The Iran Nuclear Deal Impact of U.S. Sanctions Relief on UAE Companies

Transcription

1 The Iran Nuclear Deal Impact of U.S. Sanctions Relief on UAE Companies October 11, 2015 The Oberoi Hotel Business Bay Dubai, United Arab Emirates Source: United States Department of State Presented By: akingump.com Jonathan Poling and Mac Fadlallah Akin Gump Strauss Hauer & Feld LLP Akin Gump Strauss Hauer & Feld LLP

2 The content contained herein is provided for informational purposes only and does NOT substitute for legal advice. Given the broad prohibitions in effect on Iran (and which will continue to be in effect even after the Joint Comprehensive Plan of Action is implemented), it is highly advisable to seek counsel with respect to any specific activities involving Iran or Iranian persons. FOR MORE INFORMATION PLEASE CONTACT: Jonathan Poling Robert S. Strauss Building 1333 New Hampshire Ave NW Washington, DC Direct: +1 (202) Fax: +1 (202) Mahmoud (Mac) Fadlallah Boulevard Plaza Tower Two, 23rd Floor P.O. Box Dubai, United Arab Emirates Direct: Fax:

3 Agenda ABC Dubai Welcome Remarks Akin Gump Introduction Overview of U.S. Sanctions Applicability to Non-U.S. Persons Penalties and Enforcement Overview of the Iran Nuclear Deal What s Changing? What s Not Changing? Key Takeaways Compliance Do s and Don ts Questions & Answers 2

4 Akin Gump Introduction 3

5 Our Firm & International Trade Practice Founded in 1945, Akin Gump is now one of the world s largest law firms lawyers globally, 50+ dedicated international trade advisors Unique footprint with U.S. attorneys focused on non-u.s. clients Dubai, Abu Dhabi, London, Geneva, Singapore and Hong Kong 4

6 Overview of U.S. Sanctions 5

7 Overview of U.S. Sanctions Dozens of sanctions programs administered by the U.S. Department of the Treasury, Office of Foreign Assets Control ( OFAC ) Broadly prohibit certain types of dealings: With specific countries/governments (e.g., Iran, Syria) Involving specific activities/sectors (e.g., Russian energy sector) With specific individuals/entities in both sanctioned and non-sanctioned countries (e.g., UAE has approx. 150 sanctioned parties) ALL sanctions programs apply to U.S. persons ( primary sanctions ) SOME apply to non-u.s. subsidiaries/affiliates of U.S. persons SOME apply directly to non-u.s. persons ( secondary sanctions ) 6

8 Current U.S. Sanctions Programs Iran Cuba Sudan Syria Crimea Burma North Korea Russia Ukraine Comprehensive Hybrid List-Based Iraq DRC CAR Belarus Cote d Ivoire Lebanon Liberia Libya Somalia Yemen Balkans Zimbabwe Venezuela

9 Overview of U.S. Sanctions Capturing Non-U.S. Person Activities Secondary sanctions against Iran apply directly to non-u.s. and U.S. persons Includes both individuals and entities essentially anyone in the world can be caught Primary sanctions (all programs on the last slide) apply directly to U.S. persons but can capture activities of non-u.s. persons. For example: Providing material support to a sanctioned individual or entity Engaging in a range of sanctionable activities (e.g., cyber activities posing a significant threat to the United States, corruption in Syria, providing goods, technology or services to assist or enable internet disruption in Syria, etc.) Causing a U.S. person to violate sanctions laws UAE companies employing U.S. person employees Causing a U.S. person to violate sanctions laws dealing in U.S. dollar denominated transactions (see next slide) 8

10 U.S. Dollar Transactions Capturing Non-U.S. Person Activities UAE Buyer Enter into contract for sale of goods UAE Seller Instructs Buyer s UAE Bank U.S. Correspondent Banks Buyer s UAE Bank and Seller s UAE Bank have U.S. correspondent banks to clear U.S. dollar transactions 9

11 Penalties and Enforcement Penalty amounts and types can vary by sanctions regime. In general: Civil Criminal Greater of USD 250,000 or twice the transaction value, per violation USD 1 million and/or up to 20 years imprisonment, per violation Blacklisting U.S. and many non-u.s. companies prohibited from virtually all dealings with you Other Mandated external monitors and audits, executives terminated and clawbacks on pay, denial of financing, denial of export licensing, etc. Enforcement Aggressive enforcement against both U.S. and non-u.s. companies Enforcement against individuals for knowing or willful actions Business Impact Reputational concerns paramount headlines can be extremely damaging High-caliber business partners expect world-class compliance processes 10

12 Key Takeaways on U.S. Sanctions for UAE Companies UAE companies have exposure to U.S. sanctions risks if they Employ U.S. person employees; Transact in U.S. dollars; Deal with U.S. sanctioned countries; Deal with U.S. sanctioned parties without a sanctions compliance program to manage this risk. The U.S. government will (and in some cases must) consider the existence of a meaningful sanctions compliance program as a mitigating factor when deciding whether to pursue an enforcement action Penalties for non-compliance are severe 11

13 Overview of the Iran Nuclear Deal 12

14 Overview of the Iran Nuclear Deal Landmark deal reached between the EU/E3+3 (aka P5+1) and Iran European Union, UK, France, Germany, China, Russia, and the United States Iran gets sanctions relief in exchange for halting its nuclear program Deal finalized in July 2015, but not yet implemented! IAEA must verify that Iran has complied with nuclear-related commitments Source: United States Department of State Implementation expected mid-2016 and is subject to a snap-back of sanctions if Iran fails to continue to meet its obligations under the deal 13

