Will President Obama ask Bashar Al-Assad to Step Down?

Reports are abounding that the Obama administration will soon demand the departure of Syrian President Bashar Al-Assad (see this one on Fox News’ website).  Whether or not Al-Assad budges is another story.  Heir to the dynasty established by his father over 40 years ago, Bashar Al-Assad has so far shown an unwillingness to directly respond to growing international outcry over his handling of the political crisis in Syria.

How would a change in government in Syria impact the rest of the Middle East/North African region?  In addition to knocking down yet another local dictatorship, the overthrow of this regime threatens to lead to a significant domino effect in the immediate area.  It could be  much more influential than what happened in Egypt and Tunisia earlier this year. Perhaps this may be one of the reasons the Iranian government has not withdrawn its support for its longtime ally.  With the recent proclamations such as those by Saudi Arabia’s King Abdullah, the longevity of the current regime in Syria is questionable at best.

 

List of Authorized Travel Providers and Remittance Forwarders to Cuba Announced

OFAC today released a list of travel service and remittance forwarders who are authorized to deal with Cuba.  This list is available here.  The Office periodically updates this list.

OFAC Issues New Guidelines on Travel to Cuba

The Treasury Department’s Office of Foreign Assets Control on Thursday issued a new set of guidelines regarding travel to Cuba.  This follows on the earlier easing of restrictions on travel by President Obama to the island state.

The new guidelines explain the different categories of travel under the OFAC regulations, effectively that travel which is permitted under General License (i.e., no license application process vis-a-vis OFAC) and those permitted under specific license (e.g., application and formal written approval required).  Although the scope of permitted travel has expanded notably, not all travel is permitted, including general touristic activity. Naturally, this cannot be bypassed by traveling to Cuba via a third country.

Although the guidelines provide extensive information on the scope and nature of the regulations, they obviously do not supplant or substitute the existing sanctions laws on Cuba.  Also, although they appear relatively clear to those who practice in this area of law, the guidelines may be somewhat difficult to interpret for non-lawyers.

Taking the Business Overseas

It has been a while since I posted the last entry on this page.  This entry will focus on international expansion for small to medium sized companies.

Expanding overseas is a promising and attractive option for many businesses and in some cases may be a near-requirement.   Although the global economy has helped bring manufacturers, service providers and customers closer together from remote, distant corners of the earth, there is still often a need for a physical presence overseas.   It can be exciting too, as a new territory can bring new opportunity.  This promise certainly requires some thought and planning, however.  Here are some things to consider:

1. Choosing the vehicle for entering the new market (e.g., branch, subsidiary, joint ventures)

How do you want to enter the foreign market?  It’s quite easy to say “we want to set up an office in Brazil.”  Do you want to set up a branch, a subsidiary, a joint venture with a local partner?  It may be surprising to some, but they are not all one and the same. It is important that you understand the nuances of each type of footprint.  An agency is not a distributorship is not a branch.  On top of the varying legal ramifications locally, the choice of vehicle can also significantly affect your US tax obligations.

2. Structuring the entry vehicle.

This goes hand-in-hand with the above subheading, but involves a few more steps. If you are partnering with somebody, or if you are trying to optimize your tax status, you should pay particular attention to structure.  What is your company’s exit strategy? What does the company envision in the short and long-terms?  Your strategy on the legal front should reflect and enable the implementation of this vision to the extent possible.

3. Choosing and negotiating with foreign partners and agents.

It’s amazing how so many people and companies who engage in extensive due diligence domestically will almost believe whatever foreign snake-oil salesmen tell them.  ”Oh, they’re supposed to be really connected” is often quipped, but how do we know this?  A lawyer can do extensive due diligence work on potential partners. You have to determine if the foreign partner or agent has the expertise you need, or the connections, or even the financial viability and trustworthiness.  Notably, international corporate investigations companies can also help you in this regard.

