) and Brazil’s Federal Attorney General’s Office.[55]  Under the agreement, UTC must adopt an integrity program and pay its fine within twenty-two years.[56] According to the Brazilian government, the agreement reflects “the basic pillars enumerated by the two federal agencies in the negotiations, that is, speed in obtaining evidence, identification of others involved in the crimes, cooperation with investigations, and commitment to the implementation of effective integrity mechanisms.”[57]  Notably, according to the press release, the implementation of UTC’s integrity program “will be monitored by the CGU, which can perform inspections at the company and request access to any documents and information necessary.”[58] Rolls-Royce plc.  In January 2017, Rolls-Royce settled allegations that the company offered, paid, or failed to prevent bribes involving the sale of engines, energy systems, and related services in Brazil and five other foreign jurisdictions.[59]  According to charging documents, between 2003 and 2013, Rolls-Royce allegedly made commission payments to an intermediary while knowing that portions of the payments would be paid to officials at Brazil’s state-owned oil company Petrobras.[60]  Rolls-Royce’s intermediary allegedly made more than $1.6 million BRL (approx. $485,700 USD) in corrupt payments to obtain contracts for supplying equipment and long-term service agreements.[61]  As a part of a global settlement with DOJ, Britain’s Serious Fraud Office, and Brazil’s Ministério Público Federal, Rolls-Royce agreed to pay $800 million USD total, with $25.5 million USD of that settlement being paid to the Brazilian authorities.[62] SBM Offshore N.V.  In November 2017, SBM settled allegations with DOJ that the company made payments to foreign officials in Brazil, Angola, Equatorial Guinea, Kazakhstan, and Iraq.[63]  According to the DPA, SBM used a sales agent to provide payments and hospitalities to Petrobras executives to secure an improper advantage in business with the state-owned company.[64]  SBM agreed to pay a $238 million USD criminal fine.[65]  DOJ took into account overlapping conduct prosecuted by other jurisdictions when calculating SBM’s fine, including the company’s ongoing negotiations with the MPF and a $240 million USD settlement with the Dutch authorities.[66]  The government’s press release also stated that DOJ was “grateful to Brazil’s MPF” and authorities in the Netherlands and Switzerland “for providing substantial assistance in gathering evidence during [the] investigation.”[67] Braskem/Odebrecht.  In December 2016, Brazilian construction conglomerate Odebrecht and its petrochemical production subsidiary, Braskem, resolved bribery charges with authorities in Brazil, Switzerland, and the United States.[68]  At the time of the 2016 settlement, the DOJ/SEC segment of the multibillion-dollar resolution was $419 million USD.  The settlement agreement did note, however, that Odebrecht represented it could pay no more than $2.6 billion USD in penalties.[69]  The agreement further noted that the Brazilian and U.S. authorities would conduct an independent analysis of Odebrecht’s representation.[70]  According to an April 2017 sentencing memorandum filed with the court, the U.S. and Brazilian authorities analyzed Odebrecht’s ability to pay the proposed penalty and determined that Odebrecht was indeed unable to pay a total criminal penalty in excess of $2.6 billion USD.[71]  The sentencing memorandum noted the parties agreed that Odebrecht would therefore pay a reduced fine of $93 million USD to the U.S. government.[72] Legislative Updates and Agency Guidance State-Level Anti-Corruption Law.  In late 2017, the state of Rio de Janeiro passed an anti-corruption law requiring companies contracting with the state to have compliance programs.[73]  The law applies to companies and individuals, including foreign companies with “headquarters, subsidiaries, or representation in Brazil.”[74]  While the Clean Company Act takes a company’s compliance program into consideration in the application of sanctions, Rio de Janeiro’s law goes one step further and requires companies to have programs in place before contracting with the state.[75] Ten Measures Against Corruption.  An initiative from Brazil’s Ministério Público Federal to strengthen anti-corruption laws has yet to pass both houses of Brazil’s legislative branch.  The initiative—called the “Ten Measures Against Corruption”—was first announced by the MPF in 2015.[76]  The proposal was introduced to Congress as a public initiative in 2016 after it received more than 1.7 million signatures of support from the public.[77]  The measures propose changes in corruption laws and criminal proceedings that would make the judiciary and prosecutor’s office more transparent, criminalize unjust enrichment of civil servants, hold political parties liable for accepting undeclared donations, and increase penalties for corrupt acts.[78]  Consideration of the proposal was halted in the Senate in 2017 after public outrage in response to the lower Congress’s addition of a provision that would impose harsh penalties on the judiciary and federal prosecutors for “abuse of authority.”[79]  Operation Car Wash prosecutor Deltan Dallagnol claimed that the House’s amendments “favored” white collar crimes and undermined the proposal’s purpose.[80] Ministério Público Federal Leniency Agreement Guidance.  In August 2017, the Ministério Público Federal issued guidance for prosecutors negotiating leniency agreements.[81]  The guidance provides insights into the process Brazil’s prosecutors use for negotiating such agreements and the expectations for collaborators.  One section of the guidance, for example, states that negotiations should be conducted by “more than one member of the MPF” and preferably by a criminal and administrative prosecutor for the agency.[82]  The guidance also notes the possibility that the negotiations could take place together with other Brazilian authorities, including the CGU [the chief regulator of the Clean Company Act], the Federal Attorney General’s Office (“AGU”), the chief anti-trust regulator, and the TCU.[83]  The guidance also notably details obligations of collaborators in leniency agreements, including: Communicating relevant information and proof (time frames, locations, etc.); Ceasing illicit conduct; Implementing a compliance program and submitting to external audit, at the company’s expense; Collaborating fully with the investigations during the life of the agreement and always acting with honesty, loyalty, and good faith, without reservation; Paying applicable fines and damages; and Declaring that all information supplied is correct and accurate, under the penalty of rescission of the leniency agreement.[84] 3.    Argentina Notable Enforcement Actions and Investigations A.    Investigation into President Mauricio Macri Beginning in 2016 and continuing throughout 2017, federal prosecutors in Argentina launched investigations concerning current President Mauricio Macri.[85]  While Macri was elected on promises to combat corruption in Argentina,[86] his family’s extensive business holdings have been scrutinized by Argentine authorities in connection with various influence trafficking and money laundering probes.[87]  An investigation opened in April 2017, for example, focuses on the grant of airline routes to a company connected to Macri’s father.[88]  Argentine prosecutors are also probing allegations that a government official received payments from construction conglomerate Odebrecht in connection with renewing a public contract.[89]  At the time of the alleged payments, Odebrecht was a participant in a consortium with a company connected to Macri’s cousin.[90] B.    Investigation into Former President Cristina Fernández de Kirchner In April 2017, former President Cristina Fernández de Kirchner was indicted in connection with allegations that she led a scheme to launder funds misappropriated from public coffers through a family-owned business.[91]  The charges represent the second indictment filed against Kirchner since she left office more than two years ago.[92]  In December 2016, charges were brought against Kirchner alleging that she led a criminal organization that attempted to illegally benefit its members by awarding public contracts to construction company Austral Construcciones.[93]  In a separate investigation, a judge ordered Kirchner’s arrest in connection with allegations that she covered up possible Iranian involvement in the 1994 bombing of a Jewish community center in Buenos Aires in exchange for a potentially lucrative trade deal.[94]  Other former high-level employees in Kirchner’s government have been arrested for unjust enrichment, including Vice President Amado Boudou and former planning minister Julio de Vido.[95] Legislative Update In November 2017, Argentina’s Congress passed new legislation imposing criminal liability on corporations for bribery (national and transnational), influence peddling, unjust enrichment of public officials, falsifying balance sheets and reports, and other designated offenses.[96]  The bill, called the Law on Corporate Criminal Liability, applies to both Argentine and multinational companies domiciled in the country.[97]  The law went into effect on March 1, 2018.[98] Under the bill, legal entities can be held liable for bribery and other misconduct carried out directly or indirectly, with the company’s intervention, or in the company’s name, interest, or benefit.[99]  Legal entities can also be held liable if the company ratifies the initially unauthorized actions of a third party.[100]  The bill states that legal entities are not held liable, however, if the physical person who committed the misconduct acted “for his exclusive benefit, and without providing any advantage” for the company.[101]  The bill also imposes successor liability on parent companies in mergers, acquisitions, and other corporate restructurings.[102]  The bill applies to transnational bribery for acts committed by Argentine citizens and entities that are domiciled in Argentina.[103] The bill imposes monetary and non-monetary sanctions, including: Monetary fines from two to five times the benefit that was (or could have been) obtained by the company,[104] Complete or partial suspension of activities for up to ten years,[105] Suspension for up to ten years from participating in public bids, contracts, or any other activity linked to the state,[106] and Dissolution and liquidation of the corporate person when the entity was created solely for the purposes of committing misconduct, or when misconduct constituted the principal activities of the entity.[107] Legal entities can be exempted from criminal liability where the company (1) self-reported misconduct detected through its own efforts and internal investigation, (2) implemented an adequate internal control and compliance system before the misconduct occurred, and (3) returned undue benefits obtained through the misconduct.[108]  The bill also contains provisions allowing for Argentina’s public prosecutor’s office, the Ministério Público Fiscal, to enter into collaboration agreements with legal entities.[109]  The agreements require legal entities to provide information regarding the misconduct, pay the equivalent of half the minimum monetary fine imposed under the law, and comply with other conditions of the agreement (including, but not limited to, implementing a compliance program).[110] Minimal requirements for compliance programs consistent with the bill include: A code of ethics or conduct, or the existence of integrity policies and procedures applicable to all directors, administrators, and employees that prevent the commission of the crimes contemplated by the law,[111] Specific rules and procedures to prevent wrongdoing in the context of tenders and bidding processes in the execution of administrative contracts, or in any other interaction with the public sector,[112] and Periodic trainings on the compliance program for directors, administrators, and employees.[113] The law also notes that a compliance program may include additional elements, including, among others: Periodic risk assessments,[114] Visible and unequivocal support of the program from upper management,[115] Misconduct-reporting channels that are open to third parties and adequately defined,[116] Anti-retaliation policies,[117] Internal investigation systems,[118] Due diligence processes for M&A transactions,[119] Monitoring and evaluation of the effectiveness of the compliance program,[120] and Designation of an employee responsible for the coordination and implementation of the program.[121] The compliance program components listed in the law are notably similar to elements of effective compliance programs delineated by DOJ, the SEC, and Mexico’s General Law of Administrative Responsibility.[122] 4.    Colombia Notable Enforcement Actions and Investigations A.    Odebrecht Fallout According to a December 2016 deferred prosecution agreement with DOJ, Odebrecht made more than $11 million USD in corrupt payments to government officials in Colombia to secure public works contracts.[123]  In the wake of this settlement with U.S. authorities and Brazil’s multi-year investigation into Odebrecht’s dealings, Colombian prosecutors have announced inquiries into congressional involvement in the allegations and have arrested former Colombian senator Otto Bula for allegedly taking $4.6 million USD in bribes from the company.[124]  Odebrecht allegedly paid Bula to ensure that a contract for the construction of the Ocaña-Gamarra highway included higher-priced tolls that would benefit the company.[125]  Odebrecht also allegedly made $6.5 million USD in payments to former Vice Minister of Transportation Gabriel García Morales in exchange for a contract to construct a section of the Ruta del Sol highway.[126] B.    Reficar Oil Refinery In 2017, Colombian authorities brought corruption charges against executives from an American engineering firm, Chicago Bridge & Iron Company (“CB&I”), in connection with the Refineria de Cartagena (“Reficar”) oil refinery.[127]  The Reficar oil refinery is a subsidiary of Colombia’s state-owned oil company, Ecopetrol.  Colombian authorities charged CB&I and Reficar executives with various corruption charges, including unjust enrichment, misappropriation of funds, and embezzlement.[128]  According to the Colombian authorities, Reficar executives directed contracts to CB&I without abiding by legal requirements for public bidding.[129]  The Colombian authorities also claimed to have discovered irregularities with payments CB&I received in connection with Reficar contracts, including payments for work that was not performed, reimbursements for extravagant expenses unrelated to the refinery project, and double billing.[130] C.    Conviction of Former Anti-Corruption Chief Luis Gustavo Moreno On June 27, 2017, former anti-corruption chief Luis Gustavo Moreno was arrested in his office by the CTI (the Technical Investigation Team, a division of the Colombian Attorney General).  They charged him with soliciting bribes in return for interfering with anti-corruption investigations into Alejandro Lyons Muskus, ex-governor of Córdoba, with the possibility of ending such investigations.  After his arrest, Moreno turned into a key collaborator with various officials, shedding light on a massive corruption scandal in the judiciary and congressional branch.  According to Moreno, the scandal involved state politicians such as Musa Besaile Fayad and Bernardo “Ñoño” Elías, while also accusing judges such as Gustavo Malo Fernández, Francisco José Ricaurte, and Leónidas Bustos of accepting bribes in order to corrupt judicial proceedings.[131]  President Juan Manuel Santos signed extradition orders for Moreno and extradited him to Florida, where DOJ officials charged him with conspiracy to launder money with the intent to promote foreign bribery.[132] Legislative Update In 2017, Colombian President Juan Manuel Santos announced a series of measures to address corruption issues in the country.[133]  The announcement followed Colombia’s 2016 passage of its first foreign bribery statute, the Transnational Corruption Act (“TCA”).[134]  The TCA notably has extraterritorial effect and holds legal entities administratively liable for improper payments to foreign government officials made by the entity’s employees, officers, directors, subsidiaries, contractors, or associates.[135]  The new anti-corruption measures announced by President Santos, among others, include passing new laws that would provide labor protections and economic incentives for whistleblowers, require that companies disclose information regarding “the persons who in reality profit from a business or company,” and eliminate the use of house arrest for corruption cases.[136]  The President also proposed creating a group of judges who specialize in anti-corruption cases.[137]  Other corruption reforms considered by Colombia’s Congress in 2017 include requiring lobbyists to disclose meetings with public officials and the creation of a registry of beneficiaries of public contracts.[138] Transnational Cooperation In 2017, Colombia’s Superintendence of Corporations and the Peruvian Ministry entered into a Memorandum of Understanding (“MOU”) to prosecute international corruption.[139]  The goal of the MOU is to help investigate corruption in Peru and Colombia by focusing on a bilateral exchange of evidence between the two countries.[140]  Colombia signed a similar agreement with Spain in 2017.[141]  These new efforts are meant to assist partnering states in overcoming the difficulties of cross-border investigations, including the need to acquire evidence in foreign territories. 5.    Peru Notable Enforcement Actions and Investigations The Odebrecht scandal has significantly impacted the political and anti-corruption landscape in Peru.  In its settlement with Odebrecht, DOJ disclosed that Odebrecht executives admitted to funneling around $29 million USD in bribes to Peruvian government officials between 2004 and 2015.[142]  Government officials announced that Odebrecht and other companies involved in corruption would no longer be able to bid on public work contracts.[143]  This marked the end of Odebrecht’s four-decade run as a successful bidder on public work projects in Peru.[144]  The government will now decide on a case-by-case basis what to do with the remaining contracts awarded to Odebrecht.[145] Three of Peru’s recent former presidents have been arrested and/or accused of crimes related to corruption, all with some alleged connection to Odebrecht.[146]  In July 2017, a Peruvian judge ordered the arrest of former President Ollanta Humala and his wife on charges of money laundering and conspiracy related to the alleged receipt of a $3 million USD bribe from Odebrecht.[147]  Humala, who has continued to maintain his innocence, became the first former head of state detained in connection with the Odebrecht scandal.[148]  Prosecutors are also investigating former President Alan Garcia, who allegedly facilitated irregular bidding on the subway in Lima.[149] Another former president, Alejandro Toledo, was ordered arrested by a Peruvian judge in February, pursuant to accusations that he had received $20 million USD in bribes from Odebrecht in connection with bidding on the Interoceanic Highway between Brazil and Peru.  Toledo has remained in the United States and denied any wrongdoing.[150]  A formal extradition request to the United States for Toledo to return to Peru and face charges for the alleged bribe is near approval on the Peruvian side.[151] Even Peru’s current president, Pedro Pablo Kuczynski, has been unable to evade implication in the ever-expanding Odebrecht probe.  Earlier in 2017, he had to testify as a witness in the same investigation implicating former President Toledo in the alleged irregular bidding process to build the Interoceanic Highway.[152]  In November 2017, former Odebrecht CEO Marcelo Odebrecht told Brazilian prosecutors that Odebrecht hired Kuczynski as a consultant after he had opposed highway contracts granted to the company.[153]  Kuczynski denied the allegations, but subsequently documents showed Kuczynski may have received $782,000 in payments from Odebrecht through his investment banking firm, Westfield Capital.[154]  Kuczynski narrowly survived an impeachment vote based on the corruption allegations in late December 2017.[155]  Recent additional testimony from an Odebrecht official purporting to confirm impropriety in Kuczynski’s relationship with Odebrecht has renewed calls for Kuczynski to step down or be impeached.[156] On a regional and local level in Peru, several governors have been under investigation or accused of corruption.[157]  Remarkably, a May 2014 study by Peru’s office of the anti-corruption solicitor reported that a significant majority of mayors in office between 2011 and 2014 in Peru had been investigated for criminal activity.[158] Legislative Update The most significant development in anti-corruption legislation in Peru over the last year was Legislative Decree No. 1352, enacted on January 6, 2017.  This decree modifies Law No. 30424 (Law Regulating Administrative Liability of Legal Entities for the Commission of Active Transnational Bribery),[159] which was enacted in 2016 to declare that legal entities, including corporations, would be autonomously and administratively liable for active transnational bribery when it was committed in their name or for them and on their behalf.[160]  Decree No. 1352 extended the administrative and autonomous liability of legal entities to include those guilty of active bribery of public officials.[161]  The liability provided for in Decree No. 1352 is termed “autonomous” because a natural person does not have to be found liable first; the Decree’s charges now create independent liability, and an independent entity like a corporation can be charged separately.[162]  The law provides for autonomous liability for certain crimes of bribery and money laundering.[163] Parent companies are not liable for penalties under the autonomous liability provisions of Decree No. 1352 unless the employees who engaged in corruption or money laundering did so with specific consent or authorization from the parent company.[164]  Additionally, companies that acquire entities found guilty of corruption under the autonomous liability provision may not be separately penalized if the acquiring company used proper due diligence, defined as taking reasonable actions to verify that no autonomous liability crimes had been committed.[165]  Finally, entities can avoid autonomous liability by implementing a sufficient criminal law compliance program designed to prevent such crimes of corruption from being committed on behalf of the company.[166] Elements of a properly designed program include: an autonomous person in charge of the compliance program, proper implementation of complaint procedures, continuous monitoring of the program, and training for those involved.[167]  The Peruvian securities regulator had promised additional guidance before January 1, 2018—when the Decree took effect—but, as of the date of this publication, no such guidance has been issued.[168] The Peruvian government has also modified the procurement laws via Decree 1341 to ban any company with representatives who have been convicted of corruption from securing government contracts.[169]  The ban applies even if the crimes are admitted as part of a plea bargain agreement for a reduced sentence.[170] Peru has also enacted harsher penalties for public officials found guilty of corruption and prohibitions on such officials from being able to work in the public sector post-conviction.  Legislative Decree No. 1243 (the “civil death” law) was enacted in late 2016 to establish harsher sentences for corruption-related offenses and to increase the “civil disqualification” period to five to twenty years for corruption crimes like extortion, simple and aggravated collusion, embezzlement, and bribery.[171]  That said, this disqualification only applies to crimes committed as part of a “criminal organization,” and because of the practicalities involved in these types of crimes, it is unlikely that many officials will be found to have been part of a “criminal organization” and thus barred from public service.[172] Legislative Decree No. 1295 was also enacted on December 30, 2016 with provisions to improve government integrity.[173]  The decree created the National Registry of Sanctions against Civil Servants (Registro Nacional de Sanciones contra Servidores Civiles).[174] This online registry will be updated monthly by the National Authority of Civil Service (Autoridad Nacional del Servicio Civil) and will consolidate all the information relevant to disciplinary actions and/or sanctions against public officials (including corruption charges).[175]  Anyone listed in the registry is prohibited from government employment for the duration of their registry.[176] [1] This article is intended to review key developments in the five enumerated countries.  Changes to the compliance environment continue throughout Central and South America, though they are not covered in this particular update. [2] Petróleos Mexicanos – Pemex, Report of Foreign Private Issuer (Form 6-K) (Nov. 11, 2017), at 8. [3] Petróleos Mexicanos – Pemex, Report of Foreign Private Issuer (Form 6-K) (Sept. 29, 2017), at 21. [4] See Plea Agreement, Attach. B ¶¶ 59-60, United States v. Odebrecht S.A., Cr. No. 16-643 (RJD) (E.D.N.Y. Dec. 21, 2016). [5] See Secretaría de la Función Pública, Abre SFP nuevos procedimientos administrativos en contra de filial de Odebrecht (Sep. 11, 2017), https://www.gob.mx/sfp/articulos/abre-sfp-nuevos-procedimientos-administrativos-en-contra-de-filial-de-odebrecht-126170?idiom=es. [6] Azam Ahmed and J. Jesus Esquivel, Mexico Graft Inquiry Deepens with Arrest of a Presidential Ally, N.Y. Times, Dec. 20, 2017, https://www.nytimes.com/2017/12/20/world/americas/mexico-corruption-pri.html. [7] Id.; Detienen a extesorero del PRI por presunto desvío de recursos en 2016, El Financiero, Dec. 20, 2017, http://www.elfinanciero.com.mx/nacional/detienen-a-extesorero-del-pri-por-presunto-desvio-de-recursos-en-2016.html. [8] Ley General de Responsabilidades Administrativas, Artículos 2, 52, 66, 70 (July 18, 2016) (Mex.) [hereinafter “GLAR”]. [9] GLAR at Artículos 49, 51. [10] Id. at Artículo 49. [11] Id. at Artículos 51-64. [12] Id. at Artículos 3, 4, 65. [13] Bribery includes promising, offering, or giving any benefit, whether it be through money, valuables, property, services well below market value, donations, or any other benefit, to a public servant or their spouse in return for the public servant performing or refraining from performing any act related to their duties, or using their influence in their position, for the purpose of obtaining or maintaining a benefit or advantage, irrespective of the benefit actually being achieved.  Id. at Artículos 52, 66. [14] Id. at Artículo 67. [15] Id. at Artículo 68. [16] Id. at Artículo 69. [17] Id. at Artículo 71. [18] Id. at Artículo 72. [19] Id. at Artículo 70. [20] Id. [21] Under Article 81 of the GLAR, if no benefit is obtained through the corrupt act, the financial penalty is calculated by multiplying a statutorily defined value by the daily tenor of a Mexican government economic reference rate called the Unidad de Medida y Actualización (“UMA”).  While the UMA is a variable rate that changes over time, the statutory multiple is static and defined by the GLAR.  For physical persons—if no benefit was obtained—the penalty can be up to 150,000 times the UMA (approximately $597,000 USD as of May 2017).  GLAR, Artículo 81. [22] Id. [23] Id. [24] Id. [25] Id. [26] Id. [27] Id. at Artículo 25. [28] The seven required elements of the integrity program are delineated in the statute and discussed more fully in Gibson Dunn’s review of the GLAR, found at http://www.gibsondunn.com/publications/Pages/Mexico-General-Law-of-Administrative-Responsibility-Targets-Corrupt-Activities-by-Corporate-Entities.aspx. [29] GLAR at Artículos 88-89. [30] Id. at Artículo 81. [31] Id. at Artículos 88-89. [32] Id. at Artículo 89. [33]Id. [34]Id. [35] Ministério Público Federal, MPF recebe prêmio internacional por trabalho no combate à corrupção (Nov. 6, 2017), http://www.mpf.mp.br/rj/sala-de-imprensa/noticias-rj/mpf-recebe-premio-internacional-pelo-combate-a-corrupcao. [36] Press Release, Transparency Int’l Secretariat, Brazil’s Carwash Task Force Wins Transparency Int’l Anti-Corruption Award (Dec. 6, 2016). [37] See generally FCPA Tracker, https://fcpatracker.com/. [38] See Felipe Gutierrez, Moro se diz ‘cansado’ e que trabalho da Lav Jato em Curitiba esta no fim, Folha de Sao Paulo, Aug. 15, 2017, http://www1.folha.uol.com.br/poder/2017/10/1923633-moro-diz-que-trabalho-da-lava-jato-em-curitiba-esta-acabando.shtml. [39] Id. [40] See Ministério Público Federal, A Lava Jato em numeros – STF (Jan. 12, 2018), http://www.mpf.mp.br/para-o-cidadao/caso-lava-jato/atuacao-no-stj-e-no-stf/resultados-stf/a-lava-jato-em-numeros-stf. [41] Entenda a Operação Zelotes da Polícia Federal, Folha de São Paulo, Apr. 1, 2015, http://www1.folha.uol.com.br/mercado/2015/04/1611246-entenda-a-operacao-zelotes-da-policia-federal.shtml. [42] Id. [43] Mateus Rodrigues, MPF denuncia executivos da Gerdau na Zelotes por corrupcão e lavagem de dinheiro, Oglobo, Aug. 24, 2017, https://g1.globo.com/distrito-federal/noticia/mpf-denuncia-executivos-da-gerdau-na-zelotes-por-corrupcao-e-lavagem-de-dinheiro.ghtml; MPF denuncia Lula e Gilberto Carvalho por corrupcao passive na Operacoes Zelotes, Oglobo, Sept. 11, 2017, https://g1.globo.com/politica/noticia/mpf-denuncia-lula-por-corrupcao-passiva-na-operacao-zelotes.ghtml. [44] MPF denuncia Lula e Gilberto Carvalho por corrupcao passive na Operacoes Zelotes, supra note 43. [45] Entenda a Operação Zelotes da Polícia Federal, supra note 41. [46] Estelita H. Carazzai, Bela Megale, & Camila Mattoso, Operação contra frigoríficos prende 37 e descobre até carne podre à venda, Folha de S. Paulo, Mar. 17, 2017, http://www1.folha.uol.com.br/mercado/2017/03/1867309-pf-faz-operacao-contra-frigorificos-e-cumpre-quase-40-prisoes.shtml. [47] Id. [48] Id. [49] Operação Bullish investiga fraudes em empréstimos no BNDES, Agência de Notícias de Polícia Federal, May 12, 2017, http://www.pf.gov.br/agencia/noticias/2017/05/operacao-bullish-investiga-fraudes-em-emprestimos-no-bndes; Bela Megale, Camila Mattoso, & Raquel Landim, Operação policial põe sob suspeita apoio do BNDES à expansão da JBS, Folha de S. Paulo, May 12, 2017, http://www1.folha.uol.com.br/mercado/2017/05/1883367-pf-deflagra-operacao-que-investiga-fraudes-em-emprestimos-no-bndes.shtml. [50] Megale et al., supra note 49. [51] Id. [52] Graziele Frederico and Gabriela Lapa, Grupo de acusados na ‘máfia de próteses’ do DF fecha acordo de delação premiada, Oglobo, Feb. 9, 2017, http://g1.globo.com/distrito-federal/noticia/grupo-de-acusados-na-mafia-das-proteses-do-df-fecha-acordo-de-delacao-premiada.ghtml. [53] Id. [54] Ministério da Transparência e Controladoria-Geral da União, CGU e AGU assinam acordo de leniência com UTC Engenharia, July 10, 2017, http://www.cgu.gov.br/noticias/2017/07/cgu-e-agu-assinam-acordo-de-leniencia-com-o-utc-engenharia. [55] Id. [56] Id. [57] Id. [58] Id. [59] Press Release, U.S. Dep’t of Justice, Rolls-Royce plc Agrees to Pay $170 Million Criminal Penalty to Resolve Foreign Corrupt Practices Act Case (Jan. 17, 2017), https://www.justice.gov/opa/pr/rolls-royce-plc-agrees-pay-170-million-criminal-penalty-resolve-foreign-corrupt-practices-act. [60] Deferred Prosecution Agreement, Attach. A ¶ 20, United States v. Rolls-Royce plc, No. 2:16-CR-00247-EAS (S.D. Ohio. Dec. 20, 2016). [61] Id. [62] Press Release, U.S. Dep’t of Justice, supra note 59. [63] Press Release, U.S. Dep’t of Justice, SBM Offshore N.V. and United States-Based Subsidiary Resolve Foreign Corrupt Practices Act Case Involving Bribes in Five Countries (Nov. 29, 2017), https://www.justice.gov/opa/pr/sbm-offshore-nv-and-united-states-based-subsidiary-resolve-foreign-corrupt-practices-act-case. [64] Deferred Prosecution Agreement, Attach. A ¶¶ 27, 35, United States v. SBM Offshore N.V., No. 17-686 (S.D. Tex. Nov. 29, 2017). [65] Press Release, U.S. Dep’t of Justice, supra note 63. [66] Id. [67] Id. [68] Press Release, U.S. Dep’t of Justice, Odebrecht and Braskem Plead Guilty and Agree to Pay at Least $3.5 Billion in Global Penalties to Resolve Largest Foreign Bribery Case in History (Dec. 21, 2016), https://www.justice.gov/opa/pr/odebrecht-and-braskem-plead-guilty-and-agree-pay-least-35-billion-global-penalties-resolve. [69] Plea Agreement ¶ 21(b), United States v. Odebrecht, No. 16-643 (RJD) (Dec. 21, 2016). [70] Id. at ¶ 21(c). [71] Sentencing Memorandum at 4, United States v. Odebrecht S.A., No. 13-643 (RJD) (Apr. 11, 2017). [72] Id. [73] Lei No. 7753 de 17 de outubro de 2017, do Rio de Janeiro. [74] Id. at Artigo 1. [75] Id.; Lei No. 12.846 de 2013, at Artigo 7. [76] Fausto Macedo, Quais são e o Que propõem as ’10 Medidas contra a corrupção’ do Ministério Público, Estadão, Sept. 16, 2015, http://politica.estadao.com.br/blogs/fausto-macedo/quais-sao-e-o-que-propoem-as-10-medidas-contra-a-corrupcao-do-ministerio-publico/. [77] Marcello Larcher, CCJ valida assinaturas do projeto das dez medidas contra a corrupção, Agência Câmara Notícias, Mar. 28, 2017, http://www2.camara.leg.br/camaranoticias/noticias/POLITICA/527029-CCJ-VALIDA-ASSINATURAS-DO-PROJETO-DAS-DEZ-MEDIDAS-CONTRA-A-CORRUPCAO.html. [78] Renan Ramalho, MP apresenta dez propostas para reforçar combate à corrupção no país, Oglobo, Mar. 20, 2015, http://g1.globo.com/politica/noticia/2015/03/mp-apresenta-dez-propostas-para-reforcar-combate-corrupcao-no-pais.html. [79] Felipe Gelani, Lei de abuso de autoridade divide opinões entre juristas, Jornal do Brasil, Dec. 4, 2016, http://m.jb.com.br/pais/noticias/2016/12/04/lei-de-abuso-de-autoridade-divide-opinioes-entre-juristas/; Projeto com medidas contra a corrupção aguarda relator na CCJ, Senado Notícias (Apr. 17, 2017), https://www12.senado.leg.br/noticias/materias/2017/04/17/projeto-com-medidas-contra-a-corrupcao-aguarda-relator-na-ccj. [80] Ricardo Brandt, ‘Congresso destruiu’ as 10 Medidas contra Corrupção, diz procurador da Lava Jato, Estadão, Dec. 3, 2016, http://politica.estadao.com.br/blogs/fausto-macedo/congresso-destruiu-as-10-medidas-contra-corrupcao-diz-procurador-da-lava-jato/. [81] Ministério Público Federal, Orientation No. 07/2017 – Leniency Agreements (Aug. 24, 2017), http://www.mpf.mp.br/pgr/documentos/ORIENTAO7_2017.pdf. [82] Id. [83] Id. [84] Id. [85] Almudena Calatrava, Argentine Clean-up President Macri Finds Scandals of His Own, U.S. News, Mar. 3, 2017 https://www.usnews.com/news/world/articles/2017-03-03/argentine-clean-up-president-macri-finds-scandals-of-his-own; Abren investigación contra presidente de Argentina por presunta asociación ilícita y tráfico de influencias, CNN Español, Mar. 1, 2017, http://cnnespanol.cnn.com/2017/03/01/abren-investigacion-al-presidente-de-argentina-mauricio-macri-por-entrega-de-rutas-aereas-a-avianca/. [86] Lucia de Dominicis, 10 promesas incumplidas de Macri en sus 2 años de gobierno, La Primera Piedra, Dec. 10, 2017, http://www.laprimerapiedra.com.ar/2017/12/10-promesas-incumplidas-de-macri/. [87] Calatrava, supra note 85; Fiscal argentino abre investigación a Mauricio Macri por firmas ‘offshore,’ La Prensa, Apr. 7, 2016, https://www.prensa.com/mundo/Fiscal-argentino-investigacion-Mauricio-Macri_0_4455304547.html. [88] Abren investigación contra presidente de Argentina por presunta asociación ilícita y tráfico de influencias, supra note 85. [89] Hugo Alconada Mon, Un Operador de Odebrecht le giro US$ 600.00 al jefe de inteligencia argentine, La Nacion, Jan. 11, 2017, http://www.lanacion.com.ar/1974791-un-operador-de-odebrecht-le-giro-us-600000-al-jefe-de-inteligencia-argentino; AFP, Argentina: fiscal abre causa contra jefe de espias por giro de Odebrecht, La Prensa, Jan. 24, 2017, https://www.prensa.com/mundo/Argentina-fiscal-causa-espias-Odebrecht_0_4674282545.html. [90] Mon, supra note 89. [91] Frederico Rivas Molina, Cristina Fernández de Kirchner suma otro procesamiento por corrupción, El Pais, Apr. 4, 2017, https://elpais.com/internacional/2017/04/04/argentina/1491322535_840466.html. [92] Id. [93] Id. [94] Max Radwin and Anthony Faiola, Argentine Ex-president Cristina Fernández de Kirchner Charged with Treason, Wash. Post, Dec. 7, 2017, https://www.washingtonpost.com/world/the_americas/argentine-ex-president-cristina-fernandez-charged-with-treason/2017/12/07/e3e326e0-db80-11e7-a241-0848315642d0_story.html?utm_term=.37df90a6bf06. [95] Argentina Former Vice-President Amado Boudou Arrested, BBC News, Nov. 3, 2017, http://www.bbc.com/news/world-latin-america-41867239. [96] Argentina Congress Passes Law to Fight Corporate Corruption, Reuters, Nov. 8 2017, https://www.reuters.com/article/us-argentina-corruption/argentina-congress-passes-law-to-fight-corporate-corruption-idUSKBN1D83AX; La Ley de Responsabilidad Penal de las Personas Jurídicas, Law No. 27401 (Nov. 8, 2017), Artículo 1 (Arg.) [hereinafter Ley de Responsabilidad Penal]. [97] La Ley de Responsabilidad Penal de las Personas Jurídicas, at Artículo 1, supra note 96. [98] Paula Urien, Cómo reaccionan las compañías ante la ley penal empresaria, La Nacion, March 4, 2018, https://www.lanacion.com.ar/2113848-como-reaccionan-las-companias-ante-la-ley-penal-empresaria. [99]  Ley de Responsibilidad Penal, at Artículo 2, supra note 97. [100] Id. at Artículo 1. [101] Id. at Artículo 2. [102] Id. at Artículo 3. [103] Id. at Artículo 29. [104] Id. at Artículo 7. [105] Id. [106] Id. [107] Id. [108] Id. at Artículo 9. [109] Id. at Artículo 16. [110] Id. at Artículos 16, 18. [111] Id. at Artículo 23. [112] Id. [113] Id. [114] Id. [115] Id. [116] Id. [117] Id. [118] Id. [119] Id. [120] Id. [121] Id. [122] DOJ and SEC, A Resource Guide to the U.S. Foreign Corrupt Practices Act, at 57 (Nov. 14, 2012); GLAR at  Artículo 25. [123] See Plea Agreement, Attach. B ¶ 51, United States v. Odebrecht S.A., Cr. No. 13-643 (RJD) (E.D.N.Y. Dec. 21, 2016). [124] ¿Pueden las leyes acabar con la corrupción?, Política, July 29, 2017, http://www.semana.com/nacion/articulo/corrupcion-10-proyectos-de-ley-se-tramitan-en-el-congreso-sirven/534225; Julia Symmes Cobb & Guillermo Parra-Bernal, Colombia Arrests Ex-Senator Linked to Odebrecht Graft Scandal, Reuters, Jan. 15, 2017, https://www.reuters.com/article/brazil-corruption-odebrecht-colombia/colombia-arrests-ex-senator-linked-to-odebrecht-graft-scandal-idUSL1N1F5073. [125] Cobb & Parra-Bernal, supra note 124. [126] Jose Maria Irujo & Joaquin Girl, La policía investiga la conexión Colombia-Miami en los pagos al Exviceministro García Morales, El Pais, Nov. 9, 2017, https://elpais.com/internacional/2017/11/06/actualidad/1509965659_671036.html. [127] Fiscalía General de la Nación, Imputados empresarios extranjeros y colombianos por corrupción en la construcción de Reficar (July 26, 2017), https://www.fiscalia.gov.co/colombia/bolsillos-de-cristal/imputados-empresarios-extranjeros-y-colombianos-por-corrupcion-en-la-construccion-de-reficar/. [128] Id. [129] Id. [130] Fiscalía General de la Nación, Refineria de Cartagena (2017), https://www.fiscalia.gov.co/colombia/wp-content/uploads/Presentacion-REFICAR270417.pdf. Santos ratificó extradición del exfiscal Luis Gustavo Moreno, RCN Radio, Mar. 12, 2018, https://www.rcnradio.com/judicial/santos-ratifico-extradicion-del-exfiscal-luis-gustavo-moreno. [132] Id. [133] Presidencia de la República, Gobierno presenta paquete de iniciativas para combatir la corrupción (Aug. 18, 2017), http://es.presidencia.gov.co/noticia/170818-Gobierno-presenta-paquete-de-iniciativas-para-combatir-la-corrupcion. [134] Ley. 1778 de 2016 (Feb. 2, 2016) Diario Oficial 49.774 (Colo). [135] Id. at Artículo 2. [136] Presidente anuncia nuevas medidas para seguir enfrentando el desafío de la corrupción y a los corruptos, El Observatario, Apr. 19, 2017, http://www.anticorrupcion.gov.co/Paginas/Presidente-anuncia-nuevas-medidas-para-seguir-enfrentando-el-desafio-de-la-corrupcion-y-a-los-corruptos.aspx. [137] Colombia tendrá jueces especializados en casos de corrupción, El Observatario, Dec. 7, 2017,     http://www.anticorrupcion.gov.co/Paginas/Colombia-tendra-jueces-especializados-en-casos-de-corrupcion.aspx. [138] Leyes en Contra de la Corrupción, la Apuesta del Gobierno Nacional, Actualicese, July 13, 2017, http://actualicese.com/actualidad/2017/07/13/leyes-en-contra-de-la-corrupcion-la-apuesta-del-gobierno-nacional/. [139] Colombia y Peru contra soborno transnacional, El Nuevo Siglo, Sep. 23, 2017, http://www.elnuevosiglo.com.co/articulos/09-2017-colombia-y-peru-combatiran-soborno-transnacional. [140] Id. [141] See Juan Cruz Peña, Colombia investiga a tres empresas españolas por sobornos e irregularidades, El Confidencial, May 17, 2017, https://www.elconfidencial.com/empresas/2017-05-17/colombia-investiga-empresas-espanolas-sobornos-desfalco_1379311/. [142] United States v. Odebrecht S.A., Docket No. 16-CR-643 (RJD) (E.D.N.Y. 2016). [143] Odebrecht Banned from Signing Contracts with Peru State, Andina, Jan. 9, 2017, http://www.andina.com.pe/Ingles/noticia-odebrecht-banned-from-signing-contracts-with-peru-state-648542.aspx. [144] Mitra Taj, Peru to Bar Odebrecht from Public Bids with New Anti-graft Rules, Reuters, Dec. 28, 2016,  http://www.reuters.com/article/peru-corruption-odebrecht-idUSL1N1EO00K. [145] Id. [146] Lucas Perelló, Pablo Kuczynski Loses Another Battle to the Fujimorista Opposition, Global Americans, Sept. 28, 2017, https://theglobalamericans.org/2017/09/perus-pedro-pablo-kuczynski-loses-another-battle-fujimorista-opposition/. [147] Simeon Tegel, Latin America’s Mega-Corruption Scandal Just Claimed its Two Biggest Names, Wash. Post, July 15, 2017, https://www.washingtonpost.com/news/worldviews/wp/2017/07/15/latin-americas-mega-corruption-scandal-just-claimed-its-two-biggest-names/?utm_term=.6c05e8a6bb8c; Jimena De La Quintana, Ordenan prisión preventive para Ollanta Humala y Nadine Heredia, CNN en Espanol, July 13, 2017, http://cnnespanol.cnn.com/2017/07/13/ordenan-prision-para-ollanta-humala-y-nadine-heredia/. [148] Id. [149] ¿Cuál es la relación de Alan García con el caso Odebrecht y Lava Jato?, Radio Programas del Perú, Aug. 7, 2017, http://rpp.pe/politica/judiciales/la-relacion-de-alan-garcia-con-los-casos-odebrecht-y-lava-jato-noticia-1049631. [150] Ryan Dube, Judge Orders Arrest of Former Peruvian President Alejandro Toledo in Odebrecht Bribery Case, Wall Street J., Feb. 9, 2017, https://www.wsj.com/articles/judge-orders-arrest-of-former-peruvian-president-alejandro-toledo-in-odebrecht-bribery-case-1486698137; U.S. State Department Office of Investment Affairs, Peru Country Commercial Guide – Investment Climate Statement (Sept. 20, 2017), https://www.export.gov/article?id=Peru-Corruption. [151] Peru court approves Toledo extradition request, Yahoo News, Mar. 13, 2018, https://au.news.yahoo.com/world/a/39499741/peru-court-approves-toledo-extradition-request/. [152] Lucas Perelló, Pablo Kuczynski Loses Another Battle to the Fujimorista Opposition, Global Americans, Sept. 28, 2017, https://theglobalamericans.org/2017/09/perus-pedro-pablo-kuczynski-loses-another-battle-fujimorista-opposition/; PPK declarará el Viernes por Caso Odebrecht ante fiscalía, El Comercio, Mar. 29, 2017, https://elcomercio.pe/politica/justicia/ppk-declarara-viernes-caso-odebrecht-fiscalia-420928. [153] Ex-Odebrecht CEO Says Hired Peru President as Consultant – Reports, Reuters, Nov. 14, 2017, https://www.reuters.com/article/peru-politics/ex-odebrecht-ceo-says-hired-peru-president-as-consultant-reports-idUSL1N1NK1H4. [154] Peru: President Kuczynski Denies Odebrecht Bribe Allegations, BBC News, Nov. 16, 2017, http://www.bbc.com/news/world-latin-america-42006558; Andrea Zarate & Nicholas Casey, Peru Leader Could Be Biggest to Fall in Latin America Graft Scandal, N.Y. Times, Dec. 19, 2017, https://www.nytimes.com/2017/12/19/world/americas/peru-kuczynski-impeachment.html. [155] Simeon Tegel, Peru’s President Survives Impeachment Vote Over Corruption Charges, Wash. Post, Dec. 22, 2017, https://www.washingtonpost.com/world/the_americas/perus-president-faces-impeachment-over-corruption-allegations/2017/12/20/61b2b624-e4d9-11e7-927a-e72eac1e73b6_story.html?utm_term=.e542fa1216da. Sonia Goldenberg, ‘Game of Thrones’, Inca Style, N.Y. Times, Dec. 28, 2017,  https://www.nytimes.com/2017/12/28/opinion/peru-kuczynski-fujimori-pardon-odebrecht.html. [156] Jacqueline Fowks, El fantasma de Odebrecht arrecia en Perú, El País, Mar. 8, 2018, https://elpais.com/internacional/2018/03/08/america/1520467389_977266.html. [157] U.S. State Department Office of Investment Affairs, supra note 150. [158] Id. [159] Decreto Legislativo No. 1352, Artículo 1 (Jan. 2017) (Peru). [160] Id. at Artículo 3. [161] Id. at Artículo 1. [162] Id. at Artículo 4. [163] Id. at Artículos 3-4; New Criminal Liability System for Corporate involved in Corrupt Practices and/or Money Laundering, http://www.estudiorodrigo.com/en/new-criminal-liability-system-for-corporate-involved-in-corrupt-practices-andor-money-laundering/. [164] Decreto Legislativo No. 1352, Artículo 3. [165] Id. at Artículo 17. [166] Id. [167] Id. [168] Omar Manrique, Todas las empresas deberán tomar medidas para prevenir corrupción, Gestión, Dec. 27, 2017, https://gestion.pe/economia/empresas-deberan-medidas-prevenir-corrupcion-223626. [169] Decreto Legislativo No. 1341, Artículo 11 (Jan. 2017) (Peru); José Antonio Payet & Payet Rey Cauvi Pérez, PERUVIAN UPDATE – The Impact of “Lava Jato” on M&A in Peru, International Institute for the Study of Cross-Border Investment and M&A, May 30, 2017, http://xbma.org/forum/peruvian-update-the-impact-of-lava-jato-on-ma-in-peru/. [170] Decreto Legislativo No. 1341, supra note 169. [171] Ejecutivo oficializó ley de muerte civil para corruptos, El Comercio, Oct. 22, 2016, http://elcomercio.pe/politica/gobierno/ejecutivo-oficializo-ley-muerte-civil-corruptos-273517; Decreto Legislativo No. 1243, Artículo 38 (Oct. 2016) (Peru). [172] Comentarios a la “Muerte Civil,” Decreto Legislativo 1243, Parthenon, Nov. 1, 2016, http://www.parthenon.pe/editorial/comentarios-a-la-muerte-civil-decreto-legislativo-1243/. [173] Decreto Legislativo No. 1295 (Dec. 2016) (Peru). [174] Id. at Artículo 1. [175] Id. at Artículo 4. [176] Id. The following Gibson Dunn lawyers assisted in preparing this client update: F. Joseph Warin, Michael Farhang, Lisa Alfaro, Tafari Lumumba, Michael Galas, Abiel Garcia, Renee Lizarraga, John Sandoval and Sydney Sherman. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues.  We have more than 110 attorneys with FCPA experience, including a number of former prosecutors and SEC officials, spread throughout the firm’s domestic and international offices.  Please contact the Gibson Dunn attorney with whom you usually work in the firm’s FCPA group, or the authors: F. Joseph Warin – Washington, D.C. (+1 202-887-3609, fwarin@gibsondunn.com) Michael M. Farhang – Los Angeles (+1 213-229-7005, mfarhang@gibsondunn.com) Please also feel free to contact the following Latin America practice group leaders: Lisa A. Alfaro – São Paulo (+55 (11) 3521-7160, lalfaro@gibsondunn.com) Kevin W. Kelley – New York (+1 212-351-4022, kkelley@gibsondunn.com) Tomer Pinkusiewicz – New York (+1 212-351-2630, tpinkusiewicz@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

