Post on 09-Jul-2020
Sanctions Risk ManagementSymposium
September 18-19, 2017 | The Princeton Club | New York, NY
incooperation with
September18,20174:00PM– 4:45PMNavigatingtheSanctionsandExportControls
RequirementsofMultipleJurisdictions
1
JohnBoscariolHeadofInternational
Trade&InvestmentLawGroup
McCarthyTétrault
DavidMcLeanDeputyHeadofOFSIandHeadofEnforcement&
Engagement
HeraUy SmithGlobalSanctionsCompliance
OfficerAssociatedForeignExchange(AFEX)
SaskiaRietbroekPrincipal
www.SanctionsAlert.com(Moderator)
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
2
DavidMcLeanDeputyHeadandHeadofEnforcement&EngagementOfficeofFinancialSanctionsImplementation(OFSI
WhatistheOFSIandhowUKsanctionslawcouldaffectyouextraterritorially
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
OfficeofFinancialSanctionsImplementation(OFSI)– WhoWeAre
§ PartofHMTreasury
§ UKCompetentAuthorityforfinancialsanctions
§ PartofthewiderUKGovernmentsanctionsapproachledbyUK’sForeignOffice
§ OperationalfromApril2016– partofincreasedUKGovernmentfocusonfinancialsanctions
3
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
WhatWeDo
§ ImplementationofUN&EUfinancialsanctionsinUK§ Terroristassetfreezing§ Outreachandguidance§ Licencing§ Compliance&Enforcement– civilenforcementdirectly,criminalenforcementviasupporttoUK’sNationalCrimeAgency
§ Nottradesanctions– implementedbyUK’sDepartmentofInternationalTrade,enforcedbyRevenue&Customs
4
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
WhyDoWeDoIt?
“OFSIwillbeacentreofexcellenceforfinancialsanctions,raisingawarenessandprovidingclearguidancetopromotecompliancewithfinancialsanctions,providingaprofessionalservicetothepublicandindustry,andworkingcloselywithotherpartsofgovernmenttoensurethatsanctionsbreachesarerapidlydetectedandeffectivelyaddressed.”(former)ChancelloroftheExchequer,31March2016
§ FromApril2017breachingfinancialsanctionsisaseriouscrime intheUK– upto7yearsinprison
§ Civilpenalties– thegreaterof£1mor50%ofthevalueofthebreach
5
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
Whydoesthismattertoyou?Financialsanctionsapplymorebroadlythansimplytothepersonssubjecttothem.
§ EUfinancialsanctions(incl.wheretheyimplementUNsanctions)applywithinterritoryofEUandtoallEUpersons,wherevertheyareintheworld.
§ UKfinancialsanctionsapplywithinterritoryofUKandtoallUKpersons,wherevertheyareintheworld.
§ AllindividualsandlegalentitieswhoarewithinorundertakeactivitieswithinUK’sterritorymustcomplywithEUandUKfinancialsanctionsthatareinforce.
§ AllUKnationalsandUKlegalentitiesestablishedunderUKlaw,includingtheirbranches,mustalsocomplywithUKfinancialsanctionsthatareinforce,irrespectiveofwheretheiractivitiestakeplace.
§ AllEUnationalsandlegalentitiesestablishedunderEUlawmustcomplywithEUfinancialsanctionsthatareinforce,irrespectiveofwheretheiractivitiestakeplace. 6
Whatshouldyoudo?