4. Establishing and managing the relationship with the right U.S. and locally-based service providers and vendors.

A lot of work that may need to be done overseas can be done over the internet or in the United States.  However, you need to determine how to structure your approach. As this can be a months’ long process, it is important that you take a tactical approach towards managing the project.  It’s good to always have one point person within your entity who can communicate with counsel, accountants, and consultants on these projects.   As for local vendors, good advice locally is priceless. Make sure you are working with the right people, as obvious as that may sound. While spending more money may not guarantee better service, this is not a time to be excessively frugal for no reason as frugality can wind up costing you quite a bit.

5. When and how to use local counsel.

This is related to the immediately prior point.  Using quality local counsel is exceptionally important, and it can be generally useful to have local counsel engaged in a dialog with your US counsel.  Setting expectation levels early is certainly beneficial.

7. Managing cost.

As stated above, overseas adventures can become absurdly expensive. Account for more than whatever you budget, but also keep an eye on all your vendors and service providers and try to keep costs under control. Monitor all expenditures or before you know it, things will go out of control.  Knowing what you want from the beginning and setting milestones will help, but you should also account for surprise administrative fees and wait times.

8. General themes to consider when working in certain countries and region.

Every country and region has its idiosyncrasies.  It doesn’t stop at business, and it is best to self-educate and seek consultation on these issues.  Again, it may appear obvious, but I’m amazed at how many people really do not understand this basic principle.  Working in China may offer some experience that may be useful in setting up a venture in Abu Dhabi or Chile, but the fact is that every region is different.  While countries have varying laws, experiences in some countries can be transferable to other jurisdictions in the same region. For example, laws on foreign ownership of property, foreign sponsors, tax matters.  The more educated you are about these issues, the more informed you can be and the more active a role you can play in the process.

9. Adherence to US and other laws with foreign application

Your first urge may be that working overseas frees you from legal obligations in the United States. Think again.  U.S. laws are becoming arguably more and more extra-territorial in application. Whether it’s sanctions laws such as Office of Foreign Assets Control (OFAC) regulations, to U.S. export control regulations promulgated by the Bureau of Industry and Security (BIS) to the Foreign Corrupt Practices Act (FCPA) regulations against bribery to U.S. securities laws, you should always make sure you are in compliance with all applicable requirements.  Although compliance programs are not a luxury for companies with a physical presence overseas, the need for a comprehensive compliance program becomes increasingly pressing for companies doing business overseas.

The list looks simple, but as can be seen, the challenges are formidable.  A foreign expansion can be a cash sinkhole from a legal services end alone, much less for other items. Make sure your approach to this venture is professional, compliant, and cost-effective.

Setting your International Legal Priorities for 2011

Well, 2010 is coming to a close and a new year is now before us.  What’s the new year without new year’s resolutions?  Naturally, a new year presents a tabula rasa that encourages people to change habits and start/engage in activities they have wanted to but have long procrastinated.  This can exist in your legal work as well, and that’s why I’m proposing the following checklist for those businesses that do business overseas.

1. Have you had your standard contracts adapted for use overseas? I am always amazed at how some companies doing vast business overseas often use very poor contracts that sometimes have provisions that are unenforceable overseas.  Some companies do not even use agreements!  It is absolutely important for all commitments, such as distribution,  franchise, and purchase and sale agreements be tailored for each individual market.  You probably do not want the purchase and sale agreement you use for sales to Idaho to be modified by a non-lawyer in your company and then used to manage a sale or distribution arrangement in China or Brazil.  Yes, there has arguably been considerable consolidation of international laws and business principles in some respects, but remember that the minute a contract becomes international you have to worry about two things – (i) whether the contract is enforceable overseas; and (2) whether the contract covers what you need it to cover (which may be significantly different from your concerns in the United States).  Save yourself the trouble and have experienced counsel (and local counsel, where necessary) review all the terms.

2. Are you sure your standard forms and agreements are not obsolete? Still using a form agreement from 10 years ago, when your company was one-fifth the size it is now and had zero international operations?  This is also a time to ensure your standard agreements are “cleaned up.”  Not only can laws change over time, but so can your  legal concerns, so make sure you are protected.