March 13, 2018 |
Webcast: U.S. Economic and Trade Sanctions Against Venezuela – the Outlook for 2018

This 90-minute complimentary webinar will provide a deep dive into the U.S. economic and trade sanctions against Venezuela, including a review of the most recent developments and a forecast of what may be in store for 2018. View Slides [PDF] This program covers: Status of Current Sanctions on Venezuela – Prohibited Parties and Sectors Commerce and State Department Export Controls Impact of Growing Use of Cryptocurrencies in Venezuela On the Horizon – Possibilities for U.S to “Ratchet Up” Sanctions PANELISTS: Jose W. Fernandez, a partner in our New York office and Co-Chair of the firm’s Latin America Practice Group, previously served as Assistant Secretary of State for Economic, Energy and Business Affairs during the Obama Administration, and led the Bureau that is responsible for overseeing work on sanctions and international trade and investment policy. His practice focuses on mergers and acquisitions and finance in emerging markets in Latin America, the Middle East, Africa and Asia. Judith Alison Lee, a partner in our Washington, D.C. office, is Co-Chair of the firm’s International Trade Practice Group. She practices in the areas of international trade regulation, including USA Patriot Act compliance, FCPA, economic sanctions and embargoes, and export controls. She also advises on issues relating to virtual and digital currencies, blockchain technologies and distributed cryptoledgers. Adam M. Smith, a partner in our Washington, D.C. office, is an experienced international trade lawyer who previously served in the Obama Administration as the Senior Advisor to the Director of OFAC and as the Director for Multilateral Affairs on the National Security Council. His practice focuses on international trade compliance and white collar investigations, including with respect to federal and state economic sanctions enforcement, the FCPA, embargoes, and export controls. Christopher T. Timura, of counsel in our Washington D.C. office, is a member of the firm’s International Trade Practice Group. He counsels clients on export controls (ITAR and EAR), economic sanctions, and anticorruption, and represents them before the departments of State (DDTC), Treasury (OFAC and CFIUS), Commerce (BIS), Homeland Security (CBP), and Justice in investment reviews and in voluntary and directed disclosures involving both civil and criminal enforcement actions. MCLE CREDIT INFORMATION: This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1.50 credit hours, of which 1.50 credit hours may be applied toward the areas of professional practice requirement.  This course is approved for transitional/non-transitional credit. Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast.  Please contact Jeanine McKeown (National Training Administrator), at 213-229-7140 or jmckeown@gibsondunn.com to request the MCLE form. Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1.50 hours. California attorneys may claim “self-study” credit for viewing the archived version of this webcast.  No certificate of attendance is required for California “self-study” credit.

