National Security, CFIUS, Sanctions + Export Controls

Morrison & Foerster’s National Security Practice, led by John Carlin, John Smith, and Nick Spiliotes provides strategic advice and counseling to clients on a broad range of challenging regulatory and compliance matters in the national security space.

John Carlin is the former Assistant Attorney General in charge of the U.S. Department of Justice’s (DOJ) National Security Division (NSD) where he was the lead for DOJ on CFIUS, sanctions and other enforcement matters; he also served as Chief of Staff to the Director of the Federal Bureau of Investigation.

John Smith is the former Director of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), where he was centrally involved in all aspects of developing, implementing, and enforcing U.S. government sanctions requirements, and oversaw every OFAC enforcement case against financial institutions and global operating companies.

Nick Spiliotes has decades of experience advising U.S. and foreign clients on CFIUS matters; before joining the firm he served as a U.S. Foreign Service Officer and staff member on the National Security Council at the White House.

The National Security Practice includes members from the over 100-attorney investigations/enforcement practice, including former federal and state prosecutors.

  • Sanctions and Embargoes: Representing clients on investigations and enforcement actions, and counseling on compliance with U.S. sanctions and trade embargoes under the regulations of the Treasury Department’s Office of Foreign Assets Control (“OFAC”), the European Union, and other jurisdictions including questions regarding extraterritorial applicability and global risk.
  • CFIUS Review: Evaluating the implications of proposed transactions involving non-U.S. companies or investors acquiring control of a U.S. business or assets under the Foreign Investment and National Security Act of 2007 (“FINSA”) and the possibility of reviews of proposed transactions by the Committee on Foreign Investment in the United States (“CFIUS”).
  • FARA ReviewThe Foreign Agents Registration Act (FARA) represents a heightened area of risk for companies and individuals that work closely with non-U.S. entities, especially when those entities have non-U.S. government ownership or other significant ties to non-U.S. governments. Drawing on its deep experience in national security law and government regulation, our lawyers advise clients on the latest FARA enforcement trends and interpretive guidance and conduct sensitive internal investigations and risk-based compliance reviews.
  • Export Control Restrictions: Representing clients on investigations and enforcement actions, and counseling on export control matters under the Export Administration Regulations administered by the U.S. Bureau of Industry  and Security (“BIS”) and the International Traffic in Arms Regulations administered by the Department of State’s Directorate of Defense Trade Controls (“DDTC”), and comparable European Union export controls.
  • Companies Engaged in “Classified Activities”: Navigating issues that arise when companies are engaged in “classified activities” under the National Industrial Security Program Operating Manual administered by the Defense Security Service (“DSS”).

Each of these regulatory regimes presents unique challenges to business planning and operations of U.S. and non-U.S. entities that need to be addressed in connection with diligence, obtaining required approvals, implementing appropriate compliance programs, and engaging with the U.S. government on potential enforcement matters. Our experience enables us to identify practical solutions tailored to the business needs of our clients.

Sanctions And Embargoes

Morrison & Foerster has the distinction of being perhaps the only law firm in the world with three full-time OFAC veterans, including John Smith, who served as OFAC Director until last summer. We are certainly the only firm with three such recent additions from OFAC who can speak from eyewitness experience regarding the inner workings of OFAC and the Trump Administration in their imposition, analysis, and enforcement of U.S. economic sanctions, and their expectations regarding corporate compliance programs. In addition, between John Smith and John Carlin – the former Assistant Attorney General for the Justice Department’s National Security Division and former Chief of Staff to then-FBI Director Robert Mueller – we have the former top civil and criminal sanctions enforcement authorities under one law firm roof.