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
§ Don’tbreaksanctions!§ Thinkextraterritorially§ Knowyourrisk– sensibleandeffectiveriskmanagement§ Knowyourstructures– howexposedareyourbusinessestosanctions
regimes§ Knowyourjurisdictions– whatapplies,howandwhy§ Knowyouragencies– haveyougotallnecessarylicences?Financial
sanctionsvsexportcontrols§ Getprofessionaladvice§ Talktoregulators/competentauthorities§ Dobusiness(whichdoesn’tbreaksanctions)
7
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
8
JohnBoscariolHeadofInternationalTrade&InvestmentLawGroupMcCarthyTétrault
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
9
§ Exportandtechnologytransfercontrols§ ExportControlList§ AreaControlList
§ Economicsanctions§ SpecialEconomicMeasuresAct§ UnitedNationsAct§ FreezingAssetsofCorruptForeignOfficialsAct
§ CriminalCode(“terroristgroups”)§ Domesticindustrialsecurity
§ DefenceProductionAct,Controlled
GoodsProgram§ Otherlegislationofpotentialconcern
§ blockingorders(Cuba)§ anti-boycottpolicyanddiscriminatorybusinesspracticeslaws
§ anti-briberylaw(CorruptionofForeignPublicOfficialsActandCriminalCode)
§ “Complianceconvergence”
Canada’sExportControlsandEconomicSanctions
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
10
CanadianmeasuresmaybebroaderthanthoseoftheU.S.,othercountries§ Russia/Ukraine– over300designatedpersons§ Belarus,Burma,Libya,NorthKorea§ Iran– evenpost-JCPOA
CanadiansanctionsmeasuresdivergingfromthoseoftheU.S.andEurope
Importanceof“homegrown”strategiesforenforcement,disclosuresandcompliance
ChallengesinInteractionWithOtherRegimes
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
11
CanadianmeasurescanbeindirectconflictwiththoseoftheUnitedStates§ ForeignExtraterritorialMeasuresAct“blocking”orderinrespectofUStradeembargoofCuba
§ prohibitionagainstcompliancewithUStradeembargoofCuba§ obligationtonotifyCanadianAttorneyGeneralofcertaincommunications§ criminalpenaltyexposure:upto$1.5millionand/or5yearsimprisonment
Provincialbusinessdiscriminatorypracticeslegislation
ChallengesinInteractionWithOtherRegimes(Cont.)
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
12
CanadianmeasurescanbeindirectconflictwiththoseoftheU.S.Canadianhumanrights/employmentlawsandpotentialconflictwith
§ U.S.prohibitionsondoingbusinesswithnationalsofsanctionedcountries(Cuba)
§ U.S.exportcontrolsunderInternationalTrafficinArmsRegulations– DepartmentofDefenseTradeControls(USState)
§ U.S.exportcontrolsunderExportAdministrationRegulations(CCL)- DepartmentofCommerce
ChallengesinInteractionWithOtherRegimes(Cont.)
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
13
Significantdifferences(vsUSandothercountries)inadministrationandguidanceoneconomicsanctions
§ fewcourtcasesandno FAQs,guidelines,rulings,opinions
§ noconsolidatedlists
§ noestablishedvoluntarydisclosureprocess
§ nodeferredornon-prosecutionagreements
ChallengesinInteractionWithOtherRegimes(Cont.)
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
14
JohnW.BoscariolMcCarthyTétrault LLPInternationalTradeandInvestmentLawwww.mccarthy.caDirectLine: 416-601-7835
E-mail: jboscariol@mccarthy.caLinkedIn: www.linkedin.com/in/johnboscarioltradelawTwitter: www.twitter.com/tradelawyer
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
15
HeraUy SmithGlobalSanctionsComplianceOfficerAssociatedForeignExchange(AFEX)
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
ExtraterritorialApplicationofU.S.Sanctions“U.S.nexus”
U.S.citizens,residents,companiesOwnedandcontrolledsubsidiariesofU.S.entitiesUSD,accesstotheU.S.financialsystem
SecondarySanctionsIran,Cuba,andNorthKorea
ConflictofLawIssuesCanadianLawUKLaw
16
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
ExtraterritorialApplicationofU.S.Sanctions
17
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
GlobalInternalPolicy§ Risk-basedApproach§ Consider:
§ Sanctionsregulations§ Businessrevenue§ ReputationalRisk§ Partnerbankpolicies
§ Trend:§ BordercitiesandportsbetweenChinaandNorthKorea;Crimeanregion;Iran
18
Sanctions Risk ManagementSymposium
September 18-19, 2017 | The Princeton Club | New York, NY
incooperation with
Questions?
19
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
BonusSlidesProvidedby
20
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
JointComprehensivePlanofAction(JCPOA)
21
§ July2015§ PhasedsanctionsreliefforIran§ P5+1(China,France,Germany,Russia,UKandUS),EUandIran§ January2016:“ImplementationDay”§ U.S.sanctionsreliefundertheJCPOAcanbe“snappedback”ifIranfailstocomplywiththeJCPOA.
§ http://www.state.gov/e/eb/tfs/spi/iran/jcpoa/index.htm
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
U.K.OfficeofFinancialSanctionsImplementation(OFSI)
22
§ FallsunderHerMajesty’sTreasury;§ Helpstoensurethatfinancialsanctionsareproperlyunderstood,implementedandenforcedintheUK;
§ Canimposepenaltiesforseriousfinancialsanctions breaches;
§ www.gov.uk/government/organisations/office-of-financial-sanctions-implementation
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
‘Brexit’
23
§ U.K.’swithdrawalfromtheEuropeanUnion§ DecidedbyreferendumvoteonJune23,2016.