February 28, 2018 |
Gibson Dunn Named Among Latin Lawyer 250

Gibson Dunn was named to the 2018 edition of The Latin Lawyer 250 for its Latin America-related work in six areas: Arbitration, Banking & Finance, Capital Markets, Corporate and M&A, Litigation and White Collar Crime and Compliance. The list recognizes “the leading business law firms of Latin America and is the result of 20 years of intensive research by Latin Lawyer’s editorial team.” The guide was released February 28, 2018.

February 20, 2018 |
Latin America’s Wave of Anticorruption Laws

Los Angeles partner Michael Farhang is the author of “Latin America’s Wave of Anticorruption Laws,” [PDF] published by the Daily Journal on February 20, 2018.

March 20, 2017 |
Boletín de fin de año 2016 sobre la FCPA

El 2016 fue un año que sentó precedentes en cuanto a la Ley de Prácticas Corruptas en el Extranjero (“FCPA”, por sus siglas en inglés). Después de varios años manteniendo cifras constantes de aplicación de la ley, el Departamento de Justicia, (“DOJ”, por sus siglas en inglés) y la Comisión de Bolsa y Valores (“SEC”, por sus siglas en inglés) presentaron lo que probablemente es el año de aplicación de la ley más significativo en los 39 años de historia de dicha normativa. Con 53 acciones combinadas de aplicación de la ley, más de $2 mil millones en multas corporativas impuestas por las autoridades estadounidenses y otros miles de millones por parte de los organismos extranjeros de regulación en procesos coordinados de enjuiciamiento, retornos anticipados por el Programa Piloto de la FCPA del Departamento de Justicia, así como una clara y creciente intersección entre la FCPA y las disposiciones de informantes de la Ley Dodd-Frank, todavía queda mucho por discutir. El presente boletín para nuestros clientes ofrece una descripción general de la FCPA, así como las novedades de 2016 relacionadas con el cumplimiento anti-corrupción, los litigios, y las políticas tanto a nivel nacional como internacional. Para ayudar a nuestros clientes a conducirse a través de estos desafíos, nos complace destacar que en el 2016 Gibson Dunn contrató a varios expertos del Departamento de Justicia, incluyendo al Jefe de la Unidad de la FCPA, Patrick Stokes; al Fiscal de los Estados Unidos para el Distrito Este de California, Ben Wagner; y al Fiscal General Asociado en Funciones, Stuart Delery. Boletín de fin de año 2016 sobre la FCPA (click to view alert) Los abogados de Gibson Dunn están disponibles para prestar su asistencia respondiendo a cualquier pregunta que tenga con respecto a los temas aquí presentados. Contamos con más de 110 abogados expertos en FCPA, incluyendo a una serie de exfiscales y exfuncionarios de la SEC, desplegados en todas las oficinas nacionales e internacionales del bufete. Comuníquese con el abogado de Gibson Dunn con quien por lo general trabaja, o con cualquier de los abogados de esta lista: F. Joseph Warin – Washington, D.C. (+1 202-887-3609, fwarin@gibsondunn.com)Michael M. Farhang – Los Angeles (+1 213-229-7005, mfarhang@gibsondunn.com) Latin America practice group co-chairs: Kevin W. Kelley – New York (+1 212-351-4022, kkelley@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com)Tomer Pinkusiewicz – New York (+1 212-351-2630, tpinkusiewicz@gibsondunn.com) Lisa A. Alfaro – São Paulo (+55 (11) 3521-7160, lalfaro@gibsondunn.com)   © 2017 Gibson, Dunn & Crutcher LLP Anuncio de los abogados: Los materiales anexos fueron elaborados únicamente con fines de información general y no se emiten en calidad de asesoría jurídica.

January 1, 2016 |
Clarifying Limbo: Disentangling Indigenous Autonomy from the Mexican Constitutional Order

​Los Angeles associate Ian Sprague is the author of “Clarifying Limbo: Disentangling Indigenous Autonomy from the Mexican Constitutional Order” [PDF] published in 2016 in the Volume 8, Issue 1 of Perspectives on Federalism.