Our National Security Practice Group can help clients make sense of the regulatory and policy landscapes, and forecast what might be coming so that clients can get ahead of it. Our lawyers help clients understand the various sanctions regimes implemented by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”); assist them on discrete issues, such as obtaining an OFAC license for the release of blocked funds or to permit an otherwise prohibited transaction; and handle broad sanctions investigation and enforcement matters. When new sanctions are imposed (whether by legislation, executive order, or implementing regulations), we assist clients in updating their policies and procedures to ensure best compliance practices. We also assist our clients with assessments of their OFAC policies and procedures, conduct internal investigations to identify issues that contributed to deficiencies in their OFAC compliance programs, provide training on sanctions issues, and help them develop strategic plans to improve their systems and procedures to address the identified compliance gaps. If a lapse results in government interest or action, our award-winning Investigations + White Collar Defense practice is there to provide support.

Select Matters:

• Counselled one of the world’s largest automobile manufacturers through an internal investigation regarding sanctions concerns in its supply chain.

• Represent a leading British multinational investment bank, regarding a request for authorization from OFAC to remit a large non-U.S. dollar payment that would potentially trigger U.S. sanctions in order to mitigate threat of litigation under the EU blocking statute.

• Advised one of Scandinavia’s largest banks on taking the lead on a multi-year secured loan facility associated with a project that carries high risk under U.S. sanctions.

• Represent one of the largest retailers and tech services firms in the world, including updating their sanctions contract provisions, advising on how to engage with OFAC Enforcement during an ongoing investigation, advising on third-party sanctions liability issues.

• Representing the largest container ship and supply vessel operator in the world, by advising on sanctions issues related to its port operations in areas near sanctioned countries and compliance issues related to historical transactions.

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CFIUS Review

We  have a very active and long-established practice advising clients on the potential national security implications of proposed transactions under the Defense Production Act of 1950, as amended by the recently enacted FIRRMA. FIRRMA authorizes the President of the United States to block or unwind acquisitions of, or investments in, U.S. companies by foreign investors when, in the President’s view, such transactions threaten the national security of the United States. The President administers this authority through CFIUS, an interagency committee of the U.S. Government. Under the new statute, CFIUS has the authority not only to review transactions through which a foreign person could gain “control” of a U.S. business, but also certain non-controlling investments in U.S. businesses involving critical technologies, critical infrastructure, or sensitive personal data of U.S. citizens. For the first time, FIRRMA also provides for a mandatory notification process for certain transactions, under which parties will be required to seek CFIUS review and approval prior to closing.

Our CFIUS counseling begins by working with the client and the deal team to undertake a full evaluation of the national security implications of a proposed transaction to ensure that the CFIUS review risks are properly identified and allocated in the transaction documents. As counsel, we prepare the relevant notifications and work with the CFIUS member agencies to address the national security concerns presented by the deal. We also work with the client to address and preempt potential political and public relations issues that may arise.

We have represented both foreign acquiring entities and acquired U.S. entities before CFIUS since 1990. Our CFIUS experience includes dozens of extended CFIUS investigations and two transactions (out of five in the past 20 years) that were presented to the President for decision.

Select Matters:

• Represented GLP Pte. Ltd. in its US$11.64 billion proposed privatization, reported to be the largest-ever private equity buyout of an Asian company by enterprise value.

• Represented SoftBank Group Corp. on its £24.3 billion (US$31.4 billion) acquisition of UK-based semiconductor and design company ARM Holdings plc.

• Provided CFIUS counsel to a significant multinational holding company for several years, including for its acquisition of one of the largest logistics real estate portfolios in the United States worth between $15 and $30 billion

• Osaka Gas Co., Ltd. and Chubu Electric Power Co., Inc. in the US$4.3 billion financing for the first liquid faction train of the Freeport LNG facility.

• Represented a UAE entity in its acquisitions of engineering companies with extensive U.S. manufacturing operations and contracts with the U.S. Department of Defense and intelligence agencies.

• Represented a UK-based venture capital-funded engineering company in its acquisition of a U.S. laser manufacturer with significant military contracts.

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Foreign Agents Registration Act (FARA) Counseling and Investigations

The Foreign Agents Registration Act (FARA) represents a heightened area of risk for companies and individuals that work closely with non-U.S. entities, especially when those entities have non-U.S. government ownership or other significant ties to non-U.S. governments. Drawing on its deep experience in national security law and government regulation, our lawyers advise clients on the latest FARA enforcement trends and interpretive guidance and conduct sensitive internal investigations and risk-based compliance reviews.

