I recently provided insight for a Bloomberg Law article on the new interim rules implementing the Foreign Investment Risk Review Modernization Act (FIRRMA). The interim rules, which went into effect on November 10, broaden the authority of the Committee of Foreign Investment of the United States (CFIUS) – an interagency committee that reviews foreign investments
On November 7, 2018, Global Trade Magazine republished a blog post that I wrote discussing recent changes to U.S. law that further restrict trade with individuals and entities in Russia. The changes further complicate an already-difficult situation for businesses working in and with the country.
You may access the original September 27 blog post on…
In an article published in the November 2018 issue of the ACC Docket, I co-authored an article with Elliot Burger, senior legal counsel at Linamar Corporation in Ontario, Canada discuss the expanding role of the Committee on Foreign Investment in the United States (CFIUS). CFIUS is the U.S. government committee that reviews transactions that could result in control of a U.S. business by a foreign person in order to determine whether the transaction could harm U.S. national security.
- Mandatory declarations of certain transactions now required
- Certain changes to pre-existing regulations also announced and effective immediately
- Mandatory declaration requirement may not ease burden on parties filing with CFIUS
On October 11, the U.S. Treasury Department took the first steps to implement the significant changes introduced under the Foreign Industrial Review and Risk Modernization Act (FIRRMA). FIRRMA broadens the mandate of the Committee on Foreign Investment in the United States (CFIUS), which reviews foreign investments in the United States that could impact U.S. national security.
Most notably, the Treasury Department is establishing a pilot program that imposes new obligations on foreign parties making investments, even non-controlling investments, in U.S. businesses involved in 27 explicitly designated industries. The pilot program defines such investments as “pilot program investments.”
- Economic sanctions and export restrictions extended
- Russian investment in United States likely subject to heightened scrutiny
- Diligence on Russia transactions and business partners is essential to ensure compliance
Since the beginning of August 2018, the United States has taken multiple actions that will affect U.S. trade with Russia. The actions cover exports to Russia, doing business with Russian partners, and potential Russian investment in the United States. These actions have added to the already challenging landscape of conducting business in and with Russia.
Economic Sanctions in Place Since 2014 Are Expanded Again
The United States has maintained targeted economic sanctions on Russia since 2014. Most of these sanctions are administered by the U.S. Treasury Department, Office of Foreign Assets Control (OFAC).
These sanctions ensnare many prominent Russian individuals and entities. They have also ensnared prominent U.S. companies: see our July 2017 blog post on penalties imposed against Exxon for Russia sanctions violations. For an example of how sanctions have been periodically and consistently extended, see our September 2016 blog post.
I provided insight on Tesla Inc.’s recent announcement of potential Saudi Arabian funding to take the company private and how this move could draw scrutiny from the Committee on Foreign Investment in the United States (CFIUS). “The big question is whether this technology is really sensitive enough and whether if acquired by a non-U.S. company it could have some kind of negative impact on U.S. national security,” I explained. I noted that this could be possible since the Trump administration has announced possible tariffs on auto imports for national security reasons.
Bass, Berry & Sims attorney Thad McBride provided insight for a Bloomberg Law article on how recently enacted reforms related to the Committee on Foreign Investment in the United States (CFIUS) will spur reviews of more transactions between U.S. companies and foreign investors.
Bass, Berry & Sims attorney Thad McBride provided insight on the sanctions evasion techniques being used by foreign owners of seemingly legitimate money services businesses (MSBs) to move funds illicitly. The article provides examples of foreign entities – such as those in countries faced with strict U.S. sanctions, such as Iran or North Korea – taking control of MSBs in foreign jurisdictions and then using the ownership status to pass money and convert funds to U.S. dollars. Because entities in sanctioned countries are severely restricted related to the amount of money that can be brought into or moved within the United States, ownership of these MSBs can be a profitable way of avoiding detection.
In a Law360 article published on August 7, Bass, Berry & Sims attorney Thad McBride provided insight on how the Foreign Risk Review Modernization Act (FIRRMA) legislation included in this year’s National Defense Authorization Act (NDAA) would alter the Committee on Foreign Investment in the United States (CFIUS) by broadening its authority when reviewing foreign investments in the U.S.
As part of FIRRMA’s effort to broaden CFIUS’s power, the interagency committee will officially have the ability to review foreign investments in U.S. companies that hold personal information of U.S. citizens. While this has been an issue for potential foreign investors in the past (i.e. MoneyGram International Inc.), its formal inclusion in the legislation text takes it to another level.
- Ericsson Caused Violation by Having U.S. Party Ship Equipment to Sudan
- U.S. Employee Facilitated Sudan Business
- OFAC Expects Parties Conducting International Business to Have Robust Compliance Processes
In June 2018, the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) announced that Ericsson, a Swedish telecommunications company, agreed to pay approximately $145,000 for violating U.S. sanctions on Sudan. Among other things, this is one of the few OFAC enforcement actions explicitly premised on a non-U.S. actor causing a U.S. company to violate U.S. sanctions.