February 27, 2015 |
2014 Year-End Transnational Litigation Update

2014 was a watershed year for transnational litigation in United States courts.  Rulings by the United States Supreme Court and several United States courts of appeals dramatically reshaped the circumstances under which foreign defendants are subject to general personal jurisdiction, further developed the standards for extraterritorial application of United States laws, and provided important guidance on the scope of sovereign immunity and application of the Foreign Sovereign Immunities Act ("FSIA") to commercial disputes.  The year also saw major developments in the long-running, multifaceted global battle among Chevron Corporation, Ecuador, and United States and Ecuadorian lawyers, as well as in the litigation between Argentina and NML Capital, Ltd., and Yukos Capital and Samaraneftegaz.  In 2014, global litigants also continued to expand their use of 28 U.S.C. § 1782 ("Section 1782") to deploy expansive United States discovery tools in support of foreign disputes.  In response, federal courts have issued key rulings regarding the types of proceedings Section 1782 applies to, the effect of foreign laws protecting privacy and secrecy, and a court’s power to compel production of documents stored outside the United States.  In this review, we discuss and analyze the bellwether transnational litigation actions involving these companies, as well as other developments in transnational litigation from 2014 that will be most significant to companies with cross-border operations and involved in transnational disputes.  For ease of reference, we have included hyperlinks to each Part of the alert in this Executive Summary.    Part I:  Over the past year, Daimler AG v. Bauman[1] has served to redefine the circumstances under which foreign defendants are subject to general personal jurisdiction in the United States.  Part I of this alert addresses Daimler and how it has been applied.  Part II:  The year saw dramatic decisions in cases of transnational attempts to defraud U.S. defendants, including Chevron Corporation’s successful RICO suit against the purveyors of what the Wall Street Journal called the legal "fraud of the century."  This section also discusses Laguna v. Dole Food Co., Inc.,[2] a California Court of Appeal decision affirming dismissal of a case that had produced a multi-million dollar judgment as a sanction for the Nicaraguan-based fraud on the court perpetrated against Dole Food Co. and other United States corporations. Part III:  Whether and when United States law can be applied extraterritoriality (and what that means) continues to be the focus of significant litigation.  Part III addresses the latest development of the standards for extraterritorial application of United States laws as first articulated in Morrison v. National Australian Bank Ltd,[3] including 2014’s important guidance on the scope of sovereign immunity and the FSIA’s application to commercial disputes.  Part IV:  2014 saw significant activity in the foreign judgment and arbitral award enforcement and defense arena.  Part V:  Recent developments in transnational judgment collection are addressed in this section, including an overview of NML Capital, Ltd.’s long-running effort to collect $1.8 billion in judgments against the Republic of Argentina and the groundbreaking enforcement of important arbitral awards, including the awards arising out of the complex, decade-long Yukos Oil Company dispute.  Part VI:  This section addresses developments in transnational discovery, including Section 1782.  In 2014, global litigants continued to expand their use of Section 1782 to deploy expansive United States discovery tools in support of foreign disputes.  In response, federal courts have issued key rulings regarding the types of proceedings Section 1782 applies to, the effect of foreign laws protecting privacy and secrecy, and a court’s power to compel production of documents stored outside the United States. Part I:  Daimler AG v. Bauman:  Developments in Personal Jurisdiction Over Foreign Entities The Supreme Court’s January 2014 decision in Daimler AG v. Bauman,[4] reduced the accessibility of United States courts to plaintiffs bringing actions against foreign corporations.  In Daimler, the Court unanimously held that a foreign corporation with no employees or facilities in the United States could not be subject to personal jurisdiction based on the activities of its agent, an indirect corporate subsidiary, in the forum state.   In Daimler, which was argued at the Supreme Court by Gibson Dunn’s Thomas H. Dupree Jr., the Court unanimously held that even if the extensive California-based conduct of an indirect subsidiary, including multiple physical facilities and a position as the leading supplier of luxury vehicles in the California market, were imputed to the foreign parent corporation (Daimler AG), they did not subject Daimler AG to general personal jurisdiction in California because that conduct was "slim" when compared to its worldwide operations, and thus was insufficient to render it "at home" in California.  Plaintiffs sued Daimler AG (a German corporation) in California district court for an alleged wrong that related to an Argentine subsidiary and occurred in Argentina, arguing that jurisdiction was appropriate because Mercedes-Benz USA, another indirect corporate subsidiary, distributed Daimler AG-manufactured vehicles in California.  After the district court dismissed for lack of personal jurisdiction, the Ninth Circuit affirmed, but then reversed itself en banc.  In a 9-0 decision in which all but one justice joined the majority opinion (Justice Sotomayor concurred), the United States Supreme Court reversed:  "Exercises of personal jurisdiction so exorbitant, we hold, are barred by due process constraints on the assertion of adjudicatory authority."[5]  Instead, general jurisdiction over a defendant could exist only when that entity’s "affiliations with the State are so ‘continuous and systematic’ as to render [it] essentially at home in the forum State."[6]  With regard to corporations, the Court identified the "paradigm" bases for general jurisdiction as "the place of incorporation and the principal place of business."[7]  The Court also considered jurisdictional principles from other countries, concluding that:  "Considerations of international rapport thus reinforce our determination that subjecting Daimler to the general jurisdiction of courts in California would not accord with the ‘fair play and substantial justice’ due process demands."[8]  In the transnational context, Daimler‘s impact has been immediate in two primary ways, by (1) narrowing the circumstances under which general jurisdiction will be found over foreign corporations and (2) placing greater emphasis on the importance of addressing international comity concerns before exercising jurisdiction.  How Daimler Has Been Interpreted and Implemented Marking a significant development in transnational litigation, multiple courts applying Daimler over the past year have found that they did not have personal jurisdiction over foreign defendants in transnational and multi-jurisdictional suits.[9] For example, the Southern District of Texas explicitly recognized that Daimler narrowed the courts’ ability to exercise personal jurisdiction when it noted that while a foreign company’s contacts with Texas would have previously been sufficient for general jurisdiction, Daimler‘s "even more stringent test" rendered them insufficient.[10]  In Sonera Holding B.V. v. Cukurova Holding A.S., the Second Circuit interpreted Daimler as reaffirming "that general jurisdiction extends beyond an entity’s state of incorporation and principal place of business only in the exceptional case."[11]  Sonera Holding involved a judgment enforcement suit against a Turkish holding company registered in Turkey.  The defendant did not conduct any operations or own any property in New York or the United States.  The plaintiff argued that general jurisdiction should exist nonetheless because the defendant and its affiliates had engaged in some transactions with United States businesses, among other limited activities within the United States.  The district court held that these contacts were sufficient to create personal jurisdiction.  The Second Circuit reversed and remanded the decision.  After determining that New York law would control the issue of personal jurisdiction, the court held that "even a company’s ‘engage[ment] in a substantial, continuous, and systematic course of business’ is alone insufficient to render it at home in a forum."[12]  The defendant and its affiliates’ United States conduct did "not come close to making" the defendant "at home" in New York.[13]  The court also cautioned that "Daimler‘s gloss on due process" may lead New York courts to reevaluate the "doing business" standard for personal jurisdiction under New York law.[14]  Following Daimler, courts have also generally declined to follow the Ninth Circuit’s agency theory for obtaining general personal jurisdiction.[15]  Indeed, Daimler was initially brought to the Court on a challenge to the Ninth Circuit’s "agency" theory of jurisdiction, whereby it imputed the forum-contacts of a subsidiary to the parent where the subsidiary conducted "important" affairs of the parent.  While the Supreme Court ruled that it was unnecessary to reach the agency question, it indicated in dicta that this theory was not valid. [16]  While application of Daimler has helped deter several transnational suits with suspect United States connections, it is not a complete bar to transnational suits.  Deciding a motion for reconsideration filed after the issuance of Daimler, the District of Minnesota held that it could still assert general jurisdiction over a foreign parent company on the basis of its subsidiary’s location and substantial contacts to the forum.[17]  In Barriere v. Juluca, the Southern District of Florida determined that an Anguillan-based corporation was "at home" in Florida based on the maintenance of an in-state sales office, and the substantial activities of the company’s agents in the state.[18]  The district court recognized that "Daimler has undoubtedly limited the application of general jurisdiction to foreign defendants," but distinguished the case at hand because, unlike in Daimler, there was "no ‘absence’ of a Florida connection to the injury, perpetrator, or victim."[19]  The court held that the denial of personal jurisdiction would "effectively deprive American citizens from litigating in the United States for virtually all injuries that occur at foreign resorts maintained by foreign defendants."[20]  Interestingly, a second Southern District of Florida decision distinguished Barriere in a case involving a similar set of facts, finding no general jurisdiction over the foreign company.  In Aronson v. Celebrity Cruises, Inc., the court focused on the fact that, unlike in Barriere, there was no "sustained and direct contact with the state" such as an in-state office or telephone number.[21]  The court noted that the fact-specific nature of the general jurisdiction analysis "ha[d] led to some seemingly inconsistent results in this district."[22]  And, because Daimler has been interpreted as principally being a case about general jurisdiction, at least one court has held that it did not prohibit finding specific personal jurisdiction based on a theory of agency.  Distinguishing Daimler on the basis that it did not address the viability of establishing specific personal jurisdiction through an agency theory, in In re Chinese-Manufactured Drywall Products Liability Litigation, the Fifth Circuit upheld the exercise of specific jurisdiction over a foreign manufacturer and its subsidiary,[23] allowing the subsidiary’s contacts with the forum to be imputed to the manufacturer for the purpose of finding specific jurisdiction.[24]  Likewise, the District Court for the Northern District of California distinguished Daimler in In re Cathode Ray Tube (CRT) Antitrust Litigation, holding that the exercise of personal jurisdiction over a Chinese company manufacturing cathode ray tubes (CRTS) where there was specific personal jurisdiction was reasonable under the circumstances.[25]  Back to Top Part II:  Vindicating the Rule of Law in the Face of Transnational Fraud Targeting United States Companies In 2014, U.S.-based multinational companies successfully litigated in United States courts to vindicate the rule of law against fraud and corruption directed at them by plaintiffs’ lawyers from the U.S. and overseas.  Gibson Dunn was counsel for the companies involved in two of the most significant cases related to this issue, representing Chevron Corporation and Dole Food Company, Inc. On March 4, 2014, Judge Lewis A. Kaplan of the United States District Court for the Southern District of New York entered judgment for plaintiff Chevron in Chevron Corp. v. Donziger et al., Case No. 11-cv-0691.  The court found that the U.S. lawyer who masterminded a $9.2 billion judgment against the company in Ecuador did so "by corrupt means," and in the process violated U.S. federal laws prohibiting attempted extortion, wire fraud, money laundering, witness tampering, and obstruction of justice, as well as the Foreign Corrupt Practices Act.  The court entered judgment for Chevron and imposed equitable relief designed to ensure that "the defendants here may not be allowed to benefit from [the Ecuadorian judgment] in any way."  Calling the case "extraordinary" and "includ[ing] things that normally come only out of Hollywood," the court’s 485-page opinion detailed the evidence against U.S. plaintiff’s lawyer Steven Donziger and his team, finding that "[t]he wrongful actions of Donziger and his Ecuadorian legal team would be offensive to the laws of any nation that aspires to the rule of law, including Ecuador — and they knew it.  Indeed, one Ecuadorian legal team member, in a moment of panicky candor, admitted that if documents exposing just part of what they had done were to come to light, ‘apart from destroying the proceeding, all of us, your attorneys, might go to jail.’"  The court determined that Donziger and his team even "wrote the [Ecuadorian] court’s Judgment themselves and promised $500,000 to the Ecuadorian judge to rule in their favor and sign their judgment."  "If ever there were a case warranting equitable relief with respect to a judgment procured by fraud," the court concluded, "this is it." The decision follows a six-week trial and represents a major victory for Chevron in its multi-pronged response to the long-running purported environmental litigation emanating from Ecuador known as the Lago Agrio litigation.  Gibson Dunn represented Chevron in the closely watched case.  Chevron has long maintained that the proceedings in Ecuador were marred by fraud on the part of the plaintiffs’ lawyers, as well as corruption and collusion between the Lago Agrio plaintiffs ("LAPs"), the Ecuadorian court, and the Ecuadorian government.  As a consequence, Chevron sued the plaintiffs’ lawyers and other agents in the Southern District of New York under the federal RICO statute and other laws.  The decision vindicates Chevron’s claims of fraud and corruption and sends a powerful message to U.S. and other lawyers tempted to capitalize on the weaknesses of foreign judicial systems to attempt to extract payoffs from U.S. companies.  At the same time, it forcefully supports international efforts to promote the rule of law.  During the trial, Chevron presented overwhelming and virtually uncontested evidence that Donziger and his co-conspirators had procured the judgment through bribery and fraud, including forging expert reports, hiring Ecuadorian engineers to pose as "neutral" monitors to influence the Ecuadorian court, hiring consultants in the U.S. to ghostwrite the damages report of a purportedly neutral court-appointed "special master" (Richard Cabrera), and bribing the Ecuadorian judge who issued the decision (Nicolás Zambrano) to permit them to ghostwrite the decision in their favor.  Chevron’s evidence of the ghostwriting included verbatim quotations from the LAPs’ internal work product that appeared on dozens of pages of the judgment.  "These documents never were filed with the Lago Agrio court or made part of the official case record," the court noted, and "Defendants utterly failed to explain how or why their internal work product — their ‘fingerprints’ — show up in the Judgment."  Chevron also called as a witness former Ecuadorian judge Alberto Guerra, who testified that he had long served as Judge Zambrano’s paid ghostwriter, including in the case against Chevron.  Guerra produced bank deposit slips and other evidence of payments from the LAPs.  He also testified that he had served as a middle-man, conveying Judge Zambrano’s bribe solicitation to the LAPs, who accepted it, and then editing their draft of the judgment, which Judge Zambrano then issued as if it were his own.  Donziger called Judge Zambrano as a witness, who denied the bribery scheme, but admitted that Judge Guerra had been his ghostwriter.  Chevron also presented evidence that when Chevron sought discovery from the LAPs’ attorneys and consultants in U.S. courts, Donziger and his co-conspirators engaged in a campaign of obstruction to prevent the truth from emerging, filing false affidavits in U.S. courts and tampering with witnesses.  Chevron also presented evidence that Donziger and his co-conspirators had engaged in an improper pressure campaign against Chevron, propagating numerous falsehoods based on their fabricated evidence in the press and to various state and federal agencies in an attempt to extort a settlement from Chevron.     In rendering its decision in favor of Chevron, the court noted that "[t]he transnational elements of the case make it sensitive and challenging," but concluded based on the extensive evidentiary record that Donziger was liable under RICO for operating a racketeering enterprise that committed numerous federal crimes, including: Extortion.  The court found that Donziger engaged in two categories of conduct to pressure Chevron to settle the Ecuadorian lawsuit:  corrupt conduct in the Ecuadorian lawsuit itself, and the mounting of a public pressure campaign against the company based on false statements to the media, to U.S. regulatory and prosecutorial agencies, and criminal prosecutions of Chevron lawyers in Ecuador. Obstruction of Justice and Witness Tampering.  The court found that Donziger committed various acts of obstruction of justice and witness tampering to prevent disclosure of the fraud in U.S. discovery proceedings, including filing a false declaration in the name of Donziger’s co-conspirator and Ecuadorian counsel for the LAPs, Pablo Fajardo, in at least 17 U.S. district courts:  "Donziger’s conduct with respect to the Fajardo Declaration was obstruction of justice, plain and simple."  The court also held that Donziger had engaged in witness tampering by attempting to influence the testimony of Mark Quarles, a former environmental consultant for the LAPs, in related litigation between Chevron and the Republic of Ecuador in the U.S.  The court found that "[a]lthough Donziger knew that the statements he sought to have Quarles make were false, he urged Quarles to adopt them to prevent exposure of the truth regarding Cabrera and to mislead the court.  Donziger’s effort to influence Quarles’s testimony constitutes witness tampering." The Travel Act and Foreign Corrupt Practices Act ("FCPA").  The court held that Donziger and his co-conspirators’ scheme to bribe Cabrera violated the Travel Act because Donziger used a facility of interstate or foreign commerce in furtherance of violations of the FCPA by payment of bribes to Cabrera.  The court found that "[a]ll of the circumstances — including the fact that a court-approved payment process existed but that the LAP team secretly paid Cabrera outside of that process, used a secret account to do so, worried in emails about whether any of the money should go through Yanza’s personal account even temporarily, and used code names as they did it — indicate that the secret payments were illegal or at least improper, that the LAP team knew that, and that they attempted to conceal their payments."  Wire Fraud and Money Laundering.  The court found that Donziger engaged "in a number of deceitful schemes" in order to extract payment from Chevron, "each of which was furthered by use of the wires."  The court also held that the record "contains persuasive evidence" of a number of money laundering offenses, including the solicitation of funding for use in making secret payments to Cabrera.   The court also held that the evidence showing that Donziger’s team had written the Ecuadorian judgment, not Judge Zambrano, was "overwhelming and unrefuted."  In support of this finding, the court noted that with respect to the overlap between the LAPs’ internal work product and the judgment, "[t]here is no plausible explanation for their presence in the Judgment except that whoever wrote the Judgment copied parts of them."  The court found that Judge Zambrano, who was unable to remember even the most significant aspects of the 188-page judgment that he claimed to have authored, was "a remarkably unpersuasive witness."  In addition, the court held that former judge Guerra’s testimony was credible, determining that Guerra "told the truth regarding the bribe and the essential fact as to who wrote the Judgment.  The court is convinced that the LAPs bribed Zambrano and wrote the Judgment in their favor." Defendants’ appeal is pending before the Second Circuit. Also, in March of 2014 the California Court of Appeal unanimously affirmed dismissal of a case against Gibson Dunn client Dole Food Company as a "fraud on the court" perpetrated by U.S. and Nicaraguan plaintiffs’ lawyers.  Captioned Rojas Laguna v. Dole Food Company, Case No. BC233497, the appeal affirmed a trial court ruling in Tellez v. Dole Food Company, Los Angeles Superior Court, Case No. BC312852, where the court found that U.S. and Nicaraguan plaintiffs’ lawyers had "coached their clients to lie about working on banana farms, forged work certificates to create the appearance that their clients had worked on Dole-contracted farms, and faked lab results" as part of a scheme to obtain the judgment against Dole.  In the 25-page appellate decision, the court of appeal found no "valid ground" to disturb the trial court’s ruling "that plaintiffs and their counsel committed a fraud on the court by presenting false evidence and testimony." Tellez originally went to trial in 2007 and resulted in a multi-million dollar verdict against Dole, in favor of Nicaraguan plaintiffs claiming injuries from pesticide exposure on Dole-contracted farms in the late 1970s.  The U.S. and Nicaraguan plaintiffs’ lawyers handling the case pitched it as a watershed win for U.S. plaintiffs’ lawyers, who brought cases in the United States and Nicaragua and obtained billions in Nicaraguan judgments.  It was meant to open the floodgates to additional verdicts and suits. The decision from the court of appeal was the culmination of years of effort by Dole to have the Tellez proceedings re-opened and dismissed for plaintiff fraud, based on a rarely used procedure known as a petition for writ of error coram vobis.  Shortly after the Tellez judgment, Dole, represented by Gibson Dunn, exposed evidence in the related case Mejia v. Dole Food Company, Los Angeles Superior Court, Case No. BC340049, showing that the Tellez claims resulted from what the court found to be a wide-reaching fraudulent scheme perpetrated by U.S. and Nicaraguan lawyers.  Based on this evidence from Mejia–which, according to the trial court, showed a "heinous conspiracy" "to defraud th[e] court, to extort money from the defendants, and to defraud the defendants"–Dole successfully petitioned the Court of Appeal and the trial court to re-open the Tellez proceedings, after final judgment and while the case was pending appeal.  This petition paved the way for a year-long evidentiary process, where, as the Court of Appeal recounted, Dole showed by clear and convincing evidence that the Tellez plaintiffs and their counsel perpetrated fraud on the court by: "[i] recruiting persons who had never worked on banana farms as would be plaintiffs, [ii] coaching plaintiffs to lie about their work on banana farms, [iii] submitting false work certificates, [iv] falsifying sterility by submitting fraudulent laboratory reports and concealing children fathered by plaintiffs, and [v] interfering with witnesses and investigators by threats, intimidation, and tampering." In affirming these findings, the Court of Appeal held that the Tellez plaintiffs "raise no sufficiency of the evidence challenge with regard to the relevant findings in this case that they too committed a fraud on the court by submitting false testimony, fraudulent declarations and work certificates, and fraudulent laboratory reports as part of the fraudulent scheme orchestrated by their attorneys."  The Court held that Dole met the legal requirements for the "drastic remedy" of relief from a final judgment based on a petition of writ of error coram vobis.  Back to Top Part III:  Morrison v. National Australia Bank:  Limiting the Extraterritorial Reach of Federal Statutes In 2014, courts continued to apply the Supreme Court’s landmark decision in Morrison v. National Australian Bank Ltd. to limit the extraterritorial application of federal statutes. Morrison involved claims brought under Section 10(b) of the Securities Exchange Act of 1934 by foreign purchasers of the stock of a foreign company on a foreign stock exchange.[26]  Under preexisting case law in the federal courts of appeals, whether Section 10(b) applied was generally considered a jurisdictional question resolved with reference to a variety of tests designed to determine whether enough conduct had occurred in the United States or significant enough effects were felt in the United States to justify applying the statute.[27]   Morrison displaced those inquiries. Morrison reaffirmed that the extraterritoriality analysis turns on the statutory text, which must be read in light of the presumption against extraterritoriality.  Thus "[w]hen a statute gives no clear indication of an extraterritorial application, it has none."[28] If a statute does not overcome the presumption against extraterritoriality with such a "clear indication," the only remaining question is whether the asserted application of the statute at issue is extraterritorial, and thus impermissible.[29]  This analysis depends on "the focus of congressional concern" behind the statute at issue.[30]  The Morrison plaintiffs had alleged that the fraud at issue in the case had taken place in Florida, but the Court ruled that this connection to the United States was insufficient to permit application of Section 10(b).  After examining the statutory text, the Court concluded that Section 10(b) only prohibits deceptive conduct "in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered," meaning that Congress’ focus was "not upon the place where the deception originated, but upon purchases and sales of securities in the United States."[31]  In other words, "deception with respect to certain purchases or sales is necessary for a violation of the statute."[32]    The Court, therefore, held that Section 10(b) applies only to "the use of a manipulative or deceptive device or contrivance only in connection with the purchase or sale of a security listed on an American stock exchange, and the purchase or sale of any other security in the United States."[33]          1.   Developments in the Extraterritorial Reach of the Alien Tort Statute: Kiobel v. Royal Dutch Shell Petroleum Co. In the 2013 landmark case, Kiobel v. Royal Dutch Shell Petroleum Co., the Supreme Court held that, consistent with the presumption set forth in Morrison (that a statute without a clear indication of extraterritorial application has none), the ATS presumptively does not apply to extraterritorial activity.[34]  Twelve Nigerian nationals residing in the United States sued Dutch, British and Nigerian corporations pursuant to the ATS, alleging that the corporations aided and abetted the Nigerian Government in committing violations of the law of nations in Nigeria, including state-sponsored torture and murder.[35]  While noting that the ATS was "strictly jurisdictional" and "does not directly regulate conduct or afford relief," the Court held that the statute was nonetheless subject to the canon of statutory interpretation known as the presumption against extraterritorial application.[36]  That canon provides that "[w]hen a statute gives no clear indication of an extraterritorial application, it has none,"[37] and reflects the "presumption that United States law governs domestically but does not rule the world."[38]   The Court noted that international comity concerns "implicated in any case arising under the ATS, are all the more pressing when the question is whether a cause of action under the ATS reaches conduct within the territory of another sovereign."[39]  Finding that the ATS did not indicate extraterritorial application sufficient to overcome the presumption, the Court concluded that, "there is no indication that the ATS was passed to make the United States a uniquely hospitable forum for the enforcement of international norms,"[40] and held that violations of the ATS occurring outside the United States be shown to "touch and concern the territory of the United States . . . with sufficient force,"[41] for the claim to survive. While just a year and a half has passed since Kiobel, its effects have been immediate.   The case has been a basis for dismissing ATS actions in a number of circuit courts.  In Chowdhury v. Worldtel Bangladesh Holding, Ltd., the Second Circuit pointed to the Kiobel court’s comment that "all the relevant conduct took place outside the United States," barring the plaintiffs’ case for violations of the law of nations, the body of customary international law.[42]  On those grounds, the court overturned the plaintiff’s favorable jury verdict as to their ATS claims because all of the relevant conduct in the case occurred in Bangladesh.[43]  The Eleventh Circuit used similar language to dismiss a claim where the plaintiffs alleged violations of the ATS, but where the conduct in question occurred in Colombia.[44]  They also pointed out that the defendant’s nature as a corporation is not enough to overcome the presumption against extraterritoriality.[45]  In Mujica v. AirScan Inc., the Ninth Circuit also made clear that the defendants’ status as United States corporations did not alone provide a sufficient nexus.[46]  They stated that there needed to be sufficient conduct occurring in the United States, agreeing explicitly with the Eleventh and Second Circuits on their interpretation of Kiobel.[47]  Although the cases above have had dissenting opinions taking a different opinion of extraterritoriality, the overall trend in the Circuit courts has been to deny plaintiffs’ claims under the ATS unless a sufficient nexus to the United States is shown.[48] While Kiobel may have put ATS actions on life-support in certain Circuits, it is too early to call the death of extraterritorial ATS actions.  In June 2014, a unanimous panel of the United States Court of Appeals for the Fourth Circuit overturned a lower court’s dismissal of an action brought by four former Iraqi detainees against defense contractor, CACI International, Inc., claiming the United States defense contractor’s employees directed their torture in the Abu Ghraib prison.[49]  Writing for the panel, Judge Keenan concluded that the district court erred in finding it lacked jurisdiction because the alleged abuses occurred on foreign soil.[50]   Judge Keenan explained that the plaintiffs had alleged sufficient connection to the United States, including CACI having won permission and security clearance from the United States government to conduct the interrogations and the alleged acquiescence in the misconduct of CACI managers based in the United States, to "require a different result than that reached in Kiobel."[51]  The Court of Appeals then remanded the case to the district court that had originally dismissed the action.[52]         2.   Developments in the Extraterritorial Reach of Section 10(b) Securities Act Claims City of Pontiac Policemen’s & Firemen’s Retirement System v. UBS AG continued Morrison‘s trend of further restricting the extraterritorial application of the United States securities laws and signaled the continued limitation on the use of the United States securities laws exclusively to securities that are traded on United States exchanges.[53]  In City of Pontiac, the Second Circuit, in an issue of first impression, addressed the application of United States securities laws to foreign securities cross-listed on United States exchanges.  The court ruled that the ban on extraterritorial application of United States securities laws applies not only to situations where foreign securities are listed on foreign exchanges, but also when such securities are cross-listed on United States exchanges.[54]  Previously, the Supreme Court had ruled in Morrison that Section 10(b) of the Exchange Act did not "’provide[] a cause of action to foreign plaintiffs suing foreign [ ] defendants for misconduct in connection with securities traded on foreign exchanges.’"[55] The trend since Morrison for courts to restrict the application of United States securities laws to securities traded exclusively on United States exchanges continued in 2014 with Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings SE.[56]  In Parkcentral, the Second Circuit held that a group of hedge funds that had entered into derivative transactions in the United States tied to the stock of a foreign issuer listed only on foreign exchanges could not bring a Section 10(b) suit against a foreign company for alleged fraudulent statements that it made primarily abroad relating to the foreign issuer.[57]  The plaintiff hedge funds argued that the securities-based swap agreements ("Swaps") entered into in the United States, which were economically equivalent to short sales of Volkswagen AG ("VW") stock listed on foreign exchanges, constituted "domestic transactions" under Morrison, such that they could bring a Section 10(b) action in the United States against German corporation Porsche Automobile Holdings SE ("Porsche") and its executives relating to allegedly fraudulent statements that Porsche had made regarding its intentions with respect to VW stock. The Second Circuit acknowledged that the Swaps may have qualified as domestic transactions under Morrison, and it also considered its decision in Absolute Activist Value Master Fund Ltd. v. Ficeto,[58] which outlined what constituted a domestic transaction.  Nonetheless, it ruled that, "while [Morrison] unmistakably made a domestic securities transaction (or transaction in a domestically listed security) necessary to a properly domestic invocation of Section 10(b), such a transaction is not alone sufficient to state a properly domestic claim under the statute."[59]  The court reasoned that where the claims "are so predominantly foreign as to be impermissibly extraterritorial" and likely to "place § 10(b) in conflict with the regulatory laws of other nations," then, based on "the principles underlying the Supreme Court’s decision in Morrison," plaintiffs may not bring a Section 10(b) claim even if it relates to a domestic transaction.[60]  The court observed that if a domestic transaction were alone sufficient to bring a Section 10(b) claim, then the United States securities laws would apply extraterritorially to "allegedly fraudulent conduct anywhere in the world" so long as a derivative transaction relating to the underlying foreign securities was entered into in the United States–even where the foreign defendants were unaware of the derivative transaction.[61]  Unwilling to accept that possibility, and noting that the allegations in Parkcentral related to predominantly foreign activity, the Second Circuit held that while the Swap transactions were consummated in the United States, that alone was insufficient under Morrison to state a Section 10(b) claim and therefore affirmed dismissal of the complaints.[62]          3.   Developments in the Extraterritorial Reach of Commodity Exchange Act Claims In Loginovskaya v. Batratchenko, 764 F.3d 266 (2d Cir. 2014), the Second Circuit held that a private right of action under the Commodity Exchange Act ("CEA") arises only when "a plaintiff shows that one of the four transactions listed in § 22 [of the CEA] occurred within the United States."[63]  Unless a plaintiff could show that a "domestic transaction" had occurred–evidenced either by a title transfer of the security within the United States or if a buyer or seller incurred "irrevocable liability" related to the transaction within the United States –there could be no private right of action for suits premised on foreign transactions.[64]  Domestic activity undertaken to complete a foreign transaction, such as a wire transfer of funds to the United States, was "insufficient to demonstrate a domestic transaction."[65]  The court rejected the argument that Morrison only foreclosed extraterritorial application of substantive laws, not those that merely created causes of action.  Morrison, it reasoned, did not draw "any such distinction," and the Supreme Court had confirmed this conclusion in Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013), which relied on Morrison to find that the Alien Tort Statute (a jurisdictional law) did not apply to extraterritorial conduct.[66]  It also noted that litigants who could not establish a "domestic transaction" could still "seek recovery through an administrative proceeding at the Commodity Futures Trading Commission."[67]         4.   Developments in the Extraterritorial Reach of Dodd-Frank Act Claims In Liu Meng-Lin v. Siemens AG, 763 F.3d 175 (2d Cir. 2014), the Second Circuit held that the anti-retaliation provision of the Dodd-Frank Act does not apply to extraterritorial conduct.  Liu Meng-Lin involved allegations that the plaintiff had been fired for reporting alleged improper payments by his employer in China, North Korea, and Hong Kong.  After the district court dismissed the plaintiff’s complaint, the Second Circuit affirmed.  The court first concluded that the complaint only alleged extraterritorial conduct, and that the defendant’s listing on the New York Stock Exchange was insufficient to overcome the presumption against extraterritorial application of United States securities laws.[68]  The court next found that the anti-retaliation provision did not suggest that Congress had intended for it to have extraterritorial application.  Nothing in the text or legislative history indicated such intent,[69] and even though other sections of the Dodd-Frank Act provided for exterritorial application, Congress’s decision to omit that language from the anti-retaliation provision counseled against relying on these other sections.[70]   The court also refused to credit agency regulations that supported extraterritorial application because "it is far from clear that an agency’s assertion that a statute has extraterritorial effect, unmoored from any plausible statutory basis for rebutting the presumption against extraterritoriality, should be given deference," and also because those regulations were insufficiently related to the statute’s anti-retaliation provision.[71]  On September 16, 2014, a federal district court in the District of Columbia found in favor of the Commodity Futures Trading Commission after a challenge was raised to its adoption of a general policy that provided for extraterritorial application of the derivatives provisions of the Commodities Enforcement Act and related regulations.[72]  The court concluded that "Congress has clearly indicated that the swaps provisions within Title VII of the Dodd-Frank Act–including any rules or regulations prescribed by the CFTC–apply extraterritorially whenever the jurisdictional nexus in 7 U.S.C. § 2(i) is satisfied."[73]  Given Liu Meng-Lin and the Supreme Court’s restrictive approach toward extraterritorial application of United States laws in Morrison and beyond, challenges to the Commodity Futures Trading Commission’s general policy may be forthcoming.         5.   Developments in the Extraterritorial Reach of the Sherman Act The Foreign Trade Antitrust Improvements Act ("FTAIA"), 15 U.S.C. § 6a, governs the application of the Sherman Act to foreign conduct.  Specifically, it provides that foreign anticompetitive conduct which does not involve United States import commerce, is subject to United States antitrust law only if that conduct: (1) had a direct, substantial, and reasonably foreseeable effect on United States domestic commerce, and (2) that effect "gives rise" to a Sherman Act claim.  In 2014, three United States Courts of Appeals issued rulings on the extraterritorial reach of the United States antitrust laws and the meaning of the FTAIA.  Two of the rulings arose from the ongoing litigation concerning the TFT-LCD panel industry. First, in United States v. Hui Hsiung, the Ninth Circuit joined the Second, Third, and Seventh Circuits in holding that the FTAIA does not create a jurisdictional limit on the power of federal courts, but rather "provides substantive elements under the Sherman Act in cases involving no import trade with foreign nations."[74]  The court then held that the defendants’ transactions between foreign producers and purchasers located in the United States were "import trade" and fell "outside the scope of the FTAIA."[75]  Because the convictions could be independently sustained on the basis of the clearly proven import trade, the court declined to decide whether the evidence relating to foreign sales of panels that were incorporated into finished consumer products before being imported into the United States was sufficient to establish that the foreign sales had a "direct" effect for purposes of the domestic effects exception to the FTAIA.[76] Second, in Motorola Mobility LLC v. AU Optronics Corp. ("Motorola I"), a Seventh Circuit panel ruled that the FTAIA did not extend United States antitrust law to a scenario that now arises regularly in United States antitrust matters:  the sale abroad of price-fixed products to a foreign buyer, which then integrates those price-fixed products into a finished product that is eventually sold in the United States.[77]  As the court explained, the effect on United States domestic commerce in such a situation is not "direct" under the FTAIA, but rather a situation where foreign conduct "filters through many layers and finally causes a few ripples in the United States."[78]  Nor did the foreign conduct "give rise" to a Sherman Act claim because Motorola–the company which sold finished products in the United States–"mediated" the effect of any price fixing by deciding what price to charge for those phones.[79]  But on July 1, 2014, the panel granted Motorola’s request for rehearing and vacated its March 27, 2014 decision, to allow for briefing and oral argument, including amici from the DOJ, FTC, Belgium, Japan, and Korea.     