Category: Global

Negotiators Have Reached Deal with Iran – U.S. Persons Should Not Expect Quick Relief From Sanctions

On July 14, 2015, the five permanent members of the UN Security Council (China, France, Russia, the United Kingdom, and the United States) plus Germany (the “P5 + 1”) announced a Joint Comprehensive Plan of Action (JCPOA) with Iran intended to ensure that Iran’s nuclear program will be exclusively peaceful. The agreement builds on the JCPOA framework announced on April 2, 2015, and is intended to provide Iran with phased sanctions relief based on verification that Iran has implemented key nuclear commitments.

Under the JCPOA, Iran agrees to cap its uranium enrichment capability for 10 years and to accept international monitoring of its nuclear program. In exchange, the United States, European Union, and United Nations will relax sanctions on Iran in stages. Once international nuclear inspectors verify that Iran has implemented the agreed to nuclear-related restrictions, the United Nations will pass a new resolution that will terminate various resolutions currently in place. If, at any time, Iran is determined to be out of compliance with its obligations, those resolutions will “snapback” or be re-imposed against Iran. The EU further agreed to terminate its regulations implementing all nuclear-related economic and financial sanctions at the time the inspectors verify Iran is in compliance.

U.S. sanctions relief will initially be limited to the suspension of secondary sanctions that target the commercial activities of non-U.S. companies in key sectors of the Iranian economy, such as oil, gas and petrochemical industries, as well as companies in the shipping and shipbuilding and automotive sectors. In other words, the sanctions relief that was provided to non-U.S. persons earlier in the negotiations will continue. Eventually, these secondary sanctions may be eliminated (rather than suspended) but only if the International Atomic Energy Agency (IAEA) verifies that Iran has implemented key nuclear-related measures described in the JCPOA.

It is anticipated that the United Nations Security Council will endorse the Agreement over the new few days. The JCPOA and its commitments will come into effect 90 days after the Security Council’s endorsement, which will be known as “Adoption Day.” Beginning on Adoption Day, the P5+1 and Iran will prepare for implementation of the agreement, but no sanctions relief will be granted until inspectors have verified Iran is in compliance with its commitments.

What changes, if any, will be made in primary U.S. sanctions, such as the Iranian Transactions and Sanctions Regulations (ITSR), is less certain. Under the Iran Nuclear Review Act, passed into law in May 2015, the president must transmit the agreement to Congress, which then has 60 days to review it. During Congress’ review period, the president may not waive, suspend, reduce, or provide relief from statutory sanctions or refrain from applying existing sanctions. In other words, there will be no sanctions relief for U.S. persons in the immediate future. If, as some members of Congress have threatened, Congress issues a joint resolution of disapproval, which the president in turn has threatened to veto, there is another waiting period during which the president may take no action to reduce sanctions.

Thus, the status quo will likely continue for quite some time, and from the perspective of U.S. primary sanctions – those that apply to U.S. individuals and entities, as well as entities owned or controlled by U.S. persons – no changes are imminent.

ARTICLE BY Joan Koenig & Mollie D. Sitkowski of Drinker Biddle & Reath LLP

©2015 Drinker Biddle & Reath LLP. All Rights Reserved

Part Three: An Overview of the Legal Mechanisms for Challenge and Redress by Those Potentially Affected by the Early Closure of the Renewables Obligation

In the first two parts of this series, we considered how the RO operates, possible plans to close the RO in 2016, and the potential impact of those plans upon the onshore wind industry. In this final post, we outline two possible legal avenues for challenge and redress by those who may be affected by the early closure of the RO: through the national courts and under international investment treaties.

windmill vertical

The first possibility is to challenge the Government’s actions through the national courts. This route recently has been used by the solar industry, with mixed results. In 2012, the Supreme Court refused the Government’s appeal to cut solar feed-in-tariffs before the completion of a consultation on the matter. However, in November 2014, the High Court refused an application for judicial review against the Government’s decision to close the RO to ground and building mounted solar photovoltaic capacity above 5 megawatts in 2015 rather than 2017.

Affected investors could also consider commencing international arbitration proceedings under an investment treaty. If successful, an investor could obtain compensation for the loss of their investment as a result of measures introduced by the Government. However, this option would only be available to foreign investors from member States that have an investment treaty in place with the UK, and who have made a qualifying investment in the UK, as defined by the applicable treaty.

A number of European states, including Spain, are currently being sued by foreign investors under the Energy Charter Treaty as a result of changes to national solar subsidies. Marcus Trinick QC, representing Renewables UK, has warned Energy Minister Amber Rudd to “be aware of the dangers of state aid discrimination and look at what is happening in international energy arbitration across Europe. In such a position we could not afford not to fight, especially if action is taken to interfere retrospectively.”