§ U.K.issettoleavetheE.U.byMarch2019§ Legalandcomplianceeffectsarestilltakingshape.
Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY
Sanctions Risk Management Symposiumincooperation with
RelevantCanadianGovernmentAgencies
24
§ FinancialTransactionsandReportsAnalysisCentreofCanada(FINTRAC)
§ GlobalAffairsCanada(GAC)– EconomicLawSectionandExportControlsDivision
§ OfficeoftheSuperintendentofFinancialInstitutions(OSFI)§ PublicProsecutionServiceofCanada(PPSC)§ RoyalCanadianMountedPolice(RCMP)§ CanadaBorderServicesAgency(CBSA)§ CanadianSecurityIntelligenceService(CSIS)
GrowingImpactofCanadianTradeControls• what’sdrivingthis?
• since9/11,newemphasisofCanadianauthoritiesonsecurity(vs.governmentrevenues)• morerecently,increasedpenalties,enforcementbyU.S.authorities• pressurefromU.S.affiliates,suppliersandcustomers(andU.S.government)• penaltyexposure• operationalexposure• reputationalexposure
• companiesarenowmoreconcernedthaneverbeforeaboutwhomtheydealwith,wheretheirproductsandtechnologyendup,andwhousestheirservices
• financings,bankingrelationships,mergersandacquisitions
Slide 25
WhatAreCanada’sTradeControls?• exportandtechnologytransfercontrols
• ImportControlList• ExportControlList,AreaControlList
• economicsanctions• SpecialEconomicMeasuresAct• UnitedNationsAct• FreezingAssetsofCorruptForeignOfficialsAct• CriminalCode(“terroristgroups”)
• domesticindustrialsecurity• DefenceProductionAct,ControlledGoodsProgram
• otherlegislationofpotentialconcern• blockingorders(Cuba)• anti-boycottpolicyanddiscriminatorybusinesspracticeslaws• anti-briberylaw(CorruptionofForeignPublicOfficialsActandUSFCPA)
• “complianceconvergence”
Slide 26
ChallengeswithCanada’sTradeControls¬measurestakeeffectimmediately– noconsultations
¬measureschangeoften,inresponsetodevelopinginternationalevents
¬measuresare“layered”¬multipleCanadianregulatoryregimes¬measuresinthecountryinwhichyou’redoingbusiness¬USextraterritorialmeasures
HotCanadianEconomicSanctionsIssues
• driveintonewmarkets
• Burma
• Cuba
• Iran
• businessinvolvingRussiaorUkraine
• technologytransfers– cloudcomputing
• conflictingUSandCanadiantradeandinvestmentcontrolsonCuba
Slide 28
KeyIssuesinInteractionWithUSandOtherRegimes• screenagainstCanadianlists
• listsofover2,000designatedpersons– individuals,companies,organizations• SpecialEconomicMeasuresActregulations• UnitedNationsActregulations• FreezingAssetsofCorruptForeignOfficialsAct regulations• CriminalCode anti-terrorismprovisions
• anyinvolvementinthetransaction– purchaser,ultimateuser,vendor,creditor,broker,serviceprovider• appliesregardlessofwhereCanadiancompanyisdoingbusiness• appliestonon-CanadiansinCanada
Slide 29
KeyIssuesinInteractionWithUSandOtherRegimes• CanadianmeasuresmaybebroaderthanthoseoftheUnitedStatesandothercountries
• Russia/Ukraine– over300designatedpersons• Belarus,Burma,Libya,NorthKorea• Iran– evenpost-JCPOA
• CanadiansanctionsmeasuresdivergingfromthoseoftheUnitedStatesandEurope
• importanceof“homegrown”compliancepolicies
Slide 30
KeyIssuesinInteractionWithUSandOtherRegimes• CanadianmeasurescanbeindirectconflictwiththoseoftheUnitedStates
• ForeignExtraterritorialMeasuresAct“blocking”orderinrespectofUStradeembargoofCuba• obligationtonotifyCanadianAttorneyGeneralofcertaincommunications• criminalpenaltyexposure:upto$1.5millionand/or5yearsimprisonment
• provincialbusinessdiscriminatorypracticeslegislation
Slide 31
KeyIssuesinInteractionWithUSandOtherRegimes
• CanadianmeasurescanbeindirectconflictwiththoseoftheUnitedStates• Canadianhumanrights/employmentlawsandpotentialconflictwith