On rehearing in Motorola Mobility LLC v. AU Optronics Corp. ("Motorola II"), and again in writing for a unanimous panel, Judge Posner stepped back from Motorola I‘s finding that the effect of the alleged conduct on United States commerce was not direct, reasonable, and foreseeable.[80]  Instead, he conceded that the United States effect fell into a gray area.  He assumed for the sake of the opinion that there was a direct effect on United States commerce, but declined to decide that point.  Instead, the panel unanimously affirmed the dismissal, holding that Motorola could not meet the additional requirement that the effect on domestic United States commerce give rise to an antitrust cause of action because Motorola’s foreign subsidiaries that purchased the allegedly price-fixed product outside of the United States, and not Motorola itself, were the direct purchasers, Motorola did not have a claim under the Sherman Act.  The court’s decision in Motorola II undertook an extensive analysis of antitrust standing and the indirect-purchaser doctrine of Illinois Brick Co. v. Illinois, which bars indirect purchasers from pursuing Sherman Act claims for damages.[81]  While the court acknowledged that some parent-subsidiary relationships may be exempt from the Illinois Brick bar, it held that foreign subsidiaries are not because they are incorporated under and subject to foreign regulation.[82]  Judge Posner noted that the disadvantage of regulation shopping through foreign incorporation is that a subsidiary’s remedies are limited to those granted by its country of citizenship.[83]   Subsidiaries must "take the good with the bad,"[84] and the court held that Motorola, in attempting to avoid that consequence, was merely "asserting a right to forum shop." [85]  Although the court barred Motorola from recovering civil damages, it took care to differentiate the civil remedies from the scope of the United States DOJ’s authority in criminal matters.  The DOJ had asked the court to "hold that the conspiracy to fix the price of LCD panels had a direct, substantial, and reasonably foreseeable effect on United States import and domestic commerce in cellphones incorporating these panels."[86]  While the court declined to make such a finding, it addressed the government’s request for "a disclaimer that a ruling against Motorola would interfere with criminal and injunctive remedies sought by the government against antitrust violations by foreign companies."[87] It emphasized that the ruling was limited to whether a United States -based parent company may sue on behalf of its subsidiaries, and did not constrain the government’s future ability to seek criminal and injunctive remedies of foreign corporations, provided that it can demonstrate the requisite statutory effect on domestic commerce.[88]  Third, in Lotes Co. v. Hon Hai Precision Industry Co.–which concerned a Taiwanese electronics manufacturing company’s claim that the defendants, "a group of five competing electronics firms," had attempted to gain monopoly power over the entire USB connector industry–the Second Circuit addressed whether the plaintiff stated a viable claim under the Sherman Act.[89]  In concluding that the plaintiff’s allegations fell short, the court affirmed the lower court’s judgment dismissing the plaintiff’s claims, but on alternative grounds.[90] In doing so, the court overruled its prior decision in Filetech S.A. v. France Telecom S.A.[91] and held that "the requirements of the FTAIA are substantive and nonjurisdictional in nature," but rejected the plaintiff’s argument that the defendants had waived the FTAIA’s requirements.[92]  Adopting the Seventh Circuit’s (as opposed to the Ninth Circuit’s) approach, the court also held "that foreign anticompetitive conduct can have a statutorily required ‘direct, substantial, and reasonably foreseeable effect’ on United States domestic or import commerce even if the effect does not follow as an immediate consequence of the defendant’s conduct, so long as there is a reasonably proximate causal nexus between the conduct and the effect."[93]  The court, however, did not decide whether the plaintiff plausibly alleged "the requisite ‘direct, substantial, and reasonably foreseeable effect’ under the proper standard" because the court found that the plaintiff’s claim did not satisfy the FTAIA’s "second limitation," which requires that the "domestic effect . . . ‘give[ ] rise to’" the claim.[94]  In particular, the court explained, "regardless of what effect the defendants’ conduct ha[d] on United States domestic or import commerce, any such effect did not ‘give[ ] rise to’ the plaintiff’s claim.  To the contrary, in the causal chain the plaintiff allege[d], the plaintiff’s exclusion from the relevant market actually precede[d] the alleged domestic effect." [95] Although these decisions provide some guidance about the extraterritorial reach of the United States antitrust laws, Circuit Courts are not uniform in their approaches.  The Hsiung and Motorola II decisions were the subject of pending petitions for en banc review.  Motorola’s en banc petition has been denied.[96]  Motorola has stated it will request Supreme Court review.  The resolution of those petitions, and possible petitions to the United States Supreme Court for writs of certiorari, will remain at the front of observers’ attention in 2015. The Hsiung rehearing was also denied en banc and the opinion was superseded.[97]         6.   Developments in the Extraterritorial Reach of RICO The Racketeer Influenced and Corrupt Organizations Act ("RICO") 18 U.S.C. §§ 1961–1968 creates criminal and civil liability when a "pattern of racketeering"–arising from the violation of certain federal or state criminal laws–is associated with an "enterprise."  In 2014, the Second Circuit held in European Community v. RJR Nabisco, Inc. that RICO applies to extraterritorial conduct to the extent that conduct violates an underlying RICO-predicate criminal statute with extraterritorial reach.[98] European Community involved allegations that the defendant "managed, and controlled a global money-laundering scheme with organized crime groups" in violation of RICO and New York law.[99]  The district court dismissed the RICO claims because it found that RICO itself did not overcome the presumption against extraterritorial application, that the "focus" of RICO was the criminal enterprise, and in the case before it, the alleged enterprise was "located and directed outside" the United States.  The Second Circuit reversed, explaining that by establishing some RICO predicate crimes that could "only occur outside the United States" or could apply to both domestic and extraterritorial conduct, "Congress manifested an unmistakable intent that certain of the federal statutes adopted as predicates for RICO liability apply to extraterritorial conduct."[100]  Relying primarily on RICO’s statutory text, the Second Circuit held that: RICO applies extraterritorially if, and only if, liability or guilt could attach to extraterritorial conduct under the relevant RICO predicate. Thus, when a RICO claim depends on violations of a predicate statute that manifests an unmistakable congressional intent to apply extraterritorially, RICO will apply to extraterritorial conduct, too, but only to the extent that the predicate would. Conversely, when a RICO claim depends on violations of a predicate statute that does not overcome Morrison‘s presumption against extraterritoriality, RICO will not apply extraterritorially either.[101] It explained that, by making extraterritorial application of RICO "coextensive with extraterritorial application of the relevant predicate statutes," "unmistakable" congressional intent would be satisfied, there would be simplification of "what conduct is actionable in the United States," and certain "incongruous results" would be avoided, such as the shielding of "purely domestic conduct from liability simply because the defendant has acted in concert with a foreign enterprise."[102]  Applying its standard to the predicate statutes before it, the Second Circuit determined that the complaint at issue "allege[d] sufficient domestic conduct" for the mail fraud, wire fraud, and Travel Act allegations.[103]  In Petroleos Mexicanos v. SK Engineering & Construction Co. Ltd.,[104] the Second Circuit relied on European Community to affirm dismissal of a complaint filed by Pemex alleging RICO liability based on wire fraud.  Pemex had relied exclusively on the wire fraud statute in pleading predicate acts, which European Community established as insufficient to support extraterritorial application of the RICO statute.  In Reich v. Lopez,[105] a district court also considered RICO allegations based on violations of predicate offenses of the Travel Act and wire fraud. The court held that the plaintiff had alleged "sufficient domestic conduct for each of these predicate acts" to overcome extraterritoriality concerns.[106]  Specifically, the plaintiff alleged bribery of foreign officials via wire communications originating from the United States, defendants’ travel to and from the United States, defendants’ use of United States bank accounts, and defendants’ use of wire communications in United States interstate commerce to direct the alleged bad acts.[107] Back to Top Part IV:  Developments in Foreign Judgment Recognition and Enforcement While United States courts are finding ways to respond to the influx of transnational suits, foreign judgment recognition and enforcement suits, which have been on the rise for the past decade, showed no sign of slowing in 2014.   Indeed, many plaintiffs appear to see recognition and enforcement suits as a vehicle for making an end run around the traditional United States trial process.[108]  Instead of engaging in pre-trial discovery and a full domestic trial on the merits, they file suits asking United States courts to domesticate foreign judgments and to treat the factual findings and evidence from the foreign proceeding as the law of the case, often based on little more than proof of the foreign judgment itself.[109]   If the foreign judgment is the product of fraud, corruption or a breakdown in the rule of law, it threatens the integrity of the United States system, as it can be difficult and time-consuming for defendants to reveal the deficiencies in foreign judgments.[110] Subject to certain requirements, United States courts are willing to entertain the recognition and enforcement of final and enforceable foreign civil judgments for a fixed sum of money, excluding judgments for fines, penalties or taxes.  Further, the United States generally adheres to the rule that the courts of one nation will not enforce the penal laws of another nation.[111]  The question of whether a certain state statute constitutes "penal law" depends on whether its purpose is to punish an offense against the public justice of the state, or to afford a private remedy to a person injured by the wrongful act.[112] In a recent decision, Plata v. Darbun Enterprises, Inc., a California state court reiterated that "the issue whether a monetary award is a penalty within the meaning of the [Recognition Act] requires a court to focus on the legislative purpose of the law underlying the foreign judgment.  A judgment is a penalty even if it awards monetary damages to a private individual if the judgment seeks to redress a public wrong and vindicate the public justice, as opposed to affording a private remedy to a person injured by the wrongful act."[113] In the same vein, in Harvardsky Prumyslovy Holding v. Kozeny, an intermediate New York appellate court held that the Czech judgment at issue was not "a fine or other penalty" and was therefore entitled to recognition in New York even though it had been issued by a criminal court in the Czech Republic.[114]  In that case, the monetary judgment was found to be remedial and therefore the judgment was considered to constitute a "judgment of a foreign state granting . . . a sum of money," thus entitled to recognition in New York.[115]  In general, the guiding principle in determining whether a litigant in foreign court proceedings had sufficient notice of the proceedings so as to allow recognition and enforcement of the foreign judgment is whether a reasonable method of notification was employed and reasonable opportunity to be heard was afforded to the person affected.  In a recent decision, Gardner v. Letcher,[116] the District of Nevada pointed to the fact "that no summons was served and that the ‘Summary of the Document to be Served’ form was not completely filled out."  Because the Hague Convention’s requirements for service were also not satisfied, the court concluded that the Swiss court did not have personal jurisdiction over the defendant.[117]    In Midbrook Flowerbulbs Holland B.V. v. Holland America Bulb Farms, Inc.,[118] the Western District of Washington granted summary judgment in favor of Midbrook, which had been seeking to enforce a judgment from a Dutch court against Holland America, a Washington company.  The court granted an order recognizing the Dutch judgment pursuant to the Uniform Foreign-Country Money Judgments Recognition Act ("UFCMJRA").[119]  While the court recognized that the UFCMJRA allows courts not to recognize a foreign judgment if "[t]he specific proceeding in the foreign court leading to the judgment was not compatible with the requirements of due process of law," the court concluded that Holland failed to demonstrate that the Dutch proceedings were not compatible with due process.[120]    Back to Top Part V:  Developments in Transnational Litigation and Judgment Collection         1.   Argentina v. NML Litigation:  The Supreme Court’s Restrictive Reading of the FSIA and Sovereign Immunity On June 16, 2014, the United States Supreme Court delivered two rulings related to a dispute arising from Argentina’s 2001 default on its external debt, Republic of Argentina v. NML Capital, Ltd., 134 S. Ct. 2250 (2014), and Republic of Argentina v. NML Capital, Ltd., 134 S. Ct. 2819 (2014).  In 2005 and 2010, Argentina restructured most of that debt by offering creditors new securities, with less favorable terms, in exchange for the defaulted ones.  Most bondholders accepted Argentina’s offer.  Respondent, NML Capital, Ltd. ("NML"), among others, did not and sued Argentina in a United States federal district court to collect the debt, and prevailed. The most important of these Supreme Court rulings, Republic of Argentina v. NML Capital, Ltd. ("NML I"), 134 S. Ct. 2250 (2014), concerned a dispute over third-party subpoenas that NML served on two banks in 2010 to discover information about Argentina’s property and financial transactions.[121]  Theodore B. Olson of Gibson Dunn argued the case before the Supreme Court on behalf of NML.  One of the banks, joined by Argentina, moved to quash the subpoena, and NML moved to compel compliance.[122]  The district court upheld the requested discovery, and the Second Circuit affirmed.[123]  Joined by the United States as amicus curiae, Argentina requested the Supreme Court to reverse the decision of the Second Circuit and to hold that the FSIA protects it from discovery into its assets held outside the United States and other assets Argentina claimed were immune from execution in United States courts.  In a 7-1 decision, the Supreme Court rejected Argentina’s arguments, upheld NML’s subpoenas, and held that the FSIA did not confer upon Argentina the requested protection from post-judgment discovery of information, thereby affirming the District Court and the Second Circuit.[124] Justice Scalia, writing for the majority, began by noting that "[t]he rules governing post-judgment execution proceedings are quite permissive."[125]  Foreign sovereign immunity," Justice Scalia noted, "is, and always has been, ‘a matter of grace and comity on the part of the United States, and not a restriction imposed by the Constitution.’"[126]  After setting out the evolution of the application of comity, the Supreme Court emphasized that the FSIA now provides a "comprehensive" set of legal standards to govern any claim of immunity by foreign sovereign States and, as such, "any sort of immunity defense made by a foreign sovereign in an American court must stand on the Act’s text. Or it must fall."[127]  According to the Court, nowhere in the FSIA’s "comprehensive" framework did the legislature prohibit or limit discovery in aid of execution of a foreign sovereign’s assets.[128]  The Court also rejected Argentina’s argument that the FSIA categorically barred discovery into assets that a foreign sovereign regards as diplomatic or military.  While the subpoenas were "bound to turn up information about property that Argentina regards as immune," the Court noted that NML "may think the same property not immune."[129]  In that situation, the foreign sovereign’s "self-serving legal assertion will not automatically prevail; the District Court will have to settle the matter."[130] Regarding the potential effects of granting such a discovery order on international comity and international relations, the Court responded that "[t]hese apprehensions are better directed to that branch of government with authority to amend the Act."[131]  The ruling has been referred to in seven decisions from federal courts of appeals from three Circuits, the Second, Third, and Seventh Circuits.[132]     In conjunction with the ruling in NML I, the Court denied Argentina’s petition for certiorari seeking review of a different Second Circuit decision that required Argentina to repay NML and other holders of defaulted bonds any time it made payments on the securities that it had issued in the 2005 and 2010 exchange offers.  See Republic of Argentina v. NML Capital, Ltd. ("NML II"), 134 S. Ct. 2819 (2014).  Since its default, Argentina had not made a single payment on NML’s bonds, whereas it had continued to pay other creditors who accepted smaller exchange offers that Argentina had pressed upon them.[133]  NML sought, and the district court issued, an injunction requiring Argentina to provide equal treatment to NML’s bonds.[134]  The Second Circuit affirmed this injunction, concluding that Argentina breached a provision in its bond agreement with NML that required Argentina to treat NML’s bonds at least equally to the rest of its external debt.[135]  Moreover, the Second Circuit held that the injunction was consistent with the FSIA,[136] and that it served the public interest by ensuring that contracting parties meet their obligations.[137]  Argentina was supported by the governments of France, Mexico, and Brazil (but not the United States), in its petition for review of that decision, but the Supreme Court rejected it, allowing the District Court’s injunctions — which had been stayed — to take effect.[138]          2.   Additional Developments in the Enforcement of Judgments Against Sovereign Entities In another case related to the Argentine bond dispute, on December 23, 2014, in Aurelius Capital Master, Ltd. v. Republic of Argentina, the Second Circuit issued a summary order upholding orders by the Southern District of New York compelling Argentina and third-party banks to comply with additional discovery demands issued by NML.[139]  The court held that, even if NML’s discovery related to diplomatic or military property potentially immune from attachment under international treaties or the FSIA, Argentina’s assertions of immunity did not entitle it to withhold otherwise discoverable information.[140]  The court reasoned as follows: First, the Second Circuit rejected Argentina’s contention that the FSIA prohibits discovery of sovereign property that is potentially immune from attachment, noting that the United States Supreme Court had already rejected this argument in the NML I ruling summarized in the preceding section.[141] Second, the Second Circuit rejected Argentina’s argument that the Vienna Convention on Diplomatic Relations and the Vienna Convention on Consular Relations–treaties to which both the United States and Argentina are signatories–prohibited attachment of diplomatic and consular property and discovery of diplomatic and consular documents.[142]  The court held that to the extent the discovery demands reached diplomatic or consular property that was immune from attachment, Argentina should object if and when NML actually sought to execute on such property.[143]  Insofar as the discovery demands reached diplomatic or consular documents that were privileged or inviolable under the treaties, the court held that Argentina should present its objections to the District Court "in the form of assertions of privilege or inviolability."[144] Third, the Second Circuit rejected Argentina’s argument that discovery into a foreign sovereign’s purported military property was precluded by the FSIA, 28 U.S.C. § 1611.  Citing NML I, the court reiterated that "the potential immunity of property from attachment does not preclude discovery of that property," and noted that such discovery may in fact be "necessary for the parties to properly litigate the existence of immunity."[145] In a different 2014 case implicating the FSIA, on August 29, 2014, the D.C. Circuit delivered its ruling in Odhiambo v. Republic of Kenya.[146]  Plaintiff, an employee of a Kenyan private bank who had reported certain tax irregularities associated with accounts at his employer bank, claimed he had made the report in response to an ad by the Kenya Revenue Authority promising a reward in exchange for such information.[147]  The plaintiff claimed that Kenya had failed to pay him the promised reward.[148]  After the plaintiff was identified as an informant, he feared for his safety and Kenyan authorities assisted him in moving to the United States as a refugee.[149]  The plaintiff then sued Kenya for breach of contract in relation to the alleged underpayment of rewards.[150]  Kenya moved to dismiss on the basis of sovereign immunity. The D.C. Circuit held that the FSIA barred the suit because none of the statute’s enumerated exceptions applied.  Specifically, the court found that Kenya’s accession to the 1951 Convention Relating to the Status of Refugees was not sufficient for "the exacting showing required for waivers of foreign sovereign immunity."[151]  Furthermore, the court rejected, among others, plaintiff’s argument that jurisdiction existed under the third clause of the "commercial activity exception," [152] which permits suit when a claim is based "upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States."[153]  The court agreed that plaintiff’s claim was based on Kenya’s commercial activity outside the United States, but found that it could not be found to cause a direct effect in the United States merely because Odhiambo now lived there.[154]  The court noted that in prior breach of contract cases, the point of whether an effect was "direct" had hinged on whether the United States was the place of performance of the contract.[155]  The court concluded that Kenya’s alleged breach of contract only had an indirect effect in the United States as a result of Odhiambo’s intervening relocation.[156]  According to the court, to allow plaintiffs to sue for breach of contract under this exception after moving to the United States would vastly expand the scope of the exception.[157]  The court therefore held that "breaching a contract that does not establish or necessarily contemplate the United States as a place of performance does not cause a direct effect in the United States."[158]          3.   Yukos v. Samaraneftegaz:  Developments in Enforcement of Arbitral Awards In 2007, Yukos Capital S.A.R.L. secured an award in the amount of 3,080,711,971 Russian Rubles plus fees and costs against OAO Samaraneftegaz in an arbitration conducted in New York under the ICC Rules of Arbitration.  In 2010, Gibson Dunn filed a petition on behalf of Yukos Capital to confirm the award in the Southern District of New York.  After extensive discovery into the validity of the arbitration agreement, which Samaraneftegaz asserted was invalid, the Southern District granted the petition in 2013.  The Southern District rejected Samaraneftegaz’s defenses to confirmation, including:  (1) Samaraneftegaz’s request that the Court dismiss the enforcement action on forum non conveniens grounds; (2) Samaraneftegaz’s claim that the Southern District lacked personal jurisdiction over Samaraneftegaz; and (3) Samaraneftegaz’s arguments that the award should not be enforced under the New York Convention because Samaraneftegaz lacked notice of the arbitration and the award was against public policy.[159]  Samaraneftegaz appealed.  In a later proceeding, the Southern District converted the amounts awarded in Russian rubles into United States dollars using the exchange rate as of the date the arbitration award was issued.[160]  Samaraneftegaz appealed that order as well. On November 4, 2014, the Second Circuit, in a summary opinion, affirmed the district court’s decision to enforce the award and to convert the rubles award into dollars as of the date of the award.[161] The court rejected Samaraneftegaz’s claim that enforcement of the award violated public policy, finding that the "district court was not required to defer to [a] Russian court’s determination that enforcement would violate Russian public policy" and that Samaraneftegaz had "never made any public policy arguments to the arbitrators."  Regarding the currency conversion, the court noted that the district court had followed "prevalent practice" by having "correctly determined that the proper date of conversion is the date that enforcement action arose, which is necessarily the date of the arbitration award."[162]  Robert Weigel of Gibson Dunn argued the case on behalf of Yukos Capital. In furtherance of its enforcement strategy, Yukos Capital moved for a turnover order based on the actions that Samaraneftegaz had taken that effectively depleted its available assets.  Turnover orders are a judgment enforcement mechanism available under New York law.[163]  On January 9, 2014, the Southern District of New York issued a turnover order in favor of Yukos Capital.[164]  The court enjoined Samaraneftegaz from paying dividends, making loans or any other asset transfers to its shareholders or corporate affiliates until it paid Yukos Capital or posted a bond for the full value of the award. The court also rejected Samaraneftegaz’s argument that it would suffer irreparable harm from the turnover order–finding instead that Yukos Capital would suffer irreparable harm and have no adequate remedy at law in the absence of the turnover order because Samaraneftegaz had made sizeable transfers of dividends and interest free loans to its corporate affiliates, effectively depleting its available assets.  Finally, the court characterized Samaraneftegaz’s efforts to re-litigate the issues that had already been decided as "strained and entirely unsubstantiated," as well as "a transparent attempt to escape paying the judgment."  Samaraneftegaz appealed the turnover order.  Expressing no opinion as to the merits of the underlying issues, the Second Circuit vacated the turnover order and remanded to the district court to clarify its ruling on alternative service of the turnover motion and to explain its conclusion that no foreign law conflict exists. Back to Top Part VI:  Developments in Transnational Discovery Until recently, Section 1782 was rarely used as a discovery tool in aid of foreign litigation, but since 2010 it is increasingly becoming an essential tool as litigants pursue transnational lawsuits.  Section 1782 enables litigants to use the United States’ broad discovery process to obtain evidence that might otherwise be unavailable within the constraints of pending foreign proceedings.  Section 1782 also does not restrain the use of such evidence if offered in a domestic action.  As a result, litigants may initially seek the discovery for use in the foreign litigation, but may ultimately use the evidence collected to bring a separate action in the United States.  While there are limits to the availability of Section 1782 discovery, 2014 saw the expansion of certain of those limits.          1.   To which foreign tribunals does Section 1782 apply? Courts remain divided over which foreign arbitral tribunals may serve as the basis for a Section 1782 application. Since Intel, courts have universally found that investor-state arbitration–which arises from treaty obligations contained in bilateral investment treaties or multilateral investment treaties–constitutes a "tribunal" under Section 1782.[165] With respect to private commercial arbitration, however, appellate courts have not provided clear guidance on whether Section 1782 assistance is available.  The Eleventh Circuit initially seemed open to the idea and held, in In re Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., that Section 1782 applied to a private commercial arbitration because the tribunal was a "first-instance decision-maker whose judgment was subject to judicial review."[166]  However, in January 2014, the Eleventh Circuit vacated the decision–in part because it did not have a sufficiently developed record on the nature of the arbitration tribunal–and issued a new decision that did not reach the issue because two lawsuits in Ecuadorian courts had been filed, thus obviating the need for the Eleventh Circuit to go further.[167]  As a result, the only appellate rulings on the issue are from the Courts of Appeals for the Fifth[168] and Second[169] Circuits, which do not recognize foreign private arbitral bodies (as opposed to investor state arbitration) as "tribunals" for Section 1782 purposes.  Notwithstanding these appellate rulings, a number of federal district courts have ruled to the contrary, and have allowed the use of Section 1782 to collect evidence for use in purely private foreign arbitrations.[170]          2.   How do Foreign Blocking, Privacy and Secrecy Laws Impact the Application of Section 1782 to Foreign Persons? Foreign statutes seldom provide American-style discovery, like that found in Section 1782.  While Section 1782 has some built-in protections–like the statutory requirement that prohibits compelled disclosure in violation of "any legally applicable privilege" and the Intel factors that grant courts discretion to deny "unduly intrusive or burdensome requests" and requests that attempt to "circumvent foreign proof gathering restrictions"–courts deciding Section 1782 applications have weighed the impact of foreign statutes and come out on both sides.[171]  In October 2014, the Southern District of New York quashed a Section 1782 subpoena seeking documents located in Russia and Ukraine from the law firm Chadbourne & Parke LLP for use in proceedings in Amsterdam, Netherlands, in part on the ground that they were "protected under Russian and Ukrainian client confidentiality and personal data privacy laws" such that disclosure "would offend core tenets of our [United States] legal system (and those of Russia and Ukraine)."[172]          3.   Section 1782 and Documents Located Abroad Whether documents located outside the United States can be obtained through Section 1782 discovery from a corporation with a presence in the United States is the subject of dispute.  Where the target is "found" in the district and has "control" over the documents under the Federal Rules of Civil Procedure, courts have been wrestling inconclusively with whether Section 1782 permits discovery of documents located overseas. In 2014, several courts denied discovery applications that sought documents located overseas.  In In re Slawomir Kaczor and Tomasz Rogucki,[173] the Southern District of Ohio denied a Section 1782 application for discovery in aid of Polish proceedings because, among other things, the discovery sought was located in Poland and "courts have read into § 1782 a threshold requirement that the material sought be located in the United States."[174]  The court also noted that the legislative history of Section 1782 establishes that it "was intended to aid in obtaining oral and documentary evidence in the United States . . . and was not intended to provide discovery of evidence maintain[ed] within a foreign district."[175] Likewise, in In re Certain Funds, Accounts, and/or Investment Vehicles Managed by Affiliates of Fortress Investment Group LLC,[176] the Southern District of New York observed that "courts have read into § 1782 a threshold requirement that the material sought be located in the United States," though the court denied the discovery application on other grounds." Back to Top    [1]   134 S. Ct. 746 (2014).    [2]   No. B233497, 2014 WL 891268 (Cal. Ct. App. Mar. 7, 2014).    [3]   561 U.S. 247 (2010).    [4]   134 S. Ct. 746 (2014).    [5]   Id. at 751.     [6]   Id. at 761 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011)) (quotation marks omitted).     [7]   Daimler, 134 S. Ct. at 749 (citing Goodyear, 131 S. Ct. at 2853-54).    [8]   Id. (citation omitted).     [9]   See, e.g., Air Tropiques, Sprl v. N. & W. Ins. Co., No. H-13-1438, 2014 WL 1323046, at *10 (S.D. Tex. Mar. 31, 2014); Brown v. CBS Corp., 19 F. Supp. 3d 390, 397-98 (D. Conn. 2014); Krishanti v. Rajaratnam, No. 2:09-cv-05395 (JLL)(JAD), 2014 WL 1669873, at *6 (D.N.J. Apr. 28, 2014); Intellectual Ventures I LLC v. Ricoh Co., Ltd., No. 13-474-SLR, 2014 WL 4748703, at *3 (D. Del. Sept. 12, 2014).    [10]   Air Tropiques, 2014 WL 1323046, at *10.   [11]   750 F.3d 221, 223 (2d Cir. 2014).    [12]   Sonera Holding, 750 F.3d at 226 (quoting Daimler, 134 S. Ct. at 761).    [13]   Sonera Holding, 750 F.3d  at 224-26.    [14]   Id. at 224 n.2.   [15]   The Ninth Circuit’s agency theory focused on a showing of "special importance of the services performed by the subsidiary."  Bauman v. DaimlerChrysler Corp., 644 F.3d 909, 920 (9th Cir. 2011).  They looked to whether the services performed by the subsidiary were of the sort that, had they not been performed, would have had to have been performed by the parent corporation’s own officials.  Id.   [16]   Daimler, 134 S.Ct. at 759-60.    [17]   George v. Uponor Corp., 988 F. Supp. 2d 1056, 1079-80 (D. Minn. 2013), reconsideration denied (Apr. 14, 2014).    [18]   No. 12-23510-CIV, 2014 WL 652831, at *8-9 (S.D. Fla. Feb. 19, 2014).   [19]   Id. at *9.    [20]   Id.    [21]   No. 12-cv-20129, 2014 WL 3408582, at *6-7 (S.D. Fla. May 9, 2014).    [22]   Id. at *3.   [23]   753 F.3d 521, 528, 530 (5th Cir. 2014).    [24]   Id. at 531-32.   [25]   27 F. Supp. 3d 1002, 1006, 1015 (N.D. Cal. 2014).    [26]   See 561 U.S. at 250.    [27]   Id. at 255-62.    [28]   Id. at 255, 261.    [29]   Id. at 255.    [30]   Id. at 266.   [31]   Id.   [32]   Id. at 272 (quoting Section 10(b)).    [33]   Id. at 273.   [34]   133 S. Ct. 1659 (2013).    [35]   Id. at 1660.    [36]   Id. at 1664.    [37]   Id. at 1661.   [38]   Id. at 1664.    [39]   Id. at 1665.   [40]   Id. at 1668.   [41]   Id. at 1669.   [42]   Chowdhury v. Worldtel Bangladesh Holding, Ltd., 746 F.3d 42, 49 (2d Cir. 2014) (citing Kiobel, 133 S.Ct. at 1669).   [43]   Id.    [44]   Cardona v. Chiquita Brands Int’l, Inc., 760 F.3d 1185, 1189 (11th Cir. 2014).   [45]   Id.   [46]   771 F.3d 580, 593 (9th Cir. 2014).   [47]   Id. at 596 (agreeing with the Eleventh Circuit in Cardona and the Second Circuit in Daimler AG).   [48]   See also Ben-Haim v. Neeman, 543 F. App’x 152, 154 (3d Cir. 2013) (taking the same stance as the Second, Eleventh and Ninth Circuits).   [49]   Al Shimari v. CACI Premier Tech., Inc., 758 F.3d 516 (4th Cir. 2014).   [50]   Id. at 520.   [51]   Id. at 529.   [52]   Al Shimari v. CACI Int’l, Inc., 951 F. Supp. 2d 857 (E.D. Va. 2013).   [53]   752 F.3d 173 (2d Cir. 2014).   [54]   Id. at 188.    [55]   Id. at 179 (quoting Morrison, 561 U.S. at 250-51).   [56]   763 F.3d. 198 (2d Cir. 2014).   [57]   Id. at 215.   [58]   677 F.3d 60 (2d Cir. 2012).   [59]   Parkcentral, 763 F.3d at 215 (emphasis added).    [60]   Id. at 215-18.    [61]   Id. at 214.    [62]   Id. at 218.   [63]   764 F.3d at 272.    [64]   Id. at 272-74.    [65]   Id. at 275 (citation omitted).    [66]   Id. at 272-73.    [67]   Id. at 270, 273 (citation omitted).   [68]   Liu Meng-Lin, 763 F.3d at 179.    [69]   Id. at 180.   [70]   Id. at 180-81.    [71]   Id. at 182-83.   [72]   Sec. Indus. and Fin. Mkts. Assoc. v. U.S. Commodity Futures Trading Comm’n, No. 13-1916 (PLF), 2014 WL 4629567 (D.D.C. Sept. 16, 2014).    [73]   Id. at *42.    [74]   758 F.3d 1074, 1088 (9th Cir. 2014).    [75]   Id. at 1091.    [76]   Id. at 1093.    [77]   746 F.3d 842 (7th Cir. 2014) (Posner, J.), reh’g granted and opinion vacated (July 1, 2014).    [78]   Id. at 844 (internal quotation marks omitted).    [79]   Id. at 845.    [80]   No. 14-8003, 2015 WL 137907 (7th Cir. Jan. 12, 2015).    [81]   431 U.S. 720 (1977).   [82]   Motorola II, 2015 WL 137907 at *6.     [83]   Id. at *5.   [84]   Id. at *12 (internal quotation marks omitted).   [85]   Id. at *5.    [86]   Id. at *9 (internal quotation marks omitted).   [87]   Id. at *10.    [88]   Id. at *9-10.   [89]   753 F.3d 395, 398 (2d Cir. 2014).    [90]   Id. at 398-99.    [91]   157 F.3d 922 (2d Cir. 1998).   [92]   Lotes, 753 F.3d at 398-99, 404-09.    [93]   Id. at 398.    [94]   Id. (quoting 15 U.S.C. § 6a(2)).   [95]   Id.   [96]   Motorola Mobility LLC v. AU Optronics Corp., 773 F.3d 826 (7th Cir. 2014), reh’g en banc denied, No. 14-8003, 2015 WL 137907 (7th Cir. Jan. 12, 2015).    [97]   United States v. Hui Hsiung, No. 12-10492, 2015 WL 400550 (9th Cir. Jan. 30, 2015).   [98]   764 F.3d 129 (2d Cir. 2014).   [99]   Id. at 133.  [100]   Id.  [101]   Id.  [102]   Id. at 139. [103]   Id. [104]   572 F. App’x 60 (2d Cir. 2014). [105]   2014 WL 4067179 (S.D.N.Y. Aug. 18, 2014). [106]   Id. at *5.  [107]   Id. [108]   See Osorio v. Dole Food Co., 665 F. Supp. 2d 1307 (S.D. Fla. 2009); Bridgeway Corp. v. Citibank, 45 F. Supp. 2d 276, 288 (S.D.N.Y. 1999), aff’d, 201 F.3d 134 (2d Cir. 2000). [109]   See Restatement (Third) of Foreign Relations Law §§ 481-86 (1987); Uniform Foreign-Country Money Judgments Recognition Act, ULA FC Money JMT § 3(a) (2005). [110]   See William E. Thomson & Perlette Michèle Jura, Confronting the New Breed of Transnational Litigation: Abusive Foreign Judgments, U.S. Chamber Institute for Legal Reform (Oct. 2011). [111]   Huntington v. Attrill, 146 U.S. 657, 673-74 (1892). [112]   Id. [113]   No. D062517, 2014 WL 341667, at *5 (Cal. Ct. App. Jan. 31, 2014). [114]   117 A.D.3d 77, 79 (2014).  [115]   Id. at 80.  [116]   No. 2:12-CV-00488-KJD, 2014 WL 3611587, at *1 (D. Nev. July 18, 2014). [117]   Id. [118]   No. 14-5409 RJB, 2014 WL 5605058, at *1 (W.D. Wash. Nov. 4, 2014). [119]   Id.  [120]   Id. at *6.  [121]   NML I, 134 S. Ct. at 2253.  [122]   Id.  [123]   Id.  [124]   When it issued the bonds, Argentina expressly waived any jurisdictional immunity it otherwise had under the FSIA. [125]   NML I, 134 S. Ct. at 2254. [126]   Id. at 2255 (citing Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 486 (1983)).  [127]   NML I, 134 S. Ct. at 2255-56.   [128]   Id. at 2256. [129]   Id. at 2258. [130]   Id. [131]   Id.  [132]   Mare Shipping Inc. v. Squire Sanders (US) LLP, 574 F. App’x 6 (2d Cir. 2014); Exp.-Imp. Bank of the Republic of China v. Grenada, 768 F.3d 75 (2d Cir. 2014); Gucci Am. v. Weixing Li, 768 F.3d 122 (2d Cir. 2014); Ohntrup v. Makina Ve Kimya Endustrisi Kurumu, 760 F.3d 290 (3d Cir. 2014); Pine Top Receivables of Ill., LLC v. Banco de Seguros del Estado, 771 F.3d 980 (7th Cir. 2014); Bormes v. United States, 759 F.3d 793 (7th Cir. 2014); Gates v. Syrian Arab Republic, 755 F.3d 568 (7th Cir. 2014). [133]   NML Capital, Ltd. v. Republic of Argentina, 727 F.3d 230, 237 (2d Cir. 2013).  [134]   Id.  [135]   Id. at 237, 241.  [136]   Id. [137]   Id. at 248.  [138]   NML II, 134 S. Ct. 2819. [139]   No. 13-4054, 2014 WL 7272279 (2d Cir. Dec. 23, 2014).  [140]   Id. at *1-2.  [141]   Id. at *1. [142]   Id. at *2. [143]   Id. [144]   Id. [145]   Id. [146]   764 F.3d 31 (D.C. Cir. 2014). [147]   Id. at 33.  [148]   Id.  [149]   Id.  [150]   Id.  [151]   Id. [152]   Id. [153]   28 U.S.C. § 1605(a)(2).  [154]   Odhiambo, 764 F.3d at 38.  [155]   Id.  [156]   Id.  [157]   Id. at 39.  [158]   Id. at 40.  [159]   Id. [160]   Yukos Capital S.A.R.L. v. OAO Samaraneftegaz, 963 F.Supp.2d 289 (S.D.N.Y. Aug. 6, 2013). [161]   Yukos Capital S.A.R.L. v. Samaraneftegaz, No. 13-3357-CV, 2014 WL 5572696 (2d Cir. Nov. 4, 2014). [162]   Id. at *3. [163]   N.Y. C.P.L.R. 5225(a). [164]   Yukos Capital S.A.R.L. v. OAO Samaraneftegaz, 2014 WL 81563 (S.D.N.Y. Jan. 9, 2014). [165]   See, e.g., In re Appl. of Mesa Power Group, LLC, 2012 WL 6060941 (D.N.J. Nov. 20, 2012); In re Appl. of Chevron Corp., 2012 WL 3636925 (S.D. Fla. June 12, 2012). [166]   685 F.3d 987, 997 (11th Cir. 2012). [167]   Application of Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 747 F.3d 1262 (11th Cir. 2014). [168]   The Fifth Circuit, in El Paso Corp. v. La Comision Ejecutiva Hidroelecctrica Del Rio Lempa, issued an unpublished opinion that Section 1782 did not apply to a private commercial arbitration conducted pursuant to an agreement under the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules.  341 F. App’x 31 (5th Cir. 2009). [169]   The Second Circuit held, in a pre-Intel decision that Section 1782 did not apply to a private foreign arbitration held by the ICC International Court of Arbitration.  NBC v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999). [170]   See, e.g., In re Owl Shipping, LLC & Oriole Shipping, LLC, 2014 WL 5320192 (D.N.J. Oct. 17, 2014) (finding that the London Maritime Arbitrators Association constituted a Section 1782 tribunal). [171]   Intel, 542 U.S. at 264-65. [172]   In re Application Pursuant to 28 U.S.C. Section 1782 of Okean B.V. and Logistic Solution Intern. to Take Discovery of Chadbourne & Parke LLP, 2014 WL 5090028 (S.D.N.Y. Oct. 10, 2014). [173]   2014 WL 4181618 (S.D. Ohio Aug. 21, 2014) (quoting In re Certain Funds, Accounts, and/or Inv. Vehicles Managed by Affiliates of Fortress Inv. Grp. LLC, 2014 WL 3404955, at *2 (S.D.N.Y. July 9, 2014)). [174]   Id. at *3. [175]   Id.  [176]   In re Certain Funds, 2014 WL 3404955, at *4 (S.D.N.Y. July 9, 2014).    Gibson, Dunn & Crutcher’s Transnational Litigation Practice Group lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact any member of the Gibson Dunn team, the Gibson Dunn lawyer with whom you usually work, or any of the following practice group co-chairs: United States:Randy M. Mastro – New York (+1 212-351-3825, rmastro@gibsondunn.com) Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com)Scott A. Edelman – Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com)Andrea E. Neuman – New York (+1 212-351-3883, aneuman@gibsondunn.com) William E. Thomson – Los Angeles (+1 213-229-7891, wthomson@gibsondunn.com) Perlette Michèle Jura – Los Angeles (+1 213-229-7121, pjura@gibsondunn.com) Europe:Philip Rocher – London (+44 20 7071 4202, procher@gibsondunn.com)Charlie Falconer – London (+44 20 7071 4270, cfalconer@gibsondunn.com)Patrick Doris – London (+44 20 7071 4276, pdoris@gibsondunn.com) © 2015 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

