Many high-profile litigated or arbitrated matters start as regulatory investigations.
Regulatory interest can be part and parcel of major commercial disputes.
Management of regulatory investigations, even potential ones, should be factored into the overall strategy for achieving the desired outcome and anticipating likely litigation. With regulators, a cooperative yet firm stance can sometimes achieve better results than an adversarial approach. This is highly dependent on the case.
We encourage clients to get out ahead of any such potential regulatory investigations, by identifying risk areas during deal formation and business operations, and seeking early advice on how to ensure full compliance with relevant regulations and laws. A good example is our sanctions advice for shipowner, commodities trader and bank clients. This US and English sanctions advice identifies the risk areas and concerns in trading or shipping certain types of commodities or energy products in particular jurisdictions with designated companies or individuals.
We have assisted clients with managing corporate and regulatory investigations and interfaced with many different types of regulators over the years, including: the US Coast Guard; financial services and securities regulators; the English Serious Fraud Office; the US Office of Foreign Assets Control (OFAC); the US Federal Maritime Commission, Australian Securities and Investments Commission, law enforcement officers in many jurisdictions; accident investigation bodies; and other interested government entities.
Regulatory involvement also arises in the context of crisis cases, such as train derailments, vessel casualties, major workplace incidents and other catastrophic events and disasters. Our experience, again, is that being part of the solution typically bodes well for regulatory outcomes and diminishes media blowback. Our Shipping and Logistics pages set out more experience in handling such matters. We advised a major international trading company on their interactions with the Rail Accident Investigation Branch of the British Government and drafted regulatory submissions on behalf of that client.
International political affairs have constant, and significant, bearing on international trade. Further, a government’s use of economic leverage (such as sanctions) to advance national strategy can dramatically impact trading patterns and plans, including on a very fast developing basis.
In such circumstances, clients routinely seek our counsel regarding sanctions advice and representation. We advise businesses from around the world on the reach and impact of various sanctions regimes, particularly those implemented by the US Department of Treasury’s Office of Foreign Asset Control. Our involvement runs throughout the phases of a commercial transaction. At the front-end, we advise regarding contractual sanctions clauses and the conduct of counterparty due diligence. During the course of a transaction, we advise regarding responses to developing sanctions regimes. Throughout, we are well prepared to interact with the concerned regulators, where necessary.
Perhaps most importantly, we stand ready to assist our clients at the institutional level with implementation of compliance programs focused on enhancing cultures of compliance.Back to top
When the UK leaves the European Union at the end of 2020, the UK will set its own sanctions and sanctions policy. The UK is committed to maintain national legislation to give effect to UN sanctions and many UK businesses will find that EU restrictions still apply because of the their business practices and locations. It remains to be seen whether UK sanctions policy will be materially different to the EU position given UK and EU relevant foreign policies are broadly aligned. On 6th July 2020, for the first time, the UK introduced its own domestic sanctions regime. The Global Human Rights Regulations 2020 was adopted to target individuals involved in serious violation of human rights permitting individuals to be excluded from the UK and their assets frozen. We can provide a detailed analysis of such regulations if clients are interested (please do contact us). Moving forward, it will be critical to our clients based in the UK or doing business in the UK or with UK based counterparties to ensure a close eye is kept on newly implemented UK sanctions together with changes in the EU and US regimes.Back to top
In the United States, as in some other countries, laws and regulations strictly limit what vessels may trade between two or more coastwise points. The US laws governing these restrictions are commonly referred to as the Jones Act. Such laws provide, in pertinent part, that “No merchandise shall be transported by water, or by land and water, on penalty of forfeiture thereof, between points in the United States, including districts, territories, and possessions thereof embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States.” These laws, and resulting regulations, are administered by the US Customs and Border Protection.
Through many years, we have had extensive experience advising clients on the complexities of the coastwise laws and liaising with the relevant offices of the CBP for approval and/or opinions. Equally, we advise on how to deal with difficult situations which arise when there may be little or no choice but to call at a second, coastwise point and discharge merchandise.