• UScontrolsunderInternationalTrafficinArmsRegulations– DepartmentofDefenseTradeControls(USState)
• USExportAdministrationRegulations(CCL)- DepartmentofCommerce
Slide 32
KeyIssuesinInteractionWithUSandOtherRegimes
• significantdifferencesinadministrationandguidanceoneconomicsanctions• noFAQs,guidelines,rulings,opinions• noconsolidatedlists• novoluntarydisclosureprocess• nodeferredornon-prosecutionagreements
• reportingtoRCMP/CSIS• mandatoryforpropertyofdesignatedpersons• whenGACbecomesawareofpotentialviolation,immediatenotificationtoRCMP
Slide 33
KeyIssuesinInteractionWithUSandOtherRegimes
• keyrecommendationsofCanada’sHouseofCommonsForeignAffairsCommittee
• properlyresourceandreformthestructuresforsanctionsregimes• comprehensive,publicallyavailable,writtenguidanceforpublicandprivatesectorsregardinginterpretationofsanctionsregulations
• produceandmaintainacomprehensive,publicandeasilyaccessiblelistofallindividualsandentitiestargetedbyCanadiansanctionscontainingallinformationnecessarytoassistwithproperidentification
• independentadministrativeprocessbywhichdesignatedindividualsandentitiescanchallengeinatransparentandfairmanner
• clearrationaleforthelistinganddelistingofpersons
Slide 34
ImplicationsforEconomicSanctionsComplianceandEnforcement
• internalcomplianceprogramsmustbe“homegrown”
• trainingandinternalcommunications
• screeningprocessandproviders
• coordinationofinternalinvestigationsanddisclosuresinvolvingmultiplejurisdictions
Slide 35
Canada’sEconomicSanctionsLegislation• SpecialEconomicMeasuresActandUnitedNationsActcaninclude:
• banonprovidinggoods,services,technology• assetsfreezes– cannotdealwithlistedindividuals,companies,organizations• banonfacilitation• monitoringandreportingobligations
• FreezingAssetsofCorruptForeignOfficialsAct• Ukraine,Tunisia,Egypt(untilMarch2016)
• applicationtopersonsinCanadaandCanadiansoutsideCanada
• permitprocessandenforcement(GAC,CBSAandRCMP)
• also,CriminalCode– terroristgroups
Slide 36
UnitedNationsActRegulations• countries,groupsandindividualssubjecttosanctionsunderUnitedNationsAct:
Slide 37
Al-Qaida and Taliban
Democratic Republic of the Congo
Iran
Sudan
Lebanon
Libya
Yemen
Iraq
Somalia
Eritrea
terrorists and terrorist organizations
North Korea
Central African Republic
South Sudan
SpecialEconomicMeasuresActRegulations• authorityforCanadatoimposeeconomicsanctionsabsentorinadditiontoaUNSecurityCouncilresolution
• currentlyinforce• Iran• Syria• Burma• Zimbabwe• NorthKorea• Russia• Ukraine(includingCrimearegion)• SouthSudan
Slide 38
Canada’sAutonomousSanctions:Iran
• effectiveFebruary5,2016,broadtradeembargomeasureshavebeenremoved,leavingonly:
• SEMAprohibitionsonactivitiesinvolving202listedpersons• SEMAprohibitionsonsupplyinganySchedule2itemsandrelatedtechnicaldata
• UnitedNationsrestrictions• exportandtechnologytransfercontrols
Slide 39
Canada’sUNSanctions:Iran• Canada’sUnitedNationsActIranregulationsamendedinaccordancewithUNSecurityCouncilResolution2231
• listofdesignatedpersons(andregularreportingforFSfirms)• verylonglistofprohibitedgoodsandtechnology• prohibitionsonprovisionofpropertyandfinancialservicesinconnectionwithprohibiteditems
• uraniumminingrestrictions• shippingandaircraftrestrictions• sourcingbanonarmsandrelatedmaterials• prohibitionsagainstfacilitation
Slide 40
ExportControls:Iran• exportandtechnologytransfercontrolsunderExportandImportPermitsAct
• NoticetoExportersNo.196(Feb5,2016):policyofdenialfortransferofcertainExportControlListitems:
• certainGroup1dual-use(cybersecurity,sensors,specialmaterials,aerospaceandpropulsion,etc.)