February 25, 2015 |
U.S. Department of State Releases List of Cuban Goods and Services Now Eligible for Importation

As previously reported in our January 20, 2015 Client Alert, "U.S. Department of the Treasury and Department of Commerce Issue Rules Implementing Changes in U.S. Policy on Cuba," on January 15, 2015 the Office of Foreign Assets Control ("OFAC") at the United States Department of the Treasury released regulatory amendments to the Cuban Assets Control Regulations ("CACR"), 31 C.F.R. Part 515, helping to implement the historic changes to the Cuba sanctions regime that were announced by President Obama on December 17, 2014.[1] These amendments addressed a wide range of economic activity, including, inter alia, travel to and from Cuba, personal remittances and certain other financial transactions, exports and imports, and access of Cubans to various Internet-based and telecommunications services.  The amendments primarily authorize by general license such activities which previously required case-by-case review and authorization from OFAC.  One of these amendments included a newly-added provision to the CACR, § 515.582, which opened the doors for the importation of certain Cuban goods and services by persons previously prohibited from doing so under the CACR.  Specifically, § 515.582 provides that "[p]ersons subject to U.S. jurisdiction are authorized to engage in all transactions, including payments, necessary to import certain goods and services produced by independent Cuban entrepreneurs as determined by the State Department as set forth on the State Department’s Section 515.582 List, located at http://www.state.gov/e/eb/tfs/spi/."  At the time of the publication of OFAC’s amendments to the CACR, the State Department had not yet released the Section 515.582 List of authorized goods and services, leaving this amendment temporarily without any functional applicability.  On February 13, 2015, the State Department published the Section 515.582 List and provided additional guidance on the contours of this new authorization.[2] The Section 515.582 List Referencing the Harmonized Tariff Schedule ("HTS") of the United States, the State Department set forth a negative list of specific categories of goods that are not authorized for importation.  Any goods that fall under one of the following enumerated categories are still prohibited for importation.  However, any goods produced by independent Cuban entrepreneurs that do not fall under one of the following enumerated categories are now eligible for importation: Section I: Live Animals; Animal Products All chapters Section II: Vegetable Products All chapters Section III: Animal or Vegetable Fats and Oils and their Cleavage Products; Prepared Edible Fats; Animal or Vegetable Waxes All chapters Section IV: Prepared Foodstuffs; Beverages, Spirits, and Vinegar; Tobacco and Manufactured Tobacco Substitutes All chapters Section V: Mineral Products All chapters Section VI: Products of the Chemical or Allied Industries Chapters 28-32; 35-36, 38 Section XI: Textile and Textile Articles Chapters 51-52 Section XV: Base Metals and Articles of Base Metal Chapters 72-81 Section XVI: Machinery and Mechanical Appliances; Electrical Equipment; Parts Thereof; Sound Recorders and Reproducers, Television Image and Sound Recorders and Reproducers, and Parts and Accessories of Such Articles All chapters Section XVII: Vehicles, Aircraft, Vessels, and Associated Transportation Equipment All chapters Section XIX: Arms and Ammunition; Parts and Accessories Thereof All chapters[3] The State Department noted that the $400 monetary limit set forth in § 515.560(c)(3) of the CACR for travelers bringing back goods from Cuba as accompanied baggage would not apply for any goods now authorized for import under § 515.582. In addition to transactions related to the importation of goods, § 515.582 also authorizes all transactions necessary for the importation of any service supplied by independent Cuban entrepreneurs. Independent Cuban Entrepreneurs An important limitation on the authorization granted by § 515.582 is that any allowable goods or services must be produced or supplied by "independent Cuban entrepreneurs," and importers must obtain documentary evidence that demonstrates this status.[4]  The term "independent Cuban entrepreneurs" is not yet defined by the State Department or in the CACR, although the State Department provided some limited guidance for what type of documentary evidence might be sufficient, including "a copy of a license to be self-employed issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity that is not owned or controlled in whole or in part by the Cuban government."[5] Interestingly, the wording of § 515.582 appears to attach this requirement to the goods or services being imported, and not necessarily to the person exporting the goods and services.  In the case of goods, it is an open question as to what extent § 515.582 authorizes transactions related to the importation of goods from a third party provided that the goods were originally produced by an independent Cuban entrepreneur.  Authorized Importers – "Persons Subject to U.S. Jurisdiction" Section 515.582 authorizes all "persons subject to U.S. jurisdiction" to import the allowable Cuban goods and services.  Under the CACR, this term is defined to include: (a) Any individual, wherever located, who is a citizen or resident of the United States; (b) Any person within the United States []; (c) Any corporation, partnership, association, or other organization organized under the laws of the United States or of any State, territory, possession, or district of the United States; and (d) Any corporation, partnership, association, or other organization, wherever organized or doing business, that is owned or controlled by persons specified in paragraphs (a) or (c) [above].[6] This definition is notable in that, unlike many other sanctions programs administered by OFAC, the Cuba sanctions have been applied to cover foreign subsidiaries of U.S. companies (paragraph (d) above) in addition to the more traditional coverage of U.S. sanctions which apply only to "U.S. persons," a term generally defined only to include paragraphs (a)-(c) above.[7]  Thus § 515.582 is careful to note that it eases the import restrictions on the broader base of entities generally restricted under the CACR.    [1]   Client Alert, Gibson, Dunn & Crutcher LLP, U.S. Department of the Treasury and Department of Commerce Issue Rules Implementing Changes in U.S. Policy on Cuba (Jan. 20, 2015), http://www.gibsondunn.com/publications/Pages/US-Dept-of-Treasury-and-Dept-of-Commerce-Issue-Rules-Implementing-Changes-in-US-Policy-on-Cuba.aspx; see also Client Alert, Gibson, Dunn & Crutcher LLP, U.S. Government Takes First Step Toward Normalizing Relations with Cuba; Restores Diplomatic Ties and Eases Trade Sanctions (Dec. 18, 2014), http://www.gibsondunn.com/publications/pages/US-Government-Takes-First-Step-Toward-Normalizing-Relations-with-Cuba.aspx.    [2]   See U.S. Dep’t of State, Fact Sheet U.S. Department of State Section 515.582 List (Feb. 13, 2015), available at http://www.state.gov/e/eb/tfs/spi/cuba/515582/237473.htm.    [3]   U.S. Dep’t of State, The State Department’s Section 515.582 List (Feb. 13, 2015), available at http://www.state.gov/e/eb/tfs/spi/cuba/515582/237471.htm?utm_source=15-0219+Thursday&utm_campaign=15-0210+Daily+Bugle&utm_medium=email.    [4]   See U.S. Dep’t of State Fact Sheet, supra note 2.    [5]   Id.    [6]   31 C.F.R. § 515.329.    [7]   See, e.g., definition of "U.S. Person" in the Syrian Sanctions Regulations, 31 C.F.R. § 542.319.        Gibson, Dunn & Crutcher’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, or the authors of this alert: Judith A. Lee – Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com)Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com)David A. Wolber – Washington, D.C. (+1 202-887-3727, dwolber@gibsondunn.com)Eric B. Lorber – Washington, D.C. (+1 202-887-3758, elorber@gibsondunn.com) Please also feel free to contact any of the following members of the firm’s International Trade Group: United States:Judith Alison Lee – Co-Chair, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com)Ronald Kirk – Co-Chair, 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)Daniel P. Chung – Washington, D.C. (+1 202-887-3729, dchung@gibsondunn.com)Andrea Farr – Washington, D.C. (+1 202-955-8680, afarr@gibsondunn.com)Stephenie Gosnell Handler* – Washington, D.C. (+1 202-887-3517, shandler@gibsondunn.com)Eric B. Lorber – Washington, D.C. (+1 202-887-3758, elorber@gibsondunn.com)Lindsay M. Paulin – Washington, D.C. (+1 202-887-3701, lpaulin@gibsondunn.com)Michael Willes - Los Angeles (+1 213-229-7094, mwilles@gibsondunn.com)David A. Wolber – Washington, D.C. (202-887-3727, dwolber@gibsondunn.com)Annie Yan – Washington, D.C. (+1 202-887-3547, ayan@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)Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com)Mark Handley – London (+44 (0)207 071 4277, mhandley@gibsondunn.com) *  Ms. Gosnell Handler is not yet admitted to practice in the District of Columbia and currently practices under the supervision of the Principals of the Firm. © 2015 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice. 

February 25, 2015 |
Venezuela’s Currency Regulations May Violate Investment Treaty Protections

Earlier this month, Venezuela announced a new free-floating exchange rate mechanism, which had the effect of massively devaluing Venezuela’s bolivar currency.  According to a Reuters report, the new market-set exchange rate will have the effect of wiping out over $7 billion of Venezuelan monetary assets held by 10 multinational corporations alone.  The airline industry is said to have an additional $3.5 billion in the country which they are not able to repatriate. Venezuela’s currency regulations over the past few years, including its latest adjustments to the exchange rate system, may give rise to investment treaty claims by foreign investors.  In particular, depending on the circumstances applicable to a particular investor, Venezuela’s actions may violate the right to: (1) the free transfer of capital into and out of Venezuela and; (2) the fair and equitable treatment due to protected foreign investors.  The violation of investment treaty rights is directly enforceable by foreign investors against Venezuela through international arbitration. Venezuela’s new exchange rate system caused the value of foreign investments to plummet For more than a decade, the Venezuelan government has imposed strict exchange rate controls in an effort to regulate access to its dwindling supply of US dollars.  Venezuela’s most recent foreign-exchange system consisted of three tiers: a fixed official rate of 6.3 bolivars to the dollar for "essential goods" such as food or medicine; a second rate of approximately 12 bolivars to the dollar depending on "auctions"; and a third exchange rate (which was as close to a free market as Venezuela would permit) of approximately 50 bolivars to the dollar.  Despite these regulation efforts, in recent weeks, the bolivar continued to trade on the black market for approximately 190 per dollar. The creation of the new currency platform announced earlier this month, known as SIMADI, replaced the third exchange rate with a system that now allows individuals and companies to exchange bolivars for dollars at the price set by the market.  As a result, the exchange rate for US dollars jumped from approximately 50 bolivars to more than 170 bolivars–close to the rate at which the bolivar had been trading on Venezuela’s black market. Virtually overnight, this new exchange rate consequently caused the assets of foreign investors to plummet by more than 70 percent.  To compound the issue, prior to implementing the new rate, the Venezuelan government had severely limited the number of currency exchange transactions that were permitted at the relevant official rate, effectively preventing many investors from doing anything but watch the value of their monetary assets plunge. Venezuela’s currency regulations may violate investment treaty protections Venezuela’s recent policies with respect to its currency may violate investment treaty protections owed to certain foreign investors, namely the right to freely transfer capital and the right to fair and equitable treatment.  A foreign investor is entitled to such protection when it is based in a jurisdiction that has an investment treaty with Venezuela.  There are over two dozen such treaties, including with Canada, France, Germany, Luxemburg, Spain, Switzerland, and the United Kingdom. The right to free transfer of capital Investment treaties commonly contain provisions protecting the free transfer of capital related to an investment, at the going exchange rate, into and out of the host state.[1]  These provisions are designed to prohibit "currency control restrictions or other measures taken by the host State which effectively imprison the investors’ funds, typically in the host State of the investment."[2] International arbitration tribunals have upheld the sanctity of these provisions, stating that "the guarantee that a foreign investor shall be able to remit from the investment country the income produced . . . and the value of the investment made . . . is fundamental to the freedom to make foreign investment."[3]  To the extent that Venezuela restricted foreign investors from repatriating their capital at the prevailing legal exchange rate, it may have violated its legal obligations under various investment treaties to which it is a party.  The right to fair and equitable treatment Under certain circumstances, Venezuela’s decision to launch an overhaul of the exchange rate system within which it had been operating for more than a decade may also have violated foreign investors’ right to fair and equitable treatment.  Pursuant to this protection, states are prohibited from taking any action "which entirely transforms or alters the legal or business environment" in which the investment was made.[4]  Instead, the state is required to act in a transparent manner with respect to foreign investments,[5] so as not to undermine the legitimate investment-backed expectations of a foreign investor.[6] Venezuela ensures the right to fair and equitable treatment in a number of its investment treaties,[7] and international arbitration tribunals have often relied on this standard to hold states accountable for their wrongful acts.  For example, in Achmea v. Slovak, the Tribunal found that the removal of a "right to generate profits, coupled with a ban on the transfer of the portfolio, effectively deprived Claimant of access to the commercial value of its investment" and therefore violated the principal of fair and equitable treatment.[8]     Similarly here, to the extent that the Venezuelan government prohibited foreign investors from freely converting and/or transferring their capital, and then implemented a new economic regime that devalued those investments by more than 70%, Venezuela has deprived investors of the commercial value of their investments.  The confluence of these factors may give rise to a breach of Venezuela’s obligation to ensure foreign investors fair and equitable treatment under its various investment treaties. *  *  *  * Venezuela’s recent currency regulations demonstrate just one example of where investment treaty protections might be invoked.  Investment treaties can offer important protections to foreign investors operating in markets that present significant political and legal risks.  Should 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 Venezuela’s currency regulations, we would be pleased to assist you. [1]               For example, the investment treaty between Venezuela and Spain contains a provision protecting transfers of capital made by foreign investors in convertible currency "at the exchange rate applicable the day of the transfer."  Venezuela / Spain Bilateral Investment Treaty, 1995, Article VII.3.  See also Venezuela / Canada Bilateral Investment Treaty, 1996, Article X.2 ("Unless otherwise agreed by the investor, transfers shall be made at the rate of exchange applicable on the date of transfer."). [2]               Biwater Gauff (Tanzania) Limited v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, July 24, 2008.  [3]               Continental Casualty Company v. Argentine Republic, ICSID Case No. ARB/03/9, Award, September 5, 2008, at ¶ 239. [4]               Metalclad Corporation v. Mexico, ICSID Case No. RB(AF)/97/1, Award, August 30, 2000, at ¶ 99. [5]               L.E.S.I. S.p.A. and ASTALDI S.p.A. v. Algeria, ICISD Case No. ARB/05/3, Award, November 12, 2008, at ¶ 151 (defining the fair and equitable treatment standard as requiring the state to "act consistently, unambiguously, [and] transparently" and "maintain a stable enough environment to allow a reasonably diligent investor to adopt a business strategy and implement it over time . . . ."). [6]               Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/1, Decision on Liability, December 27, 2010, at ¶ 122 (noting that while an investor cannot always expect that the legislative and regulatory regime will not change, certain general regulatory regimes can form the basis of an investor’s legitimate expectations.  Specifically, "a claim to stability can be based on the inherently prospective nature of the regulation at issue aimed at providing a defined framework for future operations . . . ."). [7]               See, e.g., Venezuela / Spain Bilateral Investment Treaty, 1995, Article IV.1 ("Each Contracting Party shall ensure in its territory fair and equal treatment under the law of international investments made by investors of the other Contracting Party."). [8]               Achmea v. Slovak, UNCITRAL, PCA Case No. 2008-13, Final Award, December 7, 2012, at ¶ 279.     Should you have any questions related to the issues discussed above, please feel free to contact the Gibson Dunn lawyer with whom you usually work, or one of the following lawyers in the firm’s International Arbitration Practice Group:  Cyrus Benson – London (+44 (0) 20 7071 4239, cbenson@gibsondunn.com)Penny Madden – London (+44 (0) 20 7071 4226, pmadden@gibsondunn.com)Rahim Moloo – New York (+1 212-351-2413, rmoloo@gibsondunn.com)Lindsey D. Schmidt – New York (+1 212-351-5395, lschmidt@gibsondunn.com) © 2015 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice

February 19, 2015 |
Havana Calling: Easing the Embargo Will Open the Cuban Telecom Sector

Gibson Dunn partner Jose W. Fernandez and associate Eric B. Lorber are authors of the following article which appears in a recent issue of Foreign Affairs, published by the Council on Foreign Relations.  It argues that the Obama Administration’s loosening of the telecommunications sanctions on Cuba was the right first step to galvanizing civil society on the island, but that the Administration (and OFAC) could do more to incentivize business investment in the country.  Mr. Fernandez joined the firm’s New York office in 2013 after serving for nearly four years at the U.S. State Department, where he was appointed Assistant Secretary of State for Economic, Energy and Business Affairs in 2009 and served as the State Department’s principal representative in CFIUS.  He is co-chair of the firm’s Latin America Practice Group.  Mr. Lorber, who practices with the firm’s International Trade Group, previously worked in the Office of Chief Counsel at OFAC and in the Office of Terrorist Financing and Financial Crime at the Treasury Department.      Havana Calling (click on title)           ___________________________ © 2015, Foreign Affairs, February 17, 2015.  Reprinted with permission from the Council on Foreign Relations. Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

