Foreign Ownership, Control or Influence (FOCI) Mitigation Specifically for Unclassified Contracts

In May 2024, the US Department of Defense (DoD) published the long-awaited DoD Instruction [1] (FOCI Instruction) expanding the FOCI review process from solely US government contractors that access classified information to all US government contractors performing on certain unclassified contracts with a value exceeding US$5 million. For the uninitiated, the US government mitigates FOCI at US companies that require security clearances through the implementation of FOCI mitigation plans. These plans vary based on the nature of the FOCI (and other risks), and can include security controls at the cleared US companies, such as requirements for independent directors, visitation and access controls, restrictions on communications with the foreign owner, and limitations on shared services and operations, among other requirements. Typically, parties that work with the DoD to implement and comply with these mitigation plans do so in order to obtain or maintain facility security clearances (FCLs) required for performance on classified contracts.  

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WEBINAR- The 2024 Revolution in Administrative Law: Chevron and Beyond

Join #TeamSPB’s Ben Glassman, Keith Bradley and Patricia Doersch for a timely webinar on the major decisions recently issued by SCOTUS.  The panel will cover each of the recent decisions (Loper Bright v. Raimondo, SEC v. Jarkesy, Ohio v. EPA, and Corner Post v. the Fed) and discuss the consequences, as well as the opportunities and challenges, that may lie ahead.  Key topics will include:

  • What does the 2024 revolution mean for the future of the administrative state?
  • What opportunities does it present for litigating against the government?
  • How will it affect agency decision making?
  • What does it mean for regulated businesses?

The webinar will be held on Tuesday, July 16, 2024, at 10 – 11 a.m. ET. 
For additional information and registration, click here.

End of the Chevron Era: The Future of Agency Enforcement Shifts to Courts

With its second of two landmark decisions impacting the future of federal agency enforcement, SCOTUS struck down the Chevron decision last week.  In a 6-3 decision in Loper Bright Enterprises v. Raimondo, the Court shifted enforcement power away from agencies and to the federal courts. The implications of the Chevron decision are both significant and wide-reaching.  Our team of specialists from government investigations, policy, appellate, and litigation dive into the key aspects of the decision as well as risks and opportunities in Chevron Has Fallen: Supreme Court Seismically Shifts Regulatory Power From Agencies to CourtsWhile speculation and uncertainty will rule the discussion in the near term, one thing is certain: a new era in enforcement has begun.  

As developments evolve around this landmark decision, our Global Investigations & Compliance Report team will keep you up to date on the latest news.

SCOTUS Ruling in Jarkesy Foreshadows Big Changes in Federal Enforcement

SPB’s Keith Bradley authored an article for Bloomberg Law covering a recent SCOTUS decision with significant ramifications: SEC v. Jarkesy. We believe that Jarkesy will decidedly shift the landscape of agency adjudication and regulatory enforcement. For the background and possible implications of this decision, read the full article at Supreme Court’s Jarkesy Ruling Upends SEC Enforcement Practices (bloomberglaw.com). We plan to discuss the impact of Jarkesy on other specific areas of enforcement in future posts.

The Chevron Reversal and Sanctions Litigation

With the recent SCOTUS decision overturning Chevron, lawyers involved in administrative litigation are considering how the decision will affect their matters.  Sanctions litigation is one area which will be impacted.  Now, when sanctions designations are challenged in court, the government will no longer be able to simply invoke Chevron deference and Specially Designated Nationals (“SDNs”) will have better chances of getting delisted. As a result, OFAC and State will presumably be more cautious in imposing sanctions.  In April, I wrote a short post for the Bribery Matters blog about what a reversal of Chevron might mean for sanctions litigation.  You can read the full post here: “Herring and Anti-Corruption”.  

Who Determines Materiality of Cybersecurity Incidents in Light of Recent SEC Rule Requiring Disclosure of Cybersecurity Incidents?

In December 2023, the U.S. Securities and Exchange Commission’s (“SEC”) new rule requiring disclosure of material cybersecurity incidents became effective. SPB previously analyzed how the new rule applies to incidents affecting third-party vendors and what companies can do to manage reporting risks created by third-party cybersecurity incidents. In the first half of 2024, more than a dozen companies reported cybersecurity incidents pursuant to the new rule using the new Item 1.05 in the updated Form 8-K. The new Item 1.05 requires an issuer to disclose specific information about a cybersecurity incident within four business days of its determination that the incident is material. This new rule makes the materiality determination pivotal in a company’s response to a cybersecurity incident and raises an important question about who should be involved in making the pivotal determination.