15 Overview of the Iran Nuclear Deal Timeline 24 Nov January July July 2015 April- October 2016 JPOA Announced Limited, temporary, and reversible sanctions relief JPOA implementation begins Continues in effect today JCPOA announced UNSCR 2231 adopted Endorses JCPOA Terminates UN sanctions on Implementation Day, except arms embargoes Implementation Day Expected April to June

16 The Iran Nuclear Deal What s Changing? Pre-Iran Deal Today (JPOA) Post-Implementation (JCPOA mid-2016) U.S. Persons (e.g., U.S. Companies) Non-U.S. Persons Owned or Controlled by U.S. Persons (e.g., UAE subsidiaries of U.S. companies) No dealings without a license Limited and narrow licenses available (e.g., food & medicine, personal communications) No dealings without a license Licensing now also available for civil aviation safety No dealings without a license Licensing will also be available for carpets and foodstuffs, and expanded civil aviation licensing No dealings without a license General License will be available to engage in certain activities in which non-u.s. persons may engage? Non-U.S. Persons (e.g., UAE Companies) Sanctioned for dealings involving several Iranian industries or parties Certain dealings with few Iranian industries authorized Authorizes dealings with several additional Iranian industries and previously designated parties 15

17 The Iran Nuclear Deal What s Changing? 16

18 The Iranian Nuclear Deal What s Changing? Industries Directly Affected Automotive Commercial Aerospace Energy (Oil & Gas) & Petrochemicals Financial, Banking & Insurance Gold, Other Precious Metals, Banknotes & Coinage Graphite & Raw or Semi-Finished Metals (e.g., Aluminum, Steel) Shipping, Shipbuilding, Ports & Transportation Technology & Software Previously Authorized: Food, Medicine, and Medical Products Agricultural Commodities Internet and Personal Communications 17

19 The Iran Nuclear Deal What s NOT Changing? Activities (even if within the industries listed on the last slide) that could materially contribute to Iranian government activities involving: International terrorism; WMD proliferation; Biological/chemical weapons; Advanced conventional weapons Human rights-related sanctions will remain in place: Asset freezes, designations, and visa restrictions Targeting Iranian government officials responsible for human rights abuses and individuals acting on their behalf 18

20 The Iran Nuclear Deal What s NOT Changing? Terrorism-related financial sanctions will remain in place: Sanctions aimed at Iran s support for terrorist organizations (e.g., Hamas, Hezbollah, and Islamic Jihad) Sanctions on non-u.s. financial institutions that facilitate financial transactions for Iran s Revolutionary Guard Corps (IRGC) Certain Iranian financial institutions will remain blocked, including Bank Saderat and Mehr Bank Iran will remain a country of money-laundering concern Financial institutions will still be exposed to some risk when conducting business involving Iran. 19

21 The Iran Nuclear Deal What s NOT Changing? Embargo on exporting U.S. origin items (including goods, software and technology) to Iran remains in place including items made in the United States, and items made outside the United States: With as little as 10% U.S.-origin content With any percentage of certain sensitive U.S. content Based on certain sensitive U.S. technology U.S. Securities and Exchange Commission (SEC) reporting requirements Currently, SEC continues to require domestic and foreign issuers to report many transactions or dealings (including those by their non-u.s. affiliates) involving Iran Reporting requirement applies even when the underlying activity is legal/licensed 20

22 What s NOT Changing? U.S. State Divestment Sanctions Sources: CLS; NASRA; Reuters. 9/4/2015 * Nevada requires the public pension system to report on exposure to companies that do business in Iran, but does not mandate divestment 21

23 Key Takeaways Compliance Do s and Don ts 22

24 Key Takeaways Compliance Do s and Don ts Before JCPOA Implementation DOs Ensure you have a meaningful compliance program in place before doing business in Iran Permissible to have general discussions about the Iranian market with Iranian or non-iranian persons Permissible to travel to Iran Permissible to hire Iranian persons not ordinarily resident in Iran to advertise or provide preexisting marketing materials in Iran Creation of new materials specifically for the Iranian market is prohibited DON Ts Exchange goods, technical information, or services with Iran or an Iranian persons without a clear basis of authorization Enter into contracts with an Iranian person (or with a non-iranian person for the provision of goods or services in Iran) or engage agents or representatives in Iran. Prohibition applies to executory contracts (i.e., those conditioned upon JCPOA implementation), and whether the contracts are oral or written, enforceable or nonenforceable (MoUs, SoIs, etc.) 23

25 Key Takeaways Compliance Do s and Don ts Before and After JCPOA Implementation 1. Ensure the deal is fully implemented before initiating any activity 2. Conduct thorough KYC diligence and screening on all parties to each transaction 3. Have a clear understanding of the anticipated end-uses of the items provided to ensure no prohibited uses (e.g., nuclear, military, etc.) 4. Understand whether any items (goods, software, or technology) to be sent to Iran are subject to U.S. export control laws 5. Ensure U.S. persons are not involved in any Iran-related transaction, including U.S. national employees or U.S. intermediaries (e.g., U.S. financial institutions) 6. Implement exit mechanism in any Iran-related contracts to unwind transactions in the event of sanctions snap-back 7. Review existing contracts & policies to ensure consistency with contemplated activities 24

26 FOR MORE INFORMATION PLEASE CONTACT: Jonathan Poling Robert S. Strauss Building 1333 New Hampshire Ave NW Washington, DC Direct: +1 (202) Fax: +1 (202) Mahmoud (Mac) Fadlallah Boulevard Plaza Tower Two, 23rd Floor P.O. Box Dubai, United Arab Emirates Direct: Fax: INTERNATIONAL PRACTICE Akin Gump is a leading international legal practice with more than 900 lawyers, working in 21 locations worldwide. 25