Media reports suggest that, given the extent of industry opposition, DECC is delaying an announcement to allow for further refinement of the proposed measures and their impact, in order to reduce the scope for legal challenges. Marcus Trinick QC has emphasised the need for dialogue between the industry and the Government before action is taken, which could reduce the risk of legal challenges arising.

The message from industry representatives is clear: the early closure of the RO would be a major blow to the future of onshore wind in the UK, which could spark a legal battle with the UK Government. As Maf Smith, deputy chief executive of RenewableUK, has stated, “[t]he industry will fight against any attempts to bring in drastic and unfair changes utilising the full range of options open, including legal means if appropriate.”

Part One: An Overview of the Renewables Obligation and Plans for Its Early Closure

Part Two: How Would the Renewables Obligation’s Early Closure Affect the UK Onshore Wind Industry?

ARTICLE BY William Lowery & Catherine Karia of Covington & Burling LLP

© 2015 Covington & Burling LLP

Part Two: How Would the Renewables Obligation’s Early Closure Affect the UK Onshore Wind Industry?

Part One of this series outlined the RO scheme and the expected announcement to close the RO earlier than anticipated. In this second post, we consider the potential impact of such measures upon the onshore wind industry.

Until the consultation with devolved authorities (Scotland and Northern Ireland) is completed, and detailed proposals are published, the timing and nature of the impact on the industry will be uncertain.

There are currently around 3,000 new turbines with a combined capacity of more than 7 gigawatts seeking planning permission, many of which would have been expecting to secure accreditation under the RO. Bloomberg Energy Finance has estimated that, if the RO closes to new generating capacity in 2016 and onshore wind was not eligible for public subsidy under the Contracts for Difference scheme, less than half the capacity of projects in advanced stages of planning would benefit from subsidies.

The majority of the planned projects are due to be located in Scotland. Given the apparent tension between the Scottish First Minister and Prime Minister over the future of onshore wind (referred to in our first post in this series), there is currently uncertainty as to whether or not the applicable RO in Scotland would close in 2016. This is an important consideration regarding the possible impact of any proposed measures.

It is unclear whether there would be a ‘grace period’ in relation to the changes, which could enable projects that already have planning permission to be included under the RO scheme, and closing the RO for those that do not. Ian Marchant, chairman of wind developer Infinis Energy, said: “The Government’s alleged plans to close down the Renewable Obligation-regime early for onshore wind beggar belief. . . . If the RO is terminated early without reasonable grace periods in place, not a single energy or large scale infrastructure project in the UK will be safe going forward.”

The potential impact of such measures is giving rise to considerable uncertainty and concern over the future of the onshore wind industry. In our final post in this series, we will consider what action could be taken by industry participants who may be affected by the early closure of the RO.

Part One: An Overview of the Renewables Obligation and Plans for Its Early Closure

Part Three: An Overview of the Legal Mechanisms for Challenge and Redress by Those Potentially Affected by the Early Closure of the Renewables Obligation

ARTICLE BY William Lowery & Catherine Karia
Covington & Burling LLP

© 2015 Covington & Burling LLP

The Uncertain Future of the UK Renewables Obligation: A Three-Part Series

In early June 2015, the UK Department for Energy & Climate Change (“DECC”) was expected to announce plans to close the existing subsidy scheme for onshore wind, the Renewables Obligation (“RO”), to new generating capacity a year earlier than expected. This announcement has been delayed amid concerns that it could spark potential legal challenges from the industry and lead to a dispute with the Scottish Government over the future of onshore wind.

In this three-part series, we outline how the RO operates, the potential impact of the early closure of the RO upon the onshore wind industry, and the possible routes for challenge and redress for industry participants who may be affected.

Part One: An Overview of the Renewables Obligation and Plans for Its Early Closure

How does the RO operate?

The RO is designed to support renewable electricity projects in the UK. It obliges UK electricity suppliers to source a proportion of the electricity that they supply to customers from eligible renewable sources. The RO is currently set to close to all new generating capacity of any technology on 31 March 2017.

Ofgem, which administers the scheme, issues Renewable Obligation Certificates (“ROCs”) to electricity generators for the eligible renewable electricity they generate.  The ROCs are sold, either directly or indirectly, to electricity suppliers, who can use the ROCs to demonstrate their compliance with their annual obligations (i.e., “redeem” the ROCs against their RO). If a supplier does not present sufficient ROCs to meet its RO, it must pay a penalty known as the buy-out price. The funds collected by Ofgem from the buy-out price are redistributed on a pro-rata basis to suppliers who redeem ROCs.

What are the proposed changes to the RO?

Before winning the UK general election, the Conservative party pledged that it would end “any new public subsidies” for onshore wind farms on the basis that they “often fail to win public support and are unable by themselves to provide the firm capacity that a stable energy system requires”.