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New 10-Year Statute of Limitations for U.S. Sanctions Violations

On April 24, 2024, President Biden signed into law H.R. 815[1], an emergency supplemental appropriations law, that provides $95.3 billion in military aid to U.S. allies and requires the divestiture of certain social media applications.

While much of the discussion surrounding the new law focuses on the emergency foreign aid funding for Ukraine, Israel, and Taiwan, and a prohibition on the provision of certain services related to social media apps owned by “foreign adversaries,” the legislation materially changes U.S. sanctions law by extending the amount of time that regulators and prosecutors have to investigate and prosecute civil and criminal sanctions violations from five to 10 years.[2]

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The Price Cap on Russian Oil – Part 2: Updated OFAC Guidance

In our previous article on this topic (which you can read here), we analyzed recent enforcement activity by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) related to the maritime transport of Russian-origin crude oil and Russian-origin petroleum products above price caps agreed by the “Price Cap Coalition,” comprising Australia, Canada, France, Germany, Italy, Japan, the European Union, the United Kingdom, and the United States.

In this second article, we focus on recent OFAC guidance that serves to shield U.S. Persons [1] providing “Covered Services,” including trading/commodities brokering, financing, shipping, insurance, flagging, and customs brokering, from strict liability for sanctions violations in cases where those U.S. Persons inadvertently deal in the purchase of Russian oil or Russian petroleum products sold above the relevant price cap owing to falsified or erroneous records provided by those who act in bad faith or make material misrepresentations. We also summarize seven recommendations published by the Price Cap Coalition to promote responsible practices in the industry and disrupt sanctioned trade.

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Webinar: The REPO Act – Political and Legal Impacts for International Businesses

Congress recently passed the Rebuilding Prosperity and Opportunity for Ukrainians (“REPO”) Act, bipartisan legislation authorizing the Administration to seize billions of dollars in Russian sovereign assets to fund Ukraine reconstruction and aid.
The legislation raises issues that could have political and legal consequences – for companies and individuals.

Join members of the firm’s Policy and Government Investigations teams on May 7 for a webinar covering:  

What does the REPO Act say?

  • How did Congress reach bipartisan consensus to pass it?
  • Will the REPO Act survive US court challenges?
  • How will the Biden Administration use this new authority?
  • How will Europe treat Russia’s frozen assets?
  • Will Russia retaliate, and in what form?
  • How can US, European and International businesses protect themselves against retaliation?

Additional details and registration: The Repo Act: Political and Legal Impacts for International Businesses | Events | Insights & Events | Squire Patton Boggs

Panelists

Ambassador Paul Jones

Tom Firestone

Keith Bradley

Ludmilla L. Kasulke

The Price Cap on Russian Oil – Part 1: Increased OFAC Enforcement

In June 2022, the Group of Seven (“G7”) countries—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—decided to pursue a policy to cap the price of Russian oil. In December 2022, the G7 countries, joined by Australia and the supranational European Union (together, the “Price Cap Coalition”) officially implemented measures to ban a range of services related to the maritime transport of Russian-origin crude oil wherever the price being paid for that oil was above a capped threshold. The intent of the price cap was to keep Russian oil flowing to world markets, since it is vital to the global economy, while simultaneously reducing the revenues going to Russia and, therefore, Russia’s ability to sustain its actions in Ukraine. The Price Cap Coalition implemented similar measures for petroleum products in February 2023.

Over the past year, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has ramped up its enforcement of the price cap by sending information requests to marine industry actors and imposing sanctions on entities implicated in transporting Russian crude oil being sold above the price cap. The Price Cap Coalition has expressly supported OFAC’s actions, including in an October 2023 statement noting that “Russian oil tax revenue was down 45%” and confirming the focus “on supporting compliance and enforcement.”[1]

The Price Cap Coalition, including the U.S. government, also has continuously published guidance to promote compliance with the price cap. For example, in conjunction with the October 2023 statement, the Price Cap Coalition released an advisory for the maritime oil industry and related sectors, outlining risks in the maritime oil trade and proposing recommendations as best practices.[2] OFAC also recently updated its guidance on the implementation of the price cap policy, setting out new expectations for maritime transport service providers.[3]

In this first article, we focus on OFAC’s recent enforcement activities and its guidance on compliance requirements.

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