Treasury Department

As previously covered here, on April 6, 2018, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) invoked authority provided under the Countering America’s Adversaries Through Sanctions Act (“CAATSA”) in order to place several Russian oligarchs, political officials and businesses under their control on its Specially Designated Nationals and Blocked Persons List (“SDN List”).  These designations generally prohibited U.S. persons from engaging in transactions  with the sanctioned individuals  and entities, however OFAC also issued several General Licenses simultaneously which were intended to provide limited windows for maintaining or winding down preexisting transactions with those sanctioned individuals or entities.  OFAC has now partially extended those authorized wind down periods by issuing the following General Licenses last week on September 21, 2018:

  • General License No. 13D, which replaces and supersedes the previous General License No. 13C, and which (subject to a variety of terms and conditions) continues to allow the divestment or transfer from U.S. persons to non-U.S. persons of debt, equity, or other holdings in the sanctioned companies EN+ Group PLC, GAZ Group and United Company RUSAL PLC and subsidiaries in which they own a 50% or greater interest (but only if those debt, equity or other holding interests were issued by their subsidiaries Irkutskenergo, GAZ Auto Plant and Rusal Capital Designated Activity Company). General License No. 13D also continues to permit U.S. persons to facilitate transfers of debt, equity, or other holdings in the aforementioned entities occurring between non-U.S. persons.  General License No. 13D allows the aforementioned transactions to continue with GAZ Group and its 50%-or-greater-owned subsidiaries until 12:01 am eastern daylight time on October 23, 2018 and to continue with EN+ Group PLC, United Company RUSAL PLC and their 50%-or-greater-owned subsidiaries until 12:01 am eastern standard time on November 12, 2018;
  • General License No. 14A, which replaces and supersedes the previous General License No. 14, and which continues to allow U.S. persons to engage in transactions to “maintain” or “wind down” pre-existing operations, contracts or other agreements that were in effect prior to April 6, 2018 with United Company RUSAL PLC and its 50%-or-greater-owned subsidiaries until 12:01 am eastern standard time on November 12, 2018; and
  • General License No. 16A, which replaces and supersedes the previous General License No. 16, and which continues to allow U.S. persons to engage in transactions to “maintain” or “wind down” pre-existing operations, contracts or other agreements that were in effect prior to April 6, 2018 with EN+ Group PLC, JSC EuroSibEnergo or their 50%-or-greater-owned subsidiaries until 12:01 am eastern standard time on November 12, 2018. Unlike General License No. 14A, General License No. 16A imposes an additional condition and requires that any funds paid to a licensed recipient under General License No. 16A must be paid into a blocked, interest-bearing account in the United States.

Under these new General Licenses, OFAC’s authorization window for transactions with GAZ Group and its subsidiaries remains unchanged from what was provided in the previous General Licenses, however, OFAC has extended the authorization window for transactions with EN+ Group PLC and United Company RUSAL PLC by 20 days.  In a press release, OFAC stated that it made these extensions because “EN+ and RUSAL have approached the U.S. Government about substantial corporate governance changes that could potentially result in significant changes in control.  To allow sufficient time for review, we are extending these licenses until November 12.”

OFAC also preceded these new General Licenses with new FAQ guidance issued on September 14, 2018.  In two new FAQ responses, OFAC stated that authorized “maintenance” activities under General License Nos. 14A and 16A generally include transactions and activities consistent with past practices that existed between the contracting party and the blocked entity prior to April 6, 2018.  This FAQ guidance also indicates that General Licenses Nos. 14A and 16A would allow U.S. persons to enter into contingent contracts for transactions and activities to take place after the current expiration of the General Licenses, provided that any performance under such contracts must be made contingent upon future action by OFAC to remove prohibitions applicable to or otherwise authorize such performance.  However, the FAQ guidance stated that General Licenses Nos. 14A and 16A do not allow purchases inconsistent with past purchasing practices in order to “stockpile” inventory prior to the General Licenses’ expiration date.

Husch Blackwell’s Export Controls and Economic Sanctions team continues to monitor developments related to CAATSA and these General Licenses and will provide updates and further analysis as new information becomes available. Should you have any questions, please contact Cortney MorganLinda Tiller, or Grant Leach.