February 11, 2015 |
Webcast: Foreign Investments in Emerging Markets

A handful of developing economies have been, and will continue to be, a key driver of global growth. In the coming years, emerging markets are expected to grow two to three times faster than developed nations. As a result, these emerging markets can provide investors higher expected returns and diversification benefits. With the prospect of these benefits, it is no surprise that foreign investment into emerging markets continues to surge. However, investing in emerging markets can be risky. Political instability and legal insecurity are among the risks that can hamper the success of a foreign investment. Join Gibson Dunn’s leading practitioners Ambassador Ronald Kirk, Jose Fernandez and Rahim Moloo for a presentation followed by a Q&A period to discuss the ways in which you can help to mitigate the political and legal risks associated with making foreign investments in emerging economies. Among other things, the presentation will address: a) due diligence inquiries that are unique to investments in developing countries; b) how to take advantage of investment treaties to protect your investments; and c) unique features that you may wish to include in contracts concerning investments in emerging markets. View Slides [PDF] Panelists: Jose W. Fernandez — A partner in the New York office of Gibson, Dunn & Crutcher and Co-Chair of Gibson Dunn’s Latin America Practice Group. His practice focuses on mergers and acquisitions and finance in emerging markets in Latin America, the Middle East, Africa and Asia. Mr. Fernandez served as Assistant Secretary of State for Economic, Energy and Business Affairs where he led the Bureau that is responsible for overseeing work on international trade and investment policy; international finance, development and debt policy; economic sanctions and combating terrorist financing; international energy security policy; international telecommunications and transportation policies; and support for U.S. businesses and the private sector overseas. His work focused on development as a business opportunity for U.S. companies and a strategic imperative for the United States, mostly in the areas of infrastructure, trade and investment, entrepreneurship, and agriculture. Mr. Fernandez spearheaded the State Department’s “Economic Statecraft” initiative to promote foreign investment into the United States and support U.S. companies overseas, co-led the interagency team that prepared the Model Bilateral Investment Treaty used by the United States today, worked with American businesses to promote responsible business conduct in Myanmar, Bangladesh and the diamond industry through the Kimberly Process, and led the U.S. government’s economic dialogues with Turkey, the UAE, Brazil and several other nations. He was the State Department’s principal representative in the Committee on Foreign Investment in the United States (CFIUS) and was also a key figure in devising and implementing U.S. sanctions policy around the world. Ronald Kirk — A senior of counsel in Gibson, Dunn & Crutcher’s Dallas and Washington, D.C. offices, Ambassador Kirk is Co-Chair of the International Trade practice and is also a member of the Public Policy, Crisis Management, Mergers and Acquisitions and Private Equity practice groups. He draws upon more than 30 years of diverse legislative and economic experience on local, state and federal levels. Ambassador Kirk’s practice focuses on providing strategic advice to companies with global interests. Prior to joining the Gibson Dunn he served as the 16th United States Trade Representative (USTR) where he was responsible for the development and oversight of U.S. trade policy, including strategy, negotiation, implementation and enforcement of multilateral, regional/bilateral and sector-specific trade agreements, and was a member of President Obama’s Cabinet, serving as the President’s principal trade advisor, negotiator and spokesperson on trade issues. Ambassador Kirk successfully negotiated the conclusion and Congressional passage of trade agreements with Columbia, Panama and Korea, and Russian’s entry in the World Trade Organization. He was also responsible for U.S. trade policy involving agriculture; industry; services and investment; intellectual property; environment; labor; development and preference programs. Rahim Moloo — An of counsel in the New York office of Gibson, Dunn & Crutcher and a member of Gibson Dunn’s International Arbitration Practice Group, Mr. Moloo’s practice focuses on assisting clients to resolve complex international disputes in the most effective and efficient way possible. He has extensive experience in both international commercial and investor-state arbitrations, and also advises clients on the structuring of foreign investments and matters of international law. Mr. Moloo has advised clients on their investments in Africa, Asia, Europe, and the Americas. He is particularly aware of the issues that multinationals face in emerging markets, having previously been General Counsel to an international organization in Central Asia. Mr. Moloo has experience across a number of industries, but especially in disputes relating to energy, mining, infrastructure, technology and consumer products.

January 20, 2015 |
U.S. Department of the Treasury and Department of Commerce Issue Rules Implementing Changes in U.S. Policy on Cuba

On January 15, 2015, the United States Department of the Treasury (Treasury Department) and the United States Department of Commerce (Commerce Department) released regulatory amendments implementing historic changes to the Cuba sanctions regime announced by President Obama on December 17, 2014.  The amendments incorporate the diplomatic and economic changes to U.S. policy towards Cuba announced by the President as they apply to the regulations enforced by the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Commerce Department’s Bureau of Industry and Security (BIS).  The revised Cuban Assets Control Regulations (CACR)[1] and Export Administration Regulations (EAR)[2] took effect on January 16, 2015, one day after issuance.  As discussed in more detail in our Gibson Dunn Client Alert, "U.S. Government Takes First Step Toward Normalizing Relations with Cuba; Restores Diplomatic Ties and Eases Trade Sanctions,"[3] the policy changes are designed to further "engage and empower"[4] the Cuban people.  The amendments released today include detailed revisions  to the applicable regulations.  The changes focus primarily on the following areas:  (i) travel; (ii) financial services; (iii) importation of goods; (iv) telecommunications; (v) consumer communications devices; (vi) insurance; (vii) remittances; (viii) third-country effects; (ix) small business growth; (x) the definition of "cash in advance;" (xi) support of the reestablishment of diplomatic relations; and (xii) support for the Cuban people.  These areas are discussed in detail in terms of changes by the Commerce Department to the EAR and revisions by the Treasury Department to the CACR. Changes to the EAR Related to Exports and Reexports Pursuant to the comprehensive U.S. trade embargo with Cuba that has been in place for more than 50 years, items "subject to the EAR" (with limited exceptions, almost all goods and technology subject to U.S. jurisdiction) require a license or license exception for export or reexport to Cuba.  In order to implement the policy changes announced by President Obama on December 17, 2014, and, specifically, to "enable[] the export and reexport to Cuba [] items intended to empower the nascent Cuban private sector by supporting private economic activity,"[5] the EAR has been amended in four ways:  (i) the creation of License Exception Support for the Cuban People (License Exception SCP); (ii) amendments to existing License Exception Consumer Communications Devices (License Exception CCD); (iii) amendments to License Exception Gift Parcels and Humanitarian Donations (License Exception GFT); and (iv) the establishment of a general policy of approval for exports and reexports to Cuba of items for the environmental protection of U.S. and international air quality, waters and coastlines. Creation of License Exception Support for the Cuban People License Exception SCP is designed to facilitate improvements in the living conditions of ordinary Cubans, support independent economic activity, strengthen civil society, and improve the free flow of information to, from, and among the Cuban people.  Pursuant to License Exception SCP, the export and reexport of certain items to support improved living conditions and independent economic activity will no longer require a license from BIS.  License Exception SCP authorizes the export and reexport of commercially sold or donated:  (i) building materials, equipment, and tools for use by the private sector in order to construct or renovate privately-owned buildings; (ii) tools and equipment for private sector agricultural activity; and (iii) tools, equipment, supplies, and instruments for use by private sector entrepreneurs (e.g., auto mechanics, barbers, and restaurateurs).[6]  In order to qualify for License Exception SCP, items must be designated as EAR99.[7] License Exception SCP also provides for the export or reexport of specific items that are donated for use in scientific, archaeological, cultural, ecological, educational, historic preservation, or sporting activities (the "SCP Designated Activities").[8]  In addition, the temporary export of certain items by persons departing the United States for use in the SCP Designated Activities or in professional research–provided such research is directly related to the traveler’s profession or area of expertise–is authorized under License Exception SCP.  The regulations clarify that such temporary exports must be returned to the United States within two years, with certain exceptions.[9]  In both instances, License Exception SCP only applies if any such items are not listed on the United States Munitions List (USML) or the Commerce Control List (CCL), unless the only reason for control of such item on the CCL is anti-terrorism.[10] Further, License Exception SCP authorizes the export and reexport to Cuba of certain items to human rights organizations, individuals, or non-governmental organizations that promote activities intended to strengthen civil society.[11]  Such items must be either designated as EAR99 or if the item is listed on the CCL, the only reason for control is anti-terrorism.[12]  License Exception SCP also seeks to facilitate the free flow of information and news media.  Accordingly, it authorizes the export and reexport to Cuba of certain items that facilitate communications, including access to the Internet, the use of Internet services, and items related to the creation and upgrade of telecommunications infrastructure, as well as items used by news media.[13]  Again, the items authorized are limited to those designated as EAR99 or controlled on the CCL only for anti-terrorism reasons.[14]  Items that are listed on the CCL for sensitive reasons such as national security, nuclear proliferation, regional stability, missile technology, and similar sensitivities are not authorized for export pursuant to License Exception SCP. Revision of License Exception Consumer Communications Device When created in 2009, License Exception CCD[15] authorized the export and reexport of donated consumer communications devices that enable the free flow of information such as computers, mobile phones, televisions, recording devices, and consumer software.  As of January 16, 2015, License Exception CCD is amended to remove the donation requirement.  As a result, commercially sold as well as donated eligible items may be exported or reexported to Cuba pursuant to License Exception CCD. Revision of License Exception Gift Parcels and Humanitarian Donations License Exception GFT[16] previously excluded from eligibility consolidated shipments of multiple parcels for delivery to individuals in a foreign country; the revised rule eliminates this exclusion.  Pursuant to today’s changes, the export and reexport of multiple gift parcels in a single shipment is now permitted under License Exception GFT.  No changes have been made with regards to the applicability of this License Exception to individual gift parcels. Revisions to Licensing Policy for Environmental Protection A general policy of approval has been added for the export and reexport of items necessary for the environmental protection or enhancement of U.S. and international air, water quality, or coastlines.[17]  This revision includes items related to energy efficiency or renewable energy. Changes to the CACR to Implement Policy Changes Telecommunications and Internet-Based Services OFAC has amended the CACR to generally authorize transactions that establish mechanisms in Cuba to provide commercial telecommunications services linking third countries and Cuba and in Cuba.[18]  Specifically, the regulations have been amended to provide a general license for transactions (including payments) that are related to the establishment of facilities, including fiber-optic cable and satellite facilities, to provide telecommunications services.[19]  Telecommunication services may include data, telephone, internet connectivity, radio, television, news wire feeds, and similar services.[20]  The CACR also now authorizes the exportation or reexportation of certain services including software design, business consulting, and information technology management services (including cloud storage) of items subject to the EAR that are exported or reexported to Cuba pursuant to License Exception CCD.[21]  This authorization also applies to items that are not subject to the EAR because they are of foreign origin and located outside of the U.S. but are of a type described in License Exception CCD and would be designated as EAR99 or would meet criteria for eligible items specified in License Exception CCD if they were subject to the EAR.[22] Further, OFAC has revised the CACR to provide that transactions relating to certain Internet-based services are now authorized.  The list of permitted transactions includes:  the exportation or reexportation, directly or indirectly, from the U.S. or by a person subject to U.S. jurisdiction to Cuba of services incident to the exchange of communications over the Internet (e.g., instant messaging, social networking, sharing of photos and movies, web browsing, blogging, and domain registration services).[23] Travel and Travel Services Travel for tourist activities continues to be prohibited by law.  However, for the twelve categories of permitted travel, travel will be authorized by general license instead of specific license.[24]  These twelve categories include:  (i) family visits; (ii) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (iii) journalistic activity; (iv) professional research and professional meetings; (v) educational activities; (vi) religious activities; (vii) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (viii) support for the Cuban people; (ix) humanitarian projects; (x) activities of private foundations or research or educational institutes; (xi) exportation, importation, or transmission of information or informational materials; and (xii) certain export transactions that may be considered for authorization under existing regulations and guidelines.[25]  Specific conditions must still be met for each of the twelve categories. Further, travel agents and airlines will no longer be required to obtain a specific license from OFAC in order to provide authorized travel and air carrier services.[26] Use of Credit and Debit Cards, Per Diem, and Importation of Certain Goods and Services The use of U.S. credit and debit cards in Cuba will now be authorized for travel-related transactions, and U.S. financial institutions will be permitted to enroll merchants to process such transactions.[27]  Additionally, the previous per diem limitation on authorized travelers’ spending in Cuba has been eliminated[28] and there will be no specific dollar limit on authorized expenses; travelers will be permitted to engage in transactions ordinarily incident to travel within Cuba.[29]  Authorized travelers will also be permitted to import up to $400 worth of goods from Cuba, which may include up to $100 of alcohol or tobacco products.[30] Financial Services Pursuant to a new OFAC general license, depository institutions will be permitted to open correspondent accounts at Cuban financial institutions, enabling the processing of authorized transactions.[31]  Note that the general license does not authorize the establishment of accounts in the U.S. or with a person subject to U.S. jurisdiction by, on behalf of, or for the benefit of, Cuba or a Cuban national.[32] As discussed above, transactions that are incident to the processing and payment of credit and debit cards involving travel-related transactions are authorized under the revised regulations.[33] In addition, the CACR has been amended to permit expanded financing options for authorized exports to Cuba through a revision to the regulatory guidance concerning the term "payment of cash in advance."[34]  Under the amended guidance, instead of defining the term as "payment of cash before shipment," this term is now defined as "payment [of cash] before the transfer of title to, and control of" the authorized export.[35] Small Business Growth OFAC has amended its general license relating to humanitarian projects to authorize certain projects intended to facilitate the development of entrepreneurial skills and small business growth.  These include educational training relating to:  entrepreneurship and business; development of small-scale private enterprise; projects related to agricultural and rural development that promote independent activity; and micro-financing projects[36] (note that this does not include loans, extensions of credit or other financing prohibited by § 515.208).[37] Further, OFAC will now permit commercial imports of certain specified goods and services that are produced by Cuban entrepreneurs.[38]  The specified goods and services will be determined by the United States Department of State and will be listed on its website and published in the Federal Register on a future date. Remittances The limit on generally authorized remittances to Cuban nationals has been raised from $500 to $2,000 per quarter.[39]  As previously provided, the recipient of such remittances must not be a prohibited official of the Government of Cuba or a prohibited member of the Cuban Community Party.[40]  Additionally, authorized travelers may now carry a total amount of $10,000 in remittances; an increase from the previous limit of $3,000.[41]  Further, remittances may be made to close relatives who are students in Cuba pursuant to a general license or specific educational license.[42]   Remittances to certain individuals and independent non-governmental organizations in Cuba, including pro-democracy groups and civil society groups, and to member of such groups, are authorized for certain purposes, including to support:  (i) humanitarian projects in or related to Cuba which are intended to directly benefit the Cuban people; (ii) the Cuban people through activities of recognized human rights organizations, independent organizations designed to promote a rapid, peaceful transition to democracy, and activities of individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba; and (iii) the development of private businesses, which includes small farms.[43] Further, OFAC has expanded the general license for U.S. banking institutions, including registered brokers or dealers and registered money transmitters, to provide services in connection with the collection of forwarding of authorized remittances.[44]  Note that detailed records relating to the provision of these authorized services must be retained for at least five years from the date of the transaction.[45] Certain Transactions with Cuban Nationals Located Outside Cuba Pursuant to the amendments to the CACR, U.S.-owned or U.S.-controlled entities in third countries will be permitted to provide goods and services to a Cuban national located outside of Cuba, so long as that transaction does not involve a commercial exportation, directly or indirectly, of goods or services to or from Cuba.[46]  Note that U.S.-owned or U.S.-controlled entities in third countries are not permitted to export to Cuba commodities produced in the authorized trade territory,[47] nor are such entities authorized to reexport to Cuba items of U.S. origin.[48]  Further, persons subject to U.S. jurisdiction are still prohibited from engaging in transactions with respect to any merchandise outside the U.S. if such merchandise is Cuban-origin, has been located in or transported from Cuba, or is made or derived from Cuban-origin materials.[49]  OFAC has also revised the CACR to unblock accounts of Cuban nationals who have permanently relocated outside of Cuba.  Pursuant to a general license, OFAC has authorized banking institutions to unblock such accounts.[50] OFAC is also revising the regulations to authorize persons subject to U.S. jurisdiction to sponsor and participate in third-country professional meetings and conferences attended by Cuban nationals.[51]  However, such meetings or conferences may not relate to tourism in Cuba.[52] Diplomatic Relations and Official Government Business In accordance with President Obama’s announcement regarding the reestablishment of diplomatic relations with Cuba, OFAC will authorize the provision of goods or services in the U.S. to the official missions of the Government of Cuba and their employees, provided that such goods and services are for the conduct of official business.[53]  In addition, a general license covering Cuba-related transactions by employees, grantees, and contractors of the U.S. Government, foreign governments, and certain international organizations in their official capacities has been expanded.[54]  Persons relying on this general authorization must retain certain records related to authorized travel transactions[55], and specific licenses may be issued for transactions related to official government business that do not qualify for the general license[56]. Recommendations  These amendments to the EAR and CACR reflect a significant shift in U.S. policy towards the Communist island, and while they now permit U.S. firms to engage in a wider range of business activities in Cuba, our friends and clients should exercise caution in re-entering Cuban markets.  In particular U.S. firms considering doing business in Cuba should take a number of steps. First, U.S. companies should ensure that their particular business activities are permitted under the new regulations.  Cuba is not "open for business," but rather OFAC and BIS now permit certain transactions to occur with the country and its citizens.  Second, U.S. companies entering the market should be aware that many sanctions on Cuba remain in place, and OFAC will be aggressively enforcing those regulations.  While certain activities are now permissible, U.S. firms operating in Cuban markets must be cautious and ensure that transactions incidental to their primary, permitted business activities in the country do not violate U.S. sanctions prohibitions.      Gibson, Dunn & Crutcher will continue to monitor further developments on these significant regulatory changes.  If you have any questions concerning compliance with U.S. government regulations concerning Cuba, please do not hesitate to contact us.    [1]   Cuban Assets Control Regulations, 80 Fed. Reg. 2,291 (Jan. 16, 2015) (to be codified at 31 C.F.R. pt. 515) (hereinafter "New OFAC Regulations").    [2]   Cuba: Providing Support for the Cuban People, 80 Fed. Reg. 2,286 (Jan. 16, 2015) (to be codified at 15 CFR pts. 736, 740, 746, and 748) (hereinafter "New BIS Regulations").    [3]   Client Alert, Gibson, Dunn & Crutcher LLP, U.S. Government Takes First Step Toward Normalizing Relations with Cuba; Restores Diplomatic Ties and Eases Trade Sanctions (Dec. 18, 2014), http://www.gibsondunn.com/publications/pages/US-Government-Takes-First-Step-Toward-Normalizing-Relations-with-Cuba.aspx.    [4]   Press Release, The White House, Fact Sheet: Charting a New Course on Cuba (Dec. 17, 2014), http://www.whitehouse.gov/the-press-office/2014/12/17/fact-sheet-charting-new-course-cuba.    [5]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,286 (Jan. 16, 2015).    [6]   Id. at 2,286-87. (codified at 15 C.F.R. § 740.21(b)).    [7]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,287 (codified at 15 C.F.R. § 740.21(b)). Items controlled by the Commerce Department and subject to the EAR include any items not controlled for export, reexport or transfer by another agency of the United States.  15 C.F.R. §§ 730.3, 734.3.  Items that fall under the jurisdiction of the Commerce Department but are not listed in the Commerce Control List, 15 C.F.R. Part 774 Supp. No. 1, are designated "EAR99."  Most commercial products are designated "EAR99."  With certain exceptions, preauthorization is not required for the export or reexport of EAR99 goods.  Transactions in which the goods are destined for embargoed countries such as Cuba are among the exceptions and generally require licensing.    [8]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,287 (codified at 15 C.F.R. § 740.21(c)(1)).    [9]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,287 (codified at 15 C.F.R. § 740.21(c)(2)).   [10]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,287 (codified at 15 C.F.R. §§ 740.21(c)(1),  740.21(c)(2)(ii)).   [11]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,287 (codified at 15 C.F.R. § 740.21(c)(3)).   [12]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,287 (codified at 15 C.F.R. § 740.21(c)).   [13]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,287 (codified at 15 C.F.R. § 740.21(d)).   [14]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,287 (codified at 15 C.F.R. § 740.21(d)).   [15]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,287 (codified at 15 C.F.R. § 740.19).   [16]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,288 (codified at 15 C.F.R. § 740.12).   [17]   New BIS Regulations, 80 Fed. Reg. 2,286, 2,288.   [18]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,292 (codified at 31 C.F.R. § 515.542(d)).   [19]   31 C.F.R. § 515.542(d).   [20]   31 C.F.R. § 515.542(f).   [21]   31 C.F.R. § 515.578(a)(2).   [22]   31 C.F.R. § 515.578(a)(2)(ii).   [23]   31 C.F.R. § 515.578(a)(1).   [24]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,291 (codified at  31 C.F.R. §§ 515.533, 515.545, 515.560 through 515.567, and 515.574 through 515.576).   [25]   31 C.F.R. §§ 515.560(a).   [26]   31 C.F.R. § 515.872(a)(1)-(2).   [27]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,291 (codified at 31 C.F.R. §§ 515.560(c)(5), 515.584(c)).   [28]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,291.   [29]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,291 (codified at 31 C.F.R. § 515.560(c)(5)).   [30]   31 C.F.R. § 515.560(c)(3).   [31]   31 C.F.R. § 515.584(a).   [32]   31 C.F.R. § 515.584(a), Note.   [33]   31 C.F.R. § 515.584(c).   [34]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,292.   [35]   31 C.F.R. § 515.533(a)(2)(i).   [36]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,291-92 (codified at 31 CF.R. § 515.575(b)).   [37]   31 C.F.R. § 515.575(b).   [38]   31 C.F.R. § 515.582.   [39]   31 C.F.R. § 515.570(b)(1).   [40]   31 C.F.R. § 515.570(b)(3).   [41]   31 C.F.R. § 515.560(c)(4)(i).   [42]   31 C.F.R. § 515.560(d).   [43]   31 C.F.R. § 515.570(g)(1)-(3).   [44]   31 C.F.R. § 515.572(a)(3).   [45]   31 C.F.R. § 515.572 (b).   [46]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,292 (codified 31 C.F.R. § 515.585).   [47]   31 C.F.R. § 515.585, Note 1; see 31 C.F.R. §515.559.  Pursuant to 31 C.F.R. § 515.322, the term authorized trade territory includes all countries, including any colony, territory, possession, or protectorate, with the exception of  the U.S. and Cuba.   [48]   31 C.F.R. § 515.585, Note 2; see 31 C.F.R. § 515.533.   [49]   31 C.F.R. § 515.585, Note 3; see 31 C.F.R. § 515.204.   [50]   31 C.F.R. § 515.505(b).   [51]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,292 (codified 31 C.F.R. § 515.581).   [52]   31 C.F.R. § 515.581.   [53]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,292 (codified at 31 C.F.R. § 515.586).   [54]   New OFAC Regulations, 80 Fed. Reg. 2,291, 2,292 (codified at 31 C.F.R. § 515.562).   [55]   31 C.F.R. § 515.562, Note   [56]   31 C.F.R. § 515.562(d).       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 or any of the following lawyers in the firm’s International Trade Group: United States:Judith Alison Lee – Co-Chair, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com)Ronald Kirk – Co-Chair, Dallas (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)Daniel P. Chung – Washington, D.C. (+1 202-887-3729, dchung@gibsondunn.com)Andrea Farr – Washington, D.C. (+1 202-955-8680, afarr@gibsondunn.com)Stephenie Gosnell Handler* – Washington, D.C. (+1 202-887-3517, shandler@gibsondunn.com)Eric Lorber* – Washington, D.C. (+1 202-887-3758, elorber@gibsondunn.com)Lindsay M. Paulin – Washington, D.C. (+1 202-887-3701, lpaulin@gibsondunn.com)Michael Willes - Los Angeles (+1 213-229-7094, mwilles@gibsondunn.com)     David A. Wolber – New York (+1 212-351-2384, dwolber@gibsondunn.com)Annie Yan – Washington, D.C. (+1 202-887-3547, ayan@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)Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com)Mark Handley – London (+44 (0)207 071 4277, mhandley@gibsondunn.com) *  Ms. Gosnell Handler and Mr. Lorber are not yet admitted to practice in the District of Columbia, and currently practice under the supervision of the Principals of the Firm. © 2015 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice. 

