On June 7, 2018, the US Department of Commerce announced that Zhongxing Telecommunications Equipment Corporation (“ZTE Corporation”) and ZTE Kangxun Telecommunications Ltd. (“ZTE Kangxun” and, collectively with ZTE Corporation, “ZTE”) had agreed to additional penalties and compliance measures to secure their removal from the Bureau of Industry and Security (“BIS”) Denied Persons List and regain access to US products and components. The new agreement imposes significant additional fines on ZTE, requires the company to carry out management changes, and institutes strict compliance requirements. Importantly, ZTE has not yet been removed from the Denied Persons List and remains subject to the existing restrictions until certain steps are taken. Nevertheless, the agreement sets out a path forward for ZTE to soon resume operations that had otherwise stalled due to the lack of access to US items.Read more…
As discussed in our previous blog post, the European Commission has begun the process of integrating US sanctions measures against Iran into the Blocking Regulation (Regulation 2271/96) in response to the US President’s withdrawal of his waiver relating to the JCPOA.
On 6 June 2018, the Commission announced that it had formally adopted an update of the Blocking Statute, adding to its scope the extraterritorial sanctions to be re-imposed by the US on Iran. The European Parliament and Council now have a period of two months to object to these measures before they enter into force. If no objection is raised, the updated acts will be published and will enter into force at the latest at the beginning of August, by the time the first batch of re-imposed US sanctions will take effect.
The full text of the Commission press release can be found here.
The Trump Administration and Congress are tightening investment restrictions and export controls to address technology transfer concerns. These measures initially focus on China, but will have broader effects on investments in the United States and transfers of emerging technologies.Read more…
On 4 June 2018, President Putin signed the Federal Law “On Measures (Countermeasures) in Response to Unfriendly Actions of the USA and (or) other Foreign States” (the “Law on Countersanctions”). The Law on Countersanctions entered into force on the date of its publication (i.e., on 4 June 2018).
Specifically, the Law on Countersanctions includes the following potential countermeasures:
- Suspension or termination of international cooperation of Russia and Russian legal entities with (i) unamicable states, (ii) entities subject to the jurisdiction of unamicable states that are directly or indirectly controlled by, or affiliated with, unamicable foreign states (in accordance with the decision of the President of Russia);
- Import ban or import restrictions with respect to products and/or raw materials (i) originating from unamicable states, or (ii) manufactured by entities subject to the jurisdiction of unamicable states that are directly or indirectly controlled by, or affiliated with, unamicable foreign states (the list of products and/or raw materials will be determined by the Russian Government).
- Export ban or export restrictions with respect to products and/or raw materials, if exported by (i) citizens of unamicable states, (ii) entities subject to the jurisdiction of unamicable states that are directly or indirectly controlled by, or affiliated with, unamicable foreign states (the list of products and/or raw materials will be determined by the Russian Government).
- Prohibition or restriction on the provision (in Russia) of works/services for state and municipal needs and for the needs of certain kinds of legal entities, if such works/services are provided by entities subject to the jurisdiction of unamicable states that are directly or indirectly controlled by, or affiliated with, unamicable foreign states (the list of works/services will be determined by the Russian Government).
- Prohibition or restriction on (i) privatization of state and municipal property, (ii) provision of works/services related to the organization for the sale of federal property and/or (iii) performance of the functions of the seller of federal property for entities subject to the jurisdiction of unamicable states that are directly or indirectly controlled by, or affiliated with, unamicable foreign states.
- Other measures as determined by the President of Russia.
Additionally, the Law on Countersanctions empowers the President of Russia to introduce a special national regime (and exceptions to it) for goods and services originating from unamicable states if such states introduce any restrictions for goods and services originating from Russia.
According to the Law on Countersanctions, import ban or import restrictions shall not cover vital goods analogues to which cannot be found in Russia and imports of articles for personal use by Russian and foreign citizens and persons without citizenship.
For the purposes of the Law on Countersanctions, “unamicable foreign states“ should be understood as the USA and other foreign countries committing “unamicable actions“ with respect to Russia or its citizens or legal entities. The Law on Countermeasures does not provide for a straightforward definition of “unamicable actions.” Article 1(1) of the Law on Countermeasures only states that unamicable actions may occur through the imposition of political or economic sanctions against Russia and/or Russian citizens and/or Russian legal entities; however, unamicable actions may take the form of other actions “threatening the territorial integrity of Russia or aimed at economic and political destabilization of Russia.”
Open sources do not contain any information with respect to products and/or raw materials that could potentially fall under import and/or export ban/restrictions. The decision on this question, as well as on the list of “unamicable foreign states” is yet to be formally taken by the Russian President and Government.
As a part of the countersanctions package, the State Duma is considering imposition of administrative and/or criminal liability for compliance with international sanctions. However, up to the moment it is not clear how the administrative and/or criminal offence in such draft bills will look like.