FARA is a U.S. law that requires “agents of foreign principals” who undertake certain types of political and quasi-political activities to register with the U.S. Department of Justice (DOJ). The registration statement must disclose certain details about the relationship between the registrant and the foreign principal, and is made publicly available on the DOJ website. Originally enacted in 1938 in response to concerns regarding foreign propaganda, FARA stayed below the radar of many in the public and the business community for much of its existence – but garnered significantly greater public attention in investigations relating to the 2016 election. Today, those who overlook it do so at their peril.

At a time of fast-moving FARA developments and enforcement actions, Morrison & Foerster’s national security team has recent and extensive government and private sector counseling experience relating to FARA enforcement and compliance. Our practice group includes the former Assistant Attorney General for National Security who until 2016 led the DOJ division that includes the FARA Unit, two former senior DOJ national security lawyers who recently held leadership roles in the same division, the former General Counsel of the Office of the Director of National Intelligence, and a former Assistant United States Attorney in the Southern District of New York with recent experience defending against FARA enforcement.

We have advised both organizations and individuals in sensitive and high stakes matters relating to FARA – and have extensive experience giving practical, risk-based guidance on the law’s applicability as well as in conducting domestic and cross-border investigations relating to FARA and engaging with the DOJ on matters relating to FARA. In addition to advising on potential filings and compliance measures, we have the right experience and background to advocate on our clients’ behalf to the DOJ and to respond to inquiries and enforcement actions.

Select Matters:

• Retained to advise prominent multinational companies and organizations across different industries to assess compliance with FARA;

• Represented multiple individuals regarding their potential FARA registration obligations in the wake of government enforcement developments;

• Represented a former c-suite executive in connection with a FARA-related criminal investigation.

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Export Control Restrictions

Our team also possesses deep experience advising clients with respect to export control considerations under the Export Administration Regulations administered by the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) and the International Traffic in Arms Regulations administered by the Department of State’s Directorate of Defense Trade Controls (“DDTC”) and comparable European Union export controls. We tailor our representation and advice to the specific requirements of the client based on their products, technology, operations, and export activities. We assist clients in developing appropriate export compliance programs to prevent inadvertent export control violations. We also assist clients in dealing with inadvertent export control violations. This frequently requires undertaking a thorough review to evaluate whether, in fact, a violation has occurred and developing safeguards to prevent any further violations. Once the facts are established, we develop, with the client, an appropriate disclosure of the violation to the relevant enforcement agency, if warranted. We also advise clients in defending against enforcement actions related to potential export control violations.

For items requiring an export license, we assist clients in obtaining the required export approvals and establishing appropriate safeguards to ensure compliance with the terms of the export license. We routinely obtain BIS export licenses on behalf of our clients and, for clients with in-house export control expertise, advice on developing appropriate arguments in support of the export license. We also obtain DDTC export licenses covering items on the U.S. Munitions List and have assisted clients in registering with the DDTC as manufacturers or exporters of defense articles or services.

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Companies Engaged in “Classified Activities”

In connection with our CFIUS representation, our team often deal with matters involving the National Industrial Security Program Operating Manual administered by DSS. U.S. companies engaged in “classified activities” face special regulatory requirements in M&A transactions involving non-U.S. parties to protect the classified activities of the U.S. companies from foreign ownership, control, or influence (“FOCI”). We have been involved in negotiating and implementing numerous arrangements to address FOCI concerns, such as Special Security Agreements, Proxy Boards, and other FOCI mitigation measures.

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The Foreign Agents Registration Act (FARA) represents a heightened area of risk for companies and individuals that work closely with non-U.S. entities, especially when those entities have non-U.S. government ownership or other significant ties to non-U.S. governments. Drawing on its deep experience in national security law and government regulation, our lawyers advise clients on the latest FARA enforcement trends and interpretive guidance and conduct sensitive internal investigations and risk-based compliance reviews.
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