December 18, 2014 |
U.S. Government Takes First Step Toward Normalizing Relations with Cuba; Restores Diplomatic Ties and Eases Trade Sanctions

On December 17, 2014, President Obama announced "the most significant changes to [U.S.] Cuba policy in more than 50 years."  According to information released by the White House, the United States and Cuba will move to normalize diplomatic and economic relations and the United States will implement significant changes to its sanctions policies and regulations with respect to Cuba.[1]  On a broad diplomatic level, the U.S. announced that it will reopen its embassy in Havana and is planning high-level exchanges and visits by government officials to Cuba within the next few months.  The two countries will also begin working together on common problems such as migration, narcotics and human trafficking, and environmental protection, and, in conjunction with the Mexican government, plan to discuss issues concerning the unresolved maritime boundary in the Gulf of Mexico. While the broader U.S. embargo against Cuba remains in place and normal tourism is still prohibited, the announced policy shift will result in substantial changes to the implementation of the embargo and the ability of individuals residing in the U.S. to travel to Cuba for specified reasons, as well as for U.S. persons, individuals and businesses to engage in limited commerce with the Cuban people.  In addition, the President called for the State Department to review Cuba’s designation as a State Sponsor of Terrorism.  Removing Cuba from this list would have a dramatic impact on any possible further relaxation of the trade and diplomatic sanctions currently in place against the country and its nationals. The changes to current U.S. policy announced today fall into the following areas: Expanding Travel by U.S. Persons to Cuba General licenses will be made available for all authorized travelers traveling to Cuba for the following reasons: (1) family visits; (2) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities; (6) religious activities; (7) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (8) support for the Cuban people; (9) humanitarian projects; (10) activities of private foundations or research or educational institutes; (11) exportation, importation, or transmission of information or informational materials; and (12) certain export transactions that may be considered for authorization under existing regulations and guidelines.  While general licenses currently exist for some individuals whose travel falls within some of the above listed categories, other individuals, such as those whose travel is described by categories 7, 8, 9, 10 and 11 currently must obtain specific licenses from the Office of Foreign Assets Control ("OFAC") in the U.S. Department of the Treasury authorizing such travel.[2]  The issuance of these general licenses will significantly ease travel for qualified individuals by expanding authorization for those traveling to Cuba for these purposes. Individuals whose travel to Cuba falls within the twelve categories authorized by the general licenses will be able to make travel arrangements through any service provider who complies with OFAC’s regulations concerning travel services to Cuba.  General licenses authorizing the provision of such services will also be issued.  This is another significant change from the current U.S. policy, which requires that providers of travel services to Cuba be specifically authorized by OFAC to provide such services.[3] The Administration also announced that it would be exploring additional options for promoting the growth of entrepreneurship and the private sector in Cuba. Facilitating Authorized Transactions Between the United States and Cuba In another change from current policy,[4] U.S. institutions will be permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions, and U.S. credit and debit cards will be permitted for use by travelers to Cuba (currently the use of U.S. credit and debit cards must be specifically authorized).[5]  The regulatory definition of the statutory term "cash in advance" will also be revised to specify that it means "cash before transfer of title," instead of the current definition which requires that payment be received by the seller prior to shipment of goods from the loading port.[6]  Updating the Application of U.S. Sanctions Towards Cuba in Countries Outside the U.S. General licenses will be issued to authorize U.S.-owned or -controlled entities in third countries to provide services to, and engage in financial transactions with, Cuban individuals in third countries.  Other general licenses will be issued to: (1) unblock accounts held at U.S. banks belonging to Cuban nationals who have relocated outside of Cuba; (2) permit U.S. persons to participate in third-country professional meetings and conferences related to Cuba; and (3) allow foreign vessels to enter the United States after engaging in certain humanitarian trade with Cuba, among other measures.  Currently, U.S. persons who need to engage in any of these activities need to obtain a specific license from OFAC. [7]  Expanding Commercial Sales and Exports from the United States of Certain Goods and Services Additional items will be authorized for export to Cuba, including certain building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment for small farmers.  Increasing Cubans’ Access to Communications and Ability to Communicate Freely To support U.S. efforts to increase the ability of the Cuban people to communicate freely and broaden their access to the Internet and other forms of telecommunications, the commercial export of certain consumer communications devices, related software, applications, hardware, and services, as well as items used for the establishment and update of communications-related systems, will be authorized.  Telecommunications providers will be also be allowed to establish and provide commercial telecommunications and internet services, including the installation and support of necessary infrastructure.  While the "freedom to communicate" has been a long term policy goal of the U.S. government, especially with respect to the access to communications and ability to communicate freely of individuals subject to repressive governments,[8] allowing U.S. telecommunications providers to actually provide such telecommunications services and infrastructure within Cuba itself is an unprecedented change in U.S. policy towards Cuba. Authorizing Limited Imports of Cuban Goods Licensed U.S. travelers to Cuba will be authorized to import $400 worth of goods from Cuba, with a limit of $100 in tobacco products and alcohol, combined.  This is a change from the current regulations, which ban the import of almost all Cuban goods.[9] Facilitating U.S. Remittances to Cuba The level of general, non-family remittances to Cuban nationals will be raised from $500 to $2,000 per quarter, except for remittances to certain officials of the Cuban government or the Communist party, which are will still be prohibited.  In addition, donative remittances for humanitarian projects, support for the Cuban people, and support for the development of private businesses in Cuba will no longer require a specific license from OFAC, nor will remittance forwarders.[10] Please note that the new policy changes announced today will not go into effect until the regulations concerning Cuba (namely the Cuban Assets Control Regulations, administered by OFAC, and the Export Administration Regulations, administered by the Bureau of Industry and Security ("BIS") at the Department of Commerce) can be amended.[11]  U.S. businesses and individuals should continue to ensure they comply with existing government licensing requirements and guidance concerning Cuba until such time as OFAC and BIS announce the regulatory amendments which will implement today’s changes.     Gibson, Dunn & Crutcher will continue to monitor and update you on further developments concerning today’s historic policy changes.  If you have any questions concerning compliance with U.S. government regulations concerning Cuba or regarding the impact of today’s announcements, please do not hesitate to contact us.     [1]   Press Release, The White House, Fact Sheet: Charting a New Course on Cuba (Dec. 17, 2014), http://www.whitehouse.gov/the-press-office/2014/12/17/fact-sheet-charting-new-course-cuba.    [2]   Office of Foreign Assets Control, Comprehensive Guidelines for License Applications to Engage in Travel-Related Transactions Involving Cuba (May 10, 2012), http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_tr_app.pdf, at 31-43.    [3]   Office of Foreign Assets Control, Summary of Travel, Carrier, and Remittance Forwarding Service Provider Program (Circular 2012) (July 2012), http://www.treasury.gov/resource-center/sanctions/Programs/Documents/circ2012.pdf.    [4]   31 C.F.R. § 515.572(a)(3).    [5]   31 C.F.R. § 515.560(e)(1).    [6]   31 C.F.R. § 515.533(a)(2)(i)(A).    [7]   31 C.F.R. § 515.201 (financial transactions with Cubans in third countries); 31 C.F.R. § 515.505(b) (bank accounts); 31 C.F.R. § 515.564(a) (2) and (b) (conferences); 31 C.F.R. § 515.207 (vessels);    [8]   Remarks by Secretary of State Clinton on Internet Freedom (Jan. 21, 2010), U.S. Department of State,  http://www.state.gov/secretary/20092013clinton/rm/2010/01/135519.htm.    [9]   31 C.F.R. §§ 515.204 and 515.560(c)(3).   [10]   See current restrictions on remittances at 31 C.F.R. § 515.570(b), 515.570(g) and 515.572.   [11]   Office of Foreign Assets Control, Publication of New Cuba-Related FAQ (Dec. 17, 2014), http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20141217_33.aspx.     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 or any of the following lawyers in the firm’s International Trade Group: United States:Judith A. Lee – Washington, D.C. (+1 202-887-3591, jalee@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)Daniel P. Chung – Washington, D.C. (+1 202-887-3729, dchung@gibsondunn.com)Andrea Farr – Washington, D.C. (+1 202-955-8680, afarr@gibsondunn.com)Stephenie Gosnell Handler – Washington, D.C. (+1 202-887-3517, shandler@gibsondunn.com)Eric Lorber* – Washington, D.C. (+1 202-887-3758, elorber@gibsondunn.com)Lindsay M. Paulin – Washington, D.C. (+1 202-887-3701, lpaulin@gibsondunn.com)Michael Willes - Los Angeles (+1 213-229-7094, mwilles@gibsondunn.com)     David A. Wolber – New York (+1 212-351-2384, dwolber@gibsondunn.com)Annie Yan – Washington, D.C. (+1 202-887-3547, ayan@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)Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com)Mark Handley – London (+44 (0)207 071 4277, mhandley@gibsondunn.com) *  Mr. Lorber previously served at the U.S. Department of Treasury on the Iran sanctions desk in the Office of Terrorist Financing and Financial Crime, as well as in the Chief Counsel’s Office at OFAC.  He is not yet admitted to practice in the District of Columbia, and currently practices under the supervision of the Principals of the Firm. © 2014 Gbson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice. 

October 6, 2014 |
Protecting Your Investments in Emerging Markets

The wealth of opportunities in emerging markets attracts a significant amount of foreign investment.  Making investments in parts of Africa, Latin America, Asia and the former Soviet Union can pay off handsomely if successful.  However, those same investments are often exposed to significant political risk. There are ways for investors in emerging markets to limit their exposure to such risk, and counsel can help to identify some of the more compelling options in this regard.  Political risk insurance is one well-known option.  Another option is to structure (or restructure) an investment, whether in a greenfield project or through an acquisition, to take advantage of the protections offered by a favorable investment treaty.  It is the latter option that is the subject of this alert. What are investment treaties? Investment treaties are legal instruments entered into by two or more states for the purpose of increasing investment flows between the state parties.  They accomplish this objective by offering foreign investors certain legal protections against adverse actions of the host state.  Investment treaties commonly contain the following protections: Prompt, adequate and effective compensation in the event of an expropriation; Fair and equitable treatment, which ensures that, among other things, the state does not undermine a foreign investor’s legitimate, investment-backed expectations; Full protection and security, which ensures that states exercise sufficient diligence to maintain the physical security and, in some cases, legal security of the investment; Non-discrimination, which ensures protected investors treatment no less favorable than that accorded to national investors, or investors from third states; The free transfer of capital, into and out of the host state, related to the investment. Most importantly, the violation of any of these rights is directly enforceable against the host-state through international arbitration.  Generally, investment treaties will permit investors to pursue arbitration before the International Center for the Settlement of Investment Disputes, otherwise known as ICSID, which is a part of the World Bank system, or under the Arbitration Rules of the United Nations Commission on International Trade Law, otherwise known as the UNCITRAL Rules.  Resulting arbitral awards are final and binding on the parties to the dispute, and enforceable in most jurisdictions around the world, subject only to very limited grounds for annulment. Of course, not all investment treaties offer the same type of protection for your investment.  For instance, the European Union is currently negotiating investment treaties with narrower, more well-defined, protections than those contained in many existing treaties.  Some treaties contain carve-outs for certain type of government regulation, including taxation.  Others contain broader protections, such as guarantees that the host state will honor any "undertakings" or "obligations" that it makes to you.  In this regard, comparing investment treaties can be like comparing insurance policies. What steps can be taken to take advantage of an investment treaty? Almost every emerging market in which you are investing, save Brazil, has an international investment agreement currently in force.  There are over 2500 such agreements–some of which are bilateral, and others that are multilateral (such as NAFTA and the Energy Charter Treaty). International arbitration tribunals have recently found that foreign investors are permitted to structure (or restructure) their investments to take advantage of the protections offered by an investment treaty.  For instance, in ConocoPhillips Petrozuata B.V. et al v. Venezuela,[1] the tribunal found that the claimants legitimately restructured their investment through Dutch subsidiaries, even though the sole business purpose of the restructuring was to obtain the protection of the Netherlands-Venezuela bilateral investment treaty.  The tribunal went on to find Venezuela liable for unlawfully expropriating ConocoPhillips’s investment, and is now in the process of assessing the appropriate quantum of damages owing to ConocoPhillips.[2]  There are three important caveats to the finding in the ConocoPhillips case, which investors should be aware of: It may be too late to seek the protection of an investment treaty after a dispute has arisen.  In this regard, ConocoPhillips restructured its investment prior to the threat of expropriation, and ConocoPhillips continued to make significant investments in Venezuela after the restructuring.  Those facts were important to the decision reached by the Tribunal that ConocoPhillips’ restructuring did not amount to "treaty abuse." The Dutch-Venezuela investment treaty did not require, as some investment treaties do, that the investor have "significant economic activities" in the investor’s home state, i.e., the Netherlands. The Dutch-Venezuela investment treaty did not contain a "denial of benefits" clause, which may allow a host state the right to deny the protections offered in the investment treaty to a company that has no substantial business activities in the territory of the treaty Party under whose laws it is constituted. Two important lessons emerge from the ConocoPhillips case: You should think about investment treaty structuring as early as possible in the life of your investment. You should be sure that you are structuring your investment to take advantage of the most favorable investment treaty available to you.  Otherwise, you may not be getting the protections you bargained for. I would like to know more about investment treaty structuring, who may I contact? Should you have any questions related to investment treaty structuring, or a potential claim under an investment treaty, please feel free to contact the Gibson Dunn lawyer with whom you normally work, or one of the investment treaty lawyers listed below.  We would be pleased to assist you. Cy Benson – London (+44 (0) 20 7071 4239, cbenson@gibsondunn.com)Penny Madden – London (+44 (0) 20 7071 4226, pmadden@gibsondunn.com)Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com)Rahim Moloo – New York (+1 212-351-2413, rmoloo@gibsondunn.com)    [1]   ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30, Decision on Jurisdiction and Merits (September 3, 2013).    [2]   For purposes of full disclosure, one of the authors of this alert previously served as counsel to ConocoPhillips in the quantum phase of its ongoing arbitration against Venezuela.  All views expressed herein are based only on public information, and do not necessarily reflect the opinions of any of the authors’ previous or existing clients.    © 2014 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, 2014 |
Speaking a Common Language with Latin America: Economics

The following article written by Gibson Dunn partner Jose W. Fernandez appears in the Spring 2014 issue of Americas Quarterly, the journal of the Council of the Americas.  It argues that improving U.S.-Latin American relations means deepening already strong economic and historical ties rather than pursuing dramatic new initiatives.  Mr. Fernandez joined the firm’s New York office in 2013 after serving for nearly four years at the State Department, where he was appointed Assistant Secretary of State for Economic, Energy and Business Affairs in 2009.   Speaking a Common Language with Latin America: Economics (click on title)       _________________________ © 2014, Americas Quarterly, Spring 2014, Vol. 8, No. 2.  Reprinted with permission from the Council of the Americas. Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

November 26, 2013 |
Bridge to Somewhere: Helping U.S. Companies Tap the Global Infrastructure Market

The following article written by Gibson Dunn partner Jose W. Fernandez appeared in a recent issue of Foreign Affairs, published by the Council on Foreign Relations.  It argues that the infrastructure boom in emerging markets is one of the most promising business opportunities of our time, and that for commercial and strategic reasons Washington needs to do more to help American companies take advantage of the opportunity.  Mr. Fernandez recently joined the firm’s New York office after serving for nearly four years at the State Department, where he was appointed Assistant Secretary of State for Economic, Energy and Business Affairs in 2009.   Bridge to Somewhere: Helping U.S. Companies Tap the Global Infrastructure Market (click on link)       _________________________ © 2013, Foreign Affairs, November/December 2013.  Reprinted with permission from the Council on Foreign Relations. Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 30, 2012 |
How to Deal with Business Corruption Risks in Mexico

Washington, D.C. partner F. Joseph Warin, Los Angeles partner Michael Farhang and associate Elizabeth Goergen are the authors of "How to Deal with Business Corruption Risks in Mexico" [PDF] published on January 30, 2012 in the International Financial Law Review.

December 17, 2007 |
Deal Note: Gibson Dunn Represents Scotiabank Inverlat in Financing of Grupo Lamosa’s Acquisition of Porcelanite

Gibson, Dunn & Crutcher LLP’s Latin America Practice Group is pleased to announce its representation of Scotiabank Inverlat, SA and other senior lenders in connection with the two-tier financing of Grupo Lamosa’s acquisition of Porcelanite from Carlos Slim.  The syndicated, multi-currency financing transaction closed on November 30, 2007. A 14 bank syndicate comprising the financing’s first tier was led by Scotia Capital with the participation of BBVA, Banamex, Comerica, HSBC, JP Morgan, Unicredit, Banorte, ING, Merrill Lynch, Inbursa, ABN-AMRO, Santander and West LB. The financing’s second tier was provided by Ontario Teachers Pension Plan, in a ground-breaking partnership with Scotia Capital. The purchase price was approximately $807 million dollars, free of net debt, and was financed through a joint credit line of up to $900 million dollars, of which initially $825 million were made available as term loans with an average term of 5.6 years, with the remainder consisting of a revolving credit facility available for a term of 3 years. Gibson Dunn’s team is led by William Candelaria, a partner in the firm’s Corporate Transactions and Latin America Practice Groups, and includes Yair Galil, Diego Valdes and Kandice Stetson. For more than thirty years Gibson, Dunn & Crutcher lawyers have acted on behalf of a wide variety of North American, European and Latin American clients in diverse transactions throughout most of Latin America. Gibson Dunn’s Latin America Practice Group is part of the Firm’s commitment to providing global legal services for our clients. The group draws on the legal as well as the linguistic and cultural expertise of its members to advise its broad base of transnational clients.    For additional information on this matter, please contact the Gibson Dunn attorney with whom you work, William Candelaria (212-351-2626, wcandelaria@gibsondunn.com) in Gibson Dunn’s New York office, or any member of the firm’s Latin America Practice Group.   © 2007 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 24, 2007 |
Labor Department Issues Final Qualified Default Investment Alternative Regulations

On October 23, the Labor Department issued final regulations setting forth the standards applicable to qualified default investment alternatives ("QDIAs"). If the regulations’ requirements are satisfied, a fiduciary of a defined contribution plan that permits participants to direct investment of their accounts generally will be relieved of liability for losses experienced by participants whose account is invested in the QDIA due to the participant’s failure to elect another investment alternative. Background. The Pension Protection Act of 2006 directed the Labor Department to issue guidance implementing fiduciary relief for QDIAs. The relief is similar to that provided to plan fiduciaries under section 404(c) of ERISA with respect to participant-directed investments. The Department issued proposed regulations in September 2006, and the final regulations adopt the proposed rules with some modifications. The rules provide a "safe harbor" form of relief, but are not the exclusive way for fiduciaries to satisfy their ERISA fiduciary duties. For example, a default investment that is not a QDIA (e.g., a "stable value" product) may be a prudent default investment, but would have to be justified under ERISA’s general standards. Scope of Relief. Under the final rules, fiduciaries are relieved from liability for losses that are the "direct and necessary result" of investments in QDIAs. However, the regulations do not relieve plan fiduciaries from their duties to prudently select and monitor any QDIA under the plan or from any liability that results from a failure to satisfy these duties. In addition, the person who manages the QDIA may be an ERISA fiduciary, and is not relieved from fiduciary responsibility in that event. Conditions for Relief. All of the following requirements must be satisfied for QDIA relief to apply:      Participant Opportunity. The participant must have been provided the opportunity to direct investment of his or her account but did not.      Notice Requirement. At least 30 days prior to plan eligibility or before the date of the first investment in a QDIA, the participant must be provided a notice that satisfies various requirements. Alternatively, if the participant is "defaulted" into the plan pursuant to the automatic contribution rules under the Pension Protection Act and is given 90 days to withdraw the contributions pursuant to Section 414(w) of the Internal Revenue Code, the notice may be provided at any time on or prior to plan eligibility. In addition, a notice must be provided at least 30 days before the commencement of each subsequent plan year. The notice generally must be in a separate document (e.g., it may not be included in the plan’s summary plan description) and must address various specified items, such as a description of when amounts will be invested in the QDIA and the fees and expenses under the QDIA.      Provision of Materials. Materials that generally are required to be provided to participants under Section 404(c) of ERISA, such as mutual fund prospectuses, must be provided to participants invested in the QDIA.      Ability to Transfer to Other Investments. A participant on whose behalf assets are invested in a QDIA must be permitted to transfer the assets, in whole or in part, to any other investment available under the plan, as frequently as participants who elected to invest in the fund that serves as the QDIA. In all events, transfers must be permitted at least quarterly. Importantly, there can be no penalties for such a transfer or withdrawal — including, for example, redemption fees — for 90 days following the participant’s first investment in the QDIA. Thereafter, restrictions, fees and expenses may be imposed to the extent that they are applicable to plan participants who elected to invest in the product that serves as the QDIA.       Broad Range of Investment Alternatives. The plan must offer a broad range of investment alternatives. The standard under section 404(c) of ERISA applies here as well. Plans that offer a variety of mutual funds or other similar types of investments generally will satisfy this standard.      Investment Must Be a QDIA. The investment alternative must satisfy various requirements. Key requirements include: Subject to limited exceptions, it must not invest in securities of the plan sponsor. It must be managed by an ERISA investment manager, a trustee that meets specified requirements, or the plan sponsor. It must constitute one of the following: A product or model portfolio that is diversified so as to minimize the risk of large losses and is designed to provide varying degrees of long-term appreciation and capital preservation through a mix of equity and fixed income exposures based on the participant’s age, target retirement date or life expectancy. Such products and portfolios change their asset allocations and associated risk levels over time with the objective of becoming more conservative with increasing age. Examples include "life-cycle" or "targeted-retirement-date" funds or accounts. A product or model portfolio that is diversified so as to minimize the risk of large losses and is designed to provide long-term appreciation and capital preservation through a mix of equity and fixed income exposures consistent with a target level of risk appropriate for participants of the plan as a whole. (Note that this will require the plan sponsor or the other responsible fiduciary to make this "level of risk" determination.) For purposes of this rule, asset allocation decisions for such products and portfolios are not required to take into account the age, risk tolerances, investments or other preferences of any individual participant. An example of such a fund or portfolio is a "balanced" fund. An investment management service with respect to which a fiduciary allocates the assets of a participant’s individual account to achieve varying degrees of long-term appreciation and capital preservation through a mix of equity and fixed income exposures, offered through investment alternatives available under the plan, based on the participant’s age, target retirement date or life expectancy. Such portfolios are diversified so as to minimize the risk of large losses and change their asset allocations and associated risk levels for an individual account over time with the objective of becoming more conservative. Asset allocation decisions are not required to take into account risk tolerances, investments or other preferences of any individual participant. An example of such a service is a "managed account." Products that are designed to preserve principal and provide a reasonable rate of return, such as stable value funds, can be QDIAs, but only for 120 days after the participant’s first elective contribution is invested in the QDIA. In addition, such products are "grandfathered" as QDIAs with respect to amounts invested therein before the date the final regulations become effective. Thus, these types of vehicles can serve as QDIAs, but there are substantial limitations, and as a practical matter there will need to be "second" QDIAs that apply after the first 120 days if this alternative is chosen. Effective Date/Steps for Plan Sponsors. The final regulations become effective on December 23, 2007. In recent years, many plan sponsors have changed their default investments to alternatives that should qualify as QDIAs, and away from stable value, money market and other products. Plan sponsors should review their default investment alternatives and, if they decide to comply with the conditions for QDIA relief, ascertain that the investments meet the requirements to qualify as QDIAs and distribute required participant notices. Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work, or William J. Kilberg (202-955-8573, wkilberg@gibsondunn.com),Stephen W. Fackler (650-849-5385, sfackler@gibsondunn.com),Charles F. Feldman (212-351-3908, cfeldman@gibsondunn.com),David West (213-229-7654, dwest@gibsondunn.com),David I. Schiller (214-698-3205, dschiller@gibsondunn.com),Michael J. Collins (202-887-3551, mcollins@gibsondunn.com),Sean Feller (213-229-7579, sfeller@gibsondunn.com),Amber Busuttil Mullen (213-229-7023, amullen@gibsondunn.com),Jennifer Patel (202-887-3564, jpatel@gibsondunn.com), Chad Mead (214-698-3134, cmead@gibsondunn.com), Kimberly Woolley (415-393-8225, kwoolley@gibsondunn.com), Jonathan Rosenblatt (650-849-5317, jrosenblatt@gibsondunn.com), orJohn C. Cook (202-887-3665, jcook@gibsondunn.com).  © 2007 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.