Such situations involve complex considerations requiring a deep understanding of the relevant law, insightful perspective gained from relevant experience, and good means for interacting with the concerned regulators. We are skilled in all of those areas and stand ready to guide clients through challenging Jones Act situations.Back to top
We have extensive experience dealing with investigations and other actions brought by financial regulators in multiple countries. We have represented clients served with documentary and testimonial disclosure requests from the US Securities and Exchange Commission, including defense of depositions taken by the SEC. We are also experienced in counseling clients regarding the US Foreign Corrupt Practices Act and, as with other areas, how to develop cultures of compliance on a global basis. Beyond the US, we have handled a major discovery and documentary investigation conducted by the UK Serious Fraud Office in relation to the UN Oil for Food Programme investigation. We have also negotiated and liaised with the Australian Securities and Investments Commission on investigations and enforceable undertakings in relation to a major Australian bank’s pensions pricing policies and separately, a multinational construction’s failures to disclose market material information.Back to top
From tariffs to terminal operations, clients rely on our lawyers to provide timely and practical advice on issues related to Federal Maritime Commission regulations. Carriers and logistics companies require guidance on tariff requirements and compliance issues to avoid running afoul of the ever-changing rules. Marine terminal operators rely on Zeiler Floyd Zadkovich to maximize the effectiveness of terminal schedules and minimize exposure to claims. Our proactive approach and outside-the-box thinking results in efficient and effective solutions, often before issues become problems.Back to top
Advised Italian shipowner on sanctions related to trade in South and Middle America.
Advised major European shipping company on the provision of an insurance product in England, Australia and the United States.
Advised client shipowner on various cabotage issues in multiple jurisdictions.
Acted for a trading company in relation to a High Court action brought by a US metals company and related court/arbitration proceedings involving a UK metals trading company. The proceedings involved allegations of fraudulent misappropriation of company funds, sanctions issues and contract default.
Advised Skandinavian shipowner regarding informal arrest of vessel in Venezuela on claims of “stolen cargo” valued at several million USD.
Acted in a major English Technology and Construction Court claim for French-based international insurers following a catastrophic train derailment in the Midlands, UK. We handled the regulatory investigations into the accident and the litigation. Devised our client’s litigation strategy and the key contractual defences. After six years the case successfully resolved.
Floyd (lecturer), “Interrelation between maritime law and national security” FZ Presentation, 30.07.2020
Misovic (lecturer), “Free Trade Agreements and European Integration of SEE Countries”, Faculty of Law University of Belgrade, Master’s Program – Jean Monnet Project (sponsored by European Commission), 21.-22.March 2020
Zojer (Table Co-Moderator), “The Impact of Economic Sanctions on International Arbitration”, Vienna Arbitration Days 2020, Vienna (Austria), 22.02.2020
Floyd & Patzwall, “A Cautionary Tale – Exxon Mobil Wins Rare Victory in US Sanctions Matter” FZ Update 06.02.2020
Mayer (panelist), “Legal and Commercial Aspects of Marine Plastics Pollution”, Maritime Law Association of the United States, October 2019
Zadkovich, “The Gulf of Oman – a war of words?” FZ Update, 11.07.2019
Floyd & Patzwall, “Update: another triple-shot of US sanctions” FZ Update, 01.03.2019
Floyd & Patzwall, “Implications of Rising Tensions between the United States and Venezuela” FZ Update, 24.01.2019
Floyd, Zadkovich, Zeiler & Herbst, “US sanctions vs. EU Blocking Regulation – Aired in Court” FZ/ZP Update, 08.11.2018
Partner Edward Floyd had the honor this week of briefing a great group from the US intel community on the interrelation between maritime law and national security.
BIMCO rounded off 2019 by releasing an overhaul of the BIMCO Sanctions Clause. Owners previously held the right to ignore charterers’ orders based on owners’ “reasonable judgment”. That right is removed. This will be of some comfort to charterers, who will be pleased to see the back of a subjective test in owners’ favour.
This note reports on an interesting and important US federal court decision concerning sanctions enforcement and, significantly, a rare instance of a business challenging OFAC’s interpretation of a US sanctions regime. Exxon was successful in voiding a US$2 million sanctions penalty. However, for the rest of us this case demonstrates why caution around sanctions remains of paramount importance.