• allGroup2(munitions),Groups3and4(nuclear)• certainGroup5(strategicitems)• allGroup6(missiletechnology,GPS)• certainGroup7(chemicalweaponsmaterials,containmentfacilities,humantoxins)
• exceptionsforitemsforcivilaircraftSlide 41
CanadavsUnitedStates
• new“disconnect”betweenUSandCanadiansanctionsagainstIran
• re-exports/re-transfersofUS-originitemstoIran• UStakesjurisdictionwithaslittleas10%US-origin– differsfromECL5400testappliedbyCanadianauthorities
• Iranianvisitors/temporaryresidentemployeesaccesstoUStechnology
• areyouUS-ownedorcontrolled?• OFACGeneralLicenseHauthorizescertaintransactionsforUS-ownedforeignentities
• involvementofUSpersons– useofrecusals• otherUStouchpoints
Slide 42
Prosecutions:R.v.Yadegari• July6,2010,firstsuccessfulprosecutionundertheIransanctionsregulationsunderUnitedNationsAct
• attemptedshipmenttoIranthroughDubaidual-usepressuretransducers
• couldbeusedinheatingandcoolingapplicationsaswellasincentrifugesforenrichinguranium
• OntarioprovincialcourtjudgefoundthatYadegari “kneworwaswilfullyblindthatthetransducershadthecharacteristicsthatmadethemembargoed”
• alsoviolationsofCustomsAct,ExportandImportPermitsAct,NuclearSafetyandControlAct,andCriminalCode
• sentencedto51monthsimprisonment(slightreductiononappeal)Slide 43
Prosecutions:R.v.LeeSpecialtiesLtd.
• firstprosecutionunderSpecialEconomicMeasuresAct• attemptedshipmentof50VitonO-ringstoIran($15totalvalue)
• althoughdual-use,thesewereprohibitedgoodslistedonSchedule2totheIranSEMAregulations
• multiplechangesinaccountandshippingaddresses
• detainedbyCBSA• April14,2014guiltypleaand$90,000penalty
Slide 44
Russia/UkraineEconomicSanctionsMeasures• designatedpersonrestrictionsonrangeofactivitiesinvolvingover300listedentitiesandindividuals
• broadprohibitions– assetfreeze• debtfinancingprohibition(30or90daysmaturity)• equityfinancingprohibition
• prohibitionsagainstsupplyoflistedgoodsorrelatedfinancial,technicalorotherservicesforusein
• offshoreoilexplorationorproductionatadepthgreaterthan500meters;• oilexplorationorproductionintheArctic;or• shaleoilexplorationorproduction
Slide 45
Russia/UkraineEconomicSanctionsMeasures
• prohibitionsondealingwithCrimearegionofUkraine,including:
• investmentandrelatedservices• importing,purchasing,acquiring,shippingorotherwisedealingingoodsexportedfromtheregion
• exporting,selling,supplying,shippingorotherwisedealingingoodsdestinedfortheregion;
• transferring,providingorcommunicatingtechnicaldataorservices;
• providingoracquiringfinancialorotherservicesrelatedtotourism
Slide 46
Russia/UkraineEconomicSanctionsMeasures• exportcontrolpolicy(GACExportControlsDivision)
• nopermitifmaterialbenefittoRussianmilitary
• March25,2015unanimousParliamentarymotiononMagnitskysanctions:
• governmentto“exploresanctionsasappropriateagainstanyforeignnationalsresponsibleforviolationsofinternationallyrecognizedhumanrightsinaforeigncountry,whenauthoritiesinthatcountryareunableorunwillingtoconductathorough,independentandobjectiveinvestigationoftheviolations”
• GovernmentresponsetoHoC ForeignAffairsCommitteerecommendations
Slide 47
TheCubanConundrum
• problem,whetherornotyoutradewithCuba• Canada’sexpandingeconomicrelationshipwithCuba
• CanadaisoneofCuba’slargesttradingpartners• CanadianexportstoCuba- machinery,agrifood products,sulphur,electricalmachinery,newsprint
• CanadianimportsfromCuba- ores,fishandseafood,tobacco,copperandaluminumscrapandrum
• CanadaisoneofCuba’slargestsourceofforeigndirectinvestment
• CanadianFDI- nickelandcobaltmining,oilandgas,powerplants,foodprocessing
Slide 48
TheCubanConundrum(cont’d)• expandingextraterritorialreachofU.Stradeembargo
• 1962– impositionoffulltradeembargounderTradingWiththeEnemyAct
• 1975– eliminationofgenerallicenseallowingtradebyforeignnon-bankingentities