DECC is expected announce that it will close the RO to new generating capacity in April 2016, instead of April 2017. Such a move has been described as “going further” than the Conservative party’s pre-election pledge, by ending an existing subsidy a year earlier than expected. At present, DECC has reportedly declined to confirm the precise nature of the proposals.

The majority Conservative Government disclosed in late May 2015 that it would “be announcing measures to deliver this soon”, after conducting a consultation with the devolved administrations (Scotland and Northern Ireland) over the nature of the changes. However, at the time of writing, an announcement has not yet been made.

The basis for delaying the announcement of these measures appears to be twofold.

First, the Conservative Prime Minister, David Cameron, and Scottish First Minister and SNP leader, Nicola Sturgeon, have opposing opinions over the future of onshore wind. While Cameron has stated that “enough is enough” for onshore wind subsidies,  Sturgeon has demanded a veto on the Conservative’s plans. Energy Minster Amber Rudd stated that the consultation with devolved authorities would continue “until we have arrived at a firm policy”, and MPs would have to “bear with us a little longer”.

Second, trade bodies representing the onshore wind industry have vocally opposed the Conservative’s plans, due to their potentially significant effect on the future of onshore wind in the UK. The possible impact on the industry is considered in part two of this series.

Part Two: How Would the Renewables Obligation’s Early Closure Affect the UK Onshore Wind Industry?

Part Three: An Overview of the Legal Mechanisms for Challenge and Redress by Those Potentially Affected by the Early Closure of the Renewables Obligation

ARTICLE BY William Lowery & Catherine Karia of Covington & Burling LLP
© 2015 Covington & Burling LLP

EU Investigating Geo-Blocking of Online Video Games

On May 6, 2015, the European Competition Commission released a new Digital Single Market Plan, and simultaneously launched a broad antitrust investigation into e-commerce.  The DSM plan, consisting of sixteen proposals, seeks to create a single digital European market where access to digital goods and services is unfettered across all 28 member states.  The European Competition Commission will investigate whether firms’ restrictions on cross-border online trade violate the EU competition laws, and attempt to remedy them through enforcement mechanisms.  High on the list is the geo-blocking of online content, including video games.  The impending probe will likely target some large U.S. technology companies.

Geo-blocking is a technical barrier that allows online merchants to charge different prices or restrict users’ access based on physical location or credit card information.  For example, a German resident may have to pay more for a pair of shoes purchased online from an Italian retailer than someone living in Italy.  With respect to gaming, the investigation will focus on the geo-blocking of video games that are sold online for use on personal computers.  The Digital Single Market plan is highly critical of geo-blocking―which it describes as violating the EU’s goal of free movement of commerce within its borders―and proposes to eliminate the practice altogether.  But the Competition Commission cannot seek to change a firm’s business practice unless it violates EU antitrust law, necessitating a rigorous investigation.

To determine whether certain geo-restricting practices are anticompetitive, the Commission will analyze game publishers’ business practices, probing into their contractual limitations on the distribution of online video games.  EU Competition Chief Margrethe Vestager said that geo-restrictions “are often the result of arrangements that are included in contracts between manufacturers and content owners on one side and their distributors on the other.”  Accordingly, the Commission is willing to go as far as “examining the clauses in their contracts.”  But the Commission also recognizes that companies use geo-blocking for legitimate and procompetitive reasons, like restricting information to paying customers and protecting copyrighted material.

The probe will begin with comprehensive questionnaires sent to companies involved in e-commerce within the EU and could potentially lead to formal inquiries and enforcement actions.  Commissioner Vestager hopes to have preliminary findings by mid-2016.

The probe may target large U.S. technology companies, especially if they are suspected of abusing their dominant position to restrict trade.  EU competition law places certain duties on companies that are “dominant” in their markets (a fairly low bar compared to US standards), and abuse of a dominant position can be illegal.  American technology companies tend to be larger and more successful than their European counterparts, so they may trigger the Commission’s scrutiny.  Accoring to Vestager, “every company that sells products online, including their suppliers and their technology providers, will be affected. Potentially, the scope will be very wide.”  On the gaming front, the probe may affect large online game developers.

The Commission hopes that the creation of a single digital market will boost European startups by making it easier for them to launch and grow quickly across borders, similar to the advantage American companies have to rapidly gain a national user base in the U.S.  “We want companies in Europe to use the Digital Single Market to scale up, not move out,” said Andrus Ansip, the EC’s Vice President of Digital Single Market.  So it’s not surprising that the proposal and investigation come on the heels of the EU’s crackdown on American tech giants, the re-opening of the Google investigation being the most recent example.  Indeed, some commentators have characterized the move as protectionist, given Europe’s recent concerns over the increasing power of large U.S. web companies.

The ramifications of the DSM plan are not yet clear, but game companies that use geo-blocking may have to look for other solutions in the future.