3. Are your permits current around the world? A huge problem. Many companies with international portfolios often lose track of all the necessary permits, from business registrations to import licenses work visas to driver’s licenses for their employees.  Make sure everything is in order, and if you cannot keep track of it, you may want to consider talking to counsel who can maintain your corporate documents and licenses around the world in an organized manner.

4. What is the status of your current commitments? This is a good time to look at every ongoing commitment to make sure you remember the key terms, refresh your clarity on your obligations, and make sure that they do not expire unexpectedly!  If you are not pleased with an agent in one of your territories, the end of your current contract may provide only a limited window to change agents – so make sure you are on top of things.

5. Have you met all your foreign and domestic tax obligations? Taxes are an exceptionally touchy subject and companies doing business overseas often have to keep track not only of obligations in multiple jurisdictions but also make sure that their U.S. returns properly reflect their international operations as may be necessary.

6. What types of vendors are you using to handle your international work? Every now and then I see a company that uses inadequate  accountants or banks for their international activities.  Large companies may not be the best choice necessarily but sophisticated vendors who can handle your international work satisfactory can save you a lot of trouble.

7. Have you identified potential areas for expansion overseas? Thinking about expanding overseas this year? Maybe Turkey, UAE, Australia, Hong Kong, or France?  Make sure you educate yourself on your options and what steps you will have to take (and how much time it will consume) early on.  The worst is when clients come up and say things like “we need our office set up in 4 weeks.”  Depending on the jurisdiction, it could be doable. More often than not it’s not. Lawyers can only work but so hard! So make sure you use the early part of the year when business is generally slow to educate yourself on these topics.  You don’t necessarily have to commission comprehensive reports from your lawyers but it may be a good idea to start looking into your potential projects.

Happy Holidays!

OFAC Removes 8 Entities from SDN List, adds Others

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a notice in the Federal Register today announcing the removal of eight entities from it’s Specially Designated Nationals (SDN) list.   All of these entities are based in South America.

Furthermore, OFAC has also added the German-Iranian Trade Bank (Deutsch-Iranische Handelsbank AG) to the SDN list. This bank has operations in Germany and in Iran (including offices in Tehran and Kish Island).

OFAC Release List of Authorized Travel Service Providers for Cuba

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released a list on August 31 listing all travel service providers (TSPs) authorized to provide services to Cuba.

Most U.S. persons are still barred from traveling to Cuba, and the new list does not appear to affect policy.

Obama Sanctions North Korean Entities

President Obama yesterday issued an Executive Order regarding sanctions on the Democratic People’s Republic of Korea (North Korea).  This order is in furtherance of the United States’ anti-proliferation efforts with respect to North Korea, but also covers activities such as money laundering and the counterfeiting of U.S. currency.  Read the White House press release here.

OFAC Releases New Financial Sanctions Regulations on Iran

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) on August 16 issued a final rule covering financial regulations on Iran.  These new regulations (the “Financial Regulations”) are based on laws outlined in the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA), signed into law by President Obama on July 1 following the passage of United Nations Security Council Resolution 1929, which called on heightened limitations on trade with Iran.  The Financial Regulations are provided in the new Part 561 of Title 31 of the U.S. Code of Federal Regulations (CFR) and are separate from the Iran Transactions Regulations (the “ITR”) contained in 31 CFR Part 560.

I released a client alert to my clients and others regarding the new OFAC Financial Regulations on Iran.  Click here to download .

Quoted in the Los Angeles Times

Read this article from Tuesday’s Los Angeles Times about the Iran sanctions.

“By limiting Iran’s access to ancillary services necessary for international trade, such as international financing and banking as well as insurance and shipping, countries are making it extremely difficult for many businesses, even those trading in nonsanctioned goods and services, from doing business with Iran,” said Farhad Alavi, a Washington lawyer specializing in the Iran sanctions. “Business is getting very tough for Iran and Iranians, including normal Iranian businessmen who do business overseas.”