National Security, CFIUS, FARA, Sanctions + Export Controls

Morrison & Foerster’s National Security Practice, led by John Smith, Brandon Van Grack, and Nicholas Spiliotes, provides strategic advice and counseling to clients on a broad range of regulatory, compliance, investigatory, and enforcement matters pertaining to national security. The government’s enforcement and regulatory efforts in this area continue to expand and overlap, and thus navigating the national security landscape increasingly requires expertise across multiple disciplines.

The National Security Practice includes almost 30 attorneys, including former senior officials at the Department of the Treasury, Department of Defense, Department of Justice, Department of State, National Security Council, and Office of the Director of National Intelligence (ODNI), as well as former federal and state prosecutors from across the country.

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 economic sanctions requirements, and oversaw as Director every OFAC enforcement case against financial institutions and global operating companies. Prior to joining OFAC, he played a leading role in sanctions oversight at the U.S. Department of Justice (DOJ) and the United Nations.

Nicholas Spiliotes has decades of experience advising U.S. and foreign clients on national security matters, with a particular focus on transactions before the Committee on Foreign Investment in the United States (CFIUS). 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.

Brandon Van Grack is the former Chief of the DOJ’s Foreign Agents Registration Act (FARA) Unit. He previously served as a lead prosecutor for Special Counsel Robert S. Mueller III’s investigation of the Russian government’s efforts to interfere in the 2016 presidential election. Over the last decade, Brandon also held other senior national security roles at DOJ, including as Counsel to the Assistant Attorney General for National Security, where he worked on the resolution of almost every significant corporate matter pertaining to export control and sanctions violations in the last decade.

  • Sanctions and Embargoes: Representing clients in investigations and enforcement actions, and counseling on compliance with U.S. sanctions and trade embargoes under the regulations of OFAC, the European Union, the United Kingdom, and other jurisdictions including questions regarding global risk under primary and secondary sanctions.
  • CFIUS Analysis: Evaluating proposed transactions involving non-U.S. companies or investors acquiring control of or certain rights in U.S. businesses under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), and, if necessary, representing parties to covered transactions before CFIUS. Our CFIUS team is recognized as an industry leader, holding a practice ranking from Chambers USA 2021 in the International Trade: CFIUS Experts category.
  • FARA Investigations and Review: Advising clients on the latest FARA enforcement trends and interpretive guidance and conducting 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 Counterintelligence and Security Agency (DCSA).

Each of these regulatory regimes presents unique challenges to business planning and operations of U.S. and non-U.S. entities that must 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 among the only law firms in the world with two full‑time OFAC veterans, including John Smith, who served as OFAC Director until May 2018. And we are certainly among the only firms with two such recent additions from OFAC who can speak from eyewitness experience about the inner workings of OFAC and the Executive Branch in their imposition, analysis, and enforcement of U.S. economic sanctions, and their expectations regarding corporate compliance programs. John Smith holds an individual ranking from Chambers USA 2021 in the International Trade: Export Controls & Economic Sanctions category. We are also the only law firm with a senior attorney who managed DOJ’s Voluntary Self Disclosure Program for export control and sanctions violations.

Our National Security Practice helps clients make sense of the regulatory and policy landscapes pertaining to economic sanctions, 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 OFAC; handle broad sanctions investigation and enforcement matters; and assist clients on discrete issues, such as obtaining an OFAC license for the release of blocked funds or to permit an otherwise prohibited transaction. 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 clients 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 available to provide support, which includes a former DOJ prosecutor who supervised and led scores of sanctions investigations across the country.

Select Matters:

  • Represent a global bank to assist with an internal investigation regarding apparent violations of Russian sanctions, remediation of the bank’s compliance policies and procedures, and preparation and filing of a voluntary self-disclosure with OFAC and notice to other relevant regulators.
  • Represent some of the largest retailers and technology services firms in the world, including by providing ongoing sanctions advice, updating sanctions contractual provisions, advising on how to engage with OFAC Compliance/Enforcement during an ongoing investigation, and counseling on third party sanctions liability issues.
  • Counseled 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 container ship and supply vessel operators 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 an active and long-established practice advising clients on potential national security implications of proposed transactions under the Defense Production Act of 1950, as amended by FIRRMA in 2018. FIRRMA authorizes the President of the United States to block or unwind acquisitions of, or investments in, U.S. companies by foreign investors when the President believes 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 FIRRMA, CFIUS has the authority to review transactions in which a foreign person could gain “control” of a U.S. business, as well as certain non-controlling investments in U.S. businesses involving critical technologies, critical infrastructure, or sensitive personal data of U.S. citizens. FIRRMA also provides for a mandatory notification process for certain transactions, under which parties may be required to seek CFIUS review and approval prior to closing.

Our CFIUS team works with the client and the deal team to evaluate national security implications of a proposed transaction to ensure that CFIUS risks are properly identified and allocated to the parties in the transaction documents. We prepare the CFIUS submissions and engage with the CFIUS member agencies to address national security risks, including negotiating mitigation agreements that the government may require to address its national security concerns.