ARTICLE BY

Nadezhda Nikonova of Sheppard, Mullin, Richter & Hampton LLP

Canada to Implement Electronic Travel Authorization System

Starting in March 2016, Canada will require individuals who may visit Canada without a visa to first obtain approval from its electronic travel authorization system (eTA). Visitors to the United States will recognize eTA as similar to the ESTA (Electronic System for Travel Authorization), which is used by the United States to pre-screen its visa-exempt visitors. Applicants will be able to use the eTA system starting Aug. 1, 2015.

The eTA will only be required for visa-exempt individuals seeking to travel to Canada by air for a short-term visit. Applicants must pay a CAD $7.00 processing fee and the resulting electronic travel authorization will be valid for five years or until the applicant’s passport expires, the eTA is cancelled, or a new eTA is issued. The eTA will include the applicant’s name, date, place of birth, gender, address, nationality, and passport information.

Notably, U.S. citizens are exempt from the eTA requirement, as are individuals who already have a Canadian visitor visa in their passport.

Authored by Rebecca Schechter of Greenberg Traurig

©2015 Greenberg Traurig, LLP. All rights reserved.

The Problems and Advantages in Taking Your Company International: A Conversation with Karen Klein, General Counsel to Hotel Tonight, Inc.

In just under two weeks, the 15th Annual Inside Counsel Super Conference kicks off in downtown Chicago. If previous years are any indication, the event will be packed with a diverse group of senior level audience participants. The speaking faculty is comprised of over 80 In-House Counsel, and more than 80 % of the attendees are in house counsel, with 65% at the senior level and above. This event promises to be packed with innovative speakers, fantastic panels and great conversation.

Karen Klein, General Counsel to Hotel Tonight, Inc, took some time to speak with the National Law Review about the upcoming Inside Counsel Conference. She has attended the conference for the last six years, and has been a speaker for the last five. Karen says, “The first year, I was invited by an outside law firm that was co-sponsoring the conference, and I have attended it ever since.” Klein says this conference stands out because of the high quality of the programming. She says, “I find the sessions to be not only informative and the speakers well-versed in their subjects, but the practical examples are invaluable.” Klein suggests that to get the most out of the experience, attendees make an effort to be really “present” during the sessions. She says, “we are all so tied to our phones and have a serious fear of our clients being upset that they can’t reach us 24/7, but it is important to our ongoing professional development to take some time to understand current issues facing our practices.”

Understanding current issues in your industry is important for success, according to Klein. She suggests, “Listen and ask questions. To provide true value to your clients, you have to understand their business. Figure out how they make money and what keeps the CEO awake at night, and what are the biggest threats to success.” Understanding that context and making your legal advice relevant means, “you won’t have to beg for a seat at the table–the management team will want you there.”

This year, Klein will be speaking at the Global Lawyer Forum’s panel, “Contracting Internationally: Do’s and Don’ts” with Roberto Berry Assistant General Counsel, International Affairs and Compliance, Chrysler Group LLC and Patrick M. Sheller, Senior Vice President, General Counsel, Secretary & Chief Administrative Officer, Eastman Kodak Company. The panel is designed to provide an outline of some of the gray areas of working internationally in the contract drafting phase. Klein says, “ we want to provide the audience with a really strong basis for understanding and spotting the issues that their businesses will encounter internationally, as well as some practical advice for how to deal with those issues.”

Klein says, “The biggest challenges companies face internationally are cultural. US Companies in particular really need to understand a local market and have ‘feet on the street’ in the local market to be successful.” Confronting these challenges can lead to some of the greatest benefits of working internationally; according to Klein–new challenges and opportunities the company probably wouldn’t encounter domestically. Klein says, “I think anytime we are forced outside our comfort zone, it expands our minds. . . Seeing things from the perspective of your employees and customers in another region brings new ideas, which ultimately make your products better, and your business stronger.”

Klein has a resume that will resonate with anyone who likes to travel: with positions with Orbitz, Kayak, and Hotel Tonight. Klein got her start as an in-house attorney when she was a third year associate in a corporate law department of a large law firm. She says, “I was working (yet another) M&A transaction and as it closed, I found myself disappointed that I had learned all these things about the company during the diligence phase, and now it was time to move on. Fortunately for me, it was just months later that one of the firm’s biggest clients had just finished an acquisition spree, and they asked me to join their team. I never looked back.” That position led to a position at Orbitz, and it’s been travel for Klein ever since. Klein enjoys working in travel, she says, “Travel is a fun industry. Everyone likes to talk about their travel experiences–good and bad, so I always have interesting cocktail party conversations.”

The 15th Annual Super Conference promises to be another great event packed with opportunities for professional development. Check out the website here to see the agenda and get more information.

Authored by E. Eilene Spear of the National Law Review