• hadtoapplyforspecificlicenseanddemonstrateindependentoperationredecision-making,risk-taking,negotiationandfinancing
• 1990– MackAmendmentproposedoutrightprohibitiononissuanceoflicensestoforeignaffiliatesofU.S.firms
• 1992– CubanDemocracyAct• 1996– Helms-BurtonActextendsaspectsofCubanembargo
toCanadiancompaniesthathavenoconnectionwithU.S.entities
Slide 49
CurrentU.S.Measuresvs.Cuba
• CubanAssetsControlRegulations• administeredbyU.S.Treasury’OfficeofForeignAssetsControl• prohibitiononforeignentitiesownedorcontrolledbyU.S.personsfromdoingbusiness
withCuba
• ExportAdministrationRegulations• administeredbytheU.S.DepartmentofCommerce’sBureauofIndustryandSecurity• requiresthatare-exportlicensebeappliedforwhereU.S.contentis10%ormore
• Helms-BurtonAct• TitleIII– privaterightofactionvs.“traffickers”in“confiscatedproperty”(right
suspended)
• TitleIV– baronentryintheUnitedStatesfortraffickers,theirspousesandminorchildren
Slide 50
TheForeignExtraterritorialMeasuresAct
• 1996“blocking”order• obligationtonotifyCanadianAttorneyGeneralofcertaincommunications• prohibitionagainstcomplyingwithcertainU.S.tradeembargomeasures
• penaltyexposure:upto$1.5millionand/or5yearsimprisonment
Slide 51
FEMAEnforcementExperience• therehasneverbeenanattemptedprosecutionoftheCanadianblockingorder
• nocaselaworadministrative/prosecutorialguidelines
• noguidancefromtheCanadiangovernment
• numerousinvestigations- AmericanExpress,Eli-Lilly,Heinz,RedLobster,Wal-Martandothers
• Wal-Mart’sCubanpyjamas• nationalisticsensitivities
Slide 52
CriticalFEMAConflictPoints
• trainingprograms• compliancemanuals• communicationsandinstructions• serveraccessibility• meetingsandtelephoneconversations• M&Aduediligence• contracts– e.g.,supplyagreementswithU.S.companies,intercompanyagreements,purchaseorders,etc.
• end-usecertificates
Slide 53
BestPractice#1– ScreeningforDesignatedPersons
• listsofdesignatedpersons– individuals,companies,organizations
• SpecialEconomicMeasuresActregulations• UnitedNationsActregulations• FreezingAssetsofCorruptForeignOfficialsActregulations• CriminalCodeanti-terrorismprovisions
• anyinvolvementintheactivity– researchpartner,collaborator,purchaser,borrower,ultimateuser,vendor,creditor,broker,serviceprovider
Slide 54
BestPractice#2– ContractClausesandCertifications
• tradecontrolclausesforagreementswithborrowers,vendors,customers,researchpartners,etc.
• designatedperson• compliancewithtradecontrolsandcertifications• productinformation,includingECL/ECCNclassification• end-usecertification• indemnification• notificationofinvestigationsorinquiries,cooperation
Slide 55
BestPractice#3– UsingVoluntaryDisclosureMechanisms
• incertaincircumstances,canbeaneffectivetool• coordinatewithseveralgovernmentdepts
• ExportControlsDivision• EconomicLawDivision• CBSA• RCMP• PWGSCControlledGoodsDirectorate(mandatoryreporting)• other(e.g.,CanadianNuclearSafetyCommission)
Slide 56
BestPractice#4– ControllingTechnologyTransfers
• higherriskvsexportshipments• processgoverning
• email• virtualmeetings– tele/videoconference• plans/drawings– marking• serveraccess– upload/download• cloudcomputing
Slide 57
BestPractice#5– “HomeGrown”CompliancePolicies
• tradecontrolcomplianceintheshadowoftheUnitedStates
• CanadiancontrolscanbemoreonerousthanUScontrols–e.g.,encryption,Russia,Belarus,Burma,NorthKorea
• CanadiancontrolsoverUS-origingoodsandtechnology• conflicts
• Cuba• ITAR
Slide 58
JohnW.BoscariolMcCarthyTétrault LLP
InternationalTradeandInvestmentLawwww.mccarthy.ca
DirectLine: 416-601-7835
E-mail: jboscariol@mccarthy.caLinkedIn: www.linkedin.com/in/johnboscarioltradelaw
Twitter: www.twitter.com/tradelawyer
John W. Boscariol, International Trade and Investment Law Group, McCarthy Tétrault LLP / mccarthy.ca