We have represented both foreign acquirers and U.S. companies before CFIUS since 1990. Our CFIUS experience includes dozens of extended CFIUS investigations and transactions presented to the President for decision. Our National Security group includes former officials across the Departments of Justice, Defense and Treasury who led and managed CFIUS reviews across four administrations. As Assistant Secretary of Defense for Global Security Affairs, Joseph Benkert led the DoD’s involvement in numerous complex matters before CFIUS. Brandon Van Grack managed the review of transactions before CFIUS and Team Telecom for DOJ across two administrations. In addition to our CFIUS team’s overall ranking as CFIUS Experts by Chambers USA 2021, partners Nicholas Spiliotes and Charles Capito are individually ranked as CFIUS Experts.

Select Representations:

  • SoftBank Group Corp. in its $21.6 billion acquisition of Sprint Corporation, and subsequent $31.8 billion merger of Sprint Corp. into T-Mobile.
  • Toshiba in its $2.3 billion acquisition of Landis+Gyr AG, a leading provider of advanced electricity and other utility meters and related solutions for the smart grid.
  • GLP Pte. Ltd. in its $11.64 billion privatization, reported to be the largest-ever private equity buyout of an Asian company by enterprise value.
  • Osaka Gas Co., Ltd. and Chubu Electric Power Co., Inc. in the $4.3 billion financing for the first liquefaction train of the Freeport LNG facility.
  • SoftBank Group Corp. in connection with its $4.4 billion investments in WeWork Companies, Inc.
  • 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.

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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 their 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 and public relations work to register with the 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 following investigations relating to foreign interference the 2016 presidential election. Today, those who overlook it do so at their peril. In 2020, the DOJ opened a record number of FARA investigations and conducted a record number of FARA enforcement actions.

At a time of fast-moving FARA developments and enforcement actions, Morrison & Foerster’s national security team has unparalleled government and private sector counseling experience relating to FARA enforcement and compliance. Our practice group includes the former Chief of the FARA Unit—which enforces and administers FARA—as well as two former senior DOJ national security lawyers, 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. 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:

  • Conduct sensitive internal and government facing investigations for prominent multi-national companies involving FARA.
  • Represent one of the world’s largest sovereign wealth funds in connection with questions regarding its obligations under FARA.
  • Conduct a comprehensive FARA risk assessment for a Fortune 500 professional services firm. Delivered a thorough report to the organization on any potential risks pertaining to FARA, as well as a set of recommendations for the business going forward
  • Conducted an internal investigation involving FARA for a Fortune 500 advisory firm.

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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”), as well as comparable European Union export controls.

We tailor our representation and advice to the specific requirements of the client based on its products, technology, operations, and export activities. We assist clients in developing appropriate export compliance programs to prevent inadvertent export control violations, and we assist clients in dealing with inadvertent export control violations that may arise. 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 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.

Export controls now occupy a central role in the U.S. government’s strategy to counter some of the most serious national security challenges our nation faces. The U.S. government’s measures not only affect companies engaged in international trade, but also U.S. companies’ supply chains and ability to obtain foreign investment. It is more critical now than ever that companies stay abreast of the myriad changes and updates to export controls, and understanding precisely how they are impacted.

Our practice includes attorneys with decades of private sector experience advised clients on export control matters. Additionally, Brandon Van Grack directed criminal investigations and prosecutions involving export control violations at the DOJ.

Select Matters:

  • Counseled aerospace manufacturer in obtaining BIS classification for its new sensor suite for aircraft and satellite programs; organized and led briefings to the Department of Defense, State, and Commerce to introduce company to regulators.
  • Served as government contracts and export control counsel for one of the largest U.S. defense contractor’s acquisition of a C3ISR manufacturer for approximately $1 billion.
  • Counseled one of the largest semiconductor manufacturers on implementing BIS’s changes to the EAR, including addition of major global companies to the Entity List; assisted with briefings to BIS; reviewed and helped obtain BIS licenses in connection with same. Served as counsel on internal investigation into potential ITAR violations and drafted and submitted initial and final disclosures to the U.S. Department of State (DoS). This resulted in no action by DoS and led to the company’s commitment to enhancing compliance policies and systems.
  • Counseled on export control-related issues for a U.S. private equity firm’s acquisitions of several defense contractors and managed export control and clearance regulatory processes related to the transaction.
  • Served as U.S. counsel for U.S. export controls issues related to one of the largest EU defense contractor’s $35 billion contract to develop and produce Australian submarine class. (Also served as U.S. counsel for other regulatory matters).
  • Served as regulatory counsel for one of the world’s largest technology manufacturers (both related to export controls and CFIUS) for its acquisition of an aircraft program for approximately $700 million.

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Companies Engaged in Classified Activities

Our team often deals with matters involving the National Industrial Security Program Operating Manual administered by DCSA. U.S. companies engaged in classified activities face special regulatory requirements in M&A transactions, especially 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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