Category: International Law

Israeli Bank to Pay $30 Million for FIFA Money Laundering Violations

In 2015, the world was shocked by well-documented revelations of widespread corruption and bribery within the Fédération Internationale de Football Association (“FIFA”). At the time, the full extent of the FIFA money laundering scandal was unknown. This month, that 2015 revelation and the subsequent investigation has led to Bank Hapoalim (“BHBM”), an Israeli subsidiary of Swiss bank Hapoalim Ltd. (“HBS”), to pay $30 million of forfeiture and criminal fines.

In an April 30, 2020 press release, Assistant Director in Charge William F. Sweeney of the FBI’s New York Field Office described the difficulty in interrupting and identifying large scale sophisticated financial crimes. “This announcement illustrates another aspect in the spider web of bribery, corruption and backroom deals going on behind the scenes as soccer games were played on the field,” Sweeney said. He further explained that “Bank Hapoalim admits executives looked the other way and allowed illicit activity to continue even when employees discovered the scheme and reported it.”

Chuck Blazer, an “insider” and a former top FIFA official, provided vital evidence relied upon by the United States in securing the indictments that served as a basis for allegations against BHBM. The key to unlocking the FIFA money laundering scandal is the long reach of U.S. anti-bribery and corruption laws, which allow any person, whether a U.S. person or not, to report international financial misconduct. Yesterday, the Department of Justice reported that Bank Hapoalim would forfeit over $20 million and pay nearly $10 million in fines as a penalty for almost five years of financial misconduct.

In 2015, the full extent of the fraud within the inner workings and financial institutions like BHBM and BHS that knowingly enabled these corrupt activities within FIFA remained undisclosed. BHBM’s admission that it conspired to launder money and did facilitate bribes to corrupt FIFA officials, and the resulting $30 million to be paid as a consequence, reinforces the value of whistleblower contributions in concrete terms. This case serves as ample evidence that backroom dealings around the world can be brought to light by brave individuals who are willing to share what they know with authorities.

Whistleblower laws are potent tools available to individuals regardless of nationality or citizenship. They also provide substantial monetary rewards. When information leads to a recovery, the whistleblower is entitled to a financial award of 10%-30% of the total recovery. Another critical component of the U.S. anti-fraud program is that whistleblowers can anonymously provide information and still recover the reward. In this case, a whistleblower could have a claim for almost $10 million of the funds paid by BHBM. Due to the strict rules regarding anonymity, the world may never know whether such a claim is paid. However, the possibility of such a significant award serves as an effective incentive to other potential insiders contemplating blowing the whistle on misconduct.

Copyright Kohn, Kohn & Colapinto, LLP 2020. All Rights Reserved.

For more on similar topics, see the National Law Review Criminal Law & Business Crimes section.

Chinese Rail System for Restaurant Meal Delivery Patent Infringed

Perhaps showing the future of restaurants in times of social distancing, defendant Xuansu Company (炫速公司) implemented a restaurant meal delivery system to deliver food to customers using rails from kitchen to customers’ tables thereby avoiding the need for any interaction between customers and restaurant staff.  However, unfortunately for Xuansu, according to the Shanghai Intellectual Property Court , the installed system infringed Chinese patent no. 101282669B and therefore awarded the exclusive licensee, Yunxiao Company (云霄公司), 1 million RMB.

Xuansu’s meal delivery system in operation

The plaintiff argued that the spiral track system installed in the SpaceLab Weightless Restaurant (Space lab失重餐厅) infringed its licensed patent and requested an injunction as well as 8 million RMB.  The defendant countered it was not infringing and used existing technology.

The Court held “Claims 1, 8, 20, 27, 58, and 59 of the patent in question include “the conveyor system transports meals and / or beverages from the back kitchen work area to the customer dining area”, auxiliary transportation devices, rail lines and customer dining areas. The infringing system has all the limitations of the claims including at least one connected dining table, a circular track, and an ordering system,  and therefore falls within the scope of protection of the plaintiff ’s patent rights.”

With respect to the defendant’s existing technology defense, the defendant claimed  US Patent No. 2216357 was prior art. The Shanghai Intellectual Property Court held that the patent publication date was October 1, 1940, which was earlier than the filing date of the patent in question, and it was prior art relative to the patent in question. After comparing the accused infringing technical solution with the prior patent, the Court found that the prior patent does not disclose the technical structure of the parallel track in the accused infringing technical solution, the circular carousel for transferring food to the table, and the guide assembly of the auxiliary conveying device. There are certain differences in the technical structure of the defendant’s system, so the defendant’s defense based on the existing technology cannot be established.

 

A static view of the restaurant meal rail system.
A static view of the restaurant meal rail system in the dining area.
Fig. 35 of the patent at issue owned by HeineMack GmbH and licensed to Yunxiao.

© 2020 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

For more Chinese and other nations patent laws, see the National Law Review Intellectual Property law section.

Airbus to Pay Unprecedented $3.9 Billion for Multinational Bribery, FCPA Violations

Last week, the Department of Justice (DOJ) announced the largest deferred prosecution agreement for violations of the Arms Export Control Act (AECA), International Traffic in Arms Regulations (ITAR), and Foreign Corrupt Practices Act (FCPA) in history. Airbus SE, a French aircraft company, agreed to pay over a combined $3.9 billion to the DOJ as well as authorities in France and the UK for foreign corruption and bribery charges. The penalty is the largest of its sort and is the result of anti-fraud efforts across the three countries.

Airbus engaged in corruption for several years, offering bribes to foreign officials and misreporting to authorities to conceal the bribes. These violations of the Arms Export Control, International Traffic in Arms, and FCPA encompass activities in the United States, UK, France, and China. The crimes also include corruption in defense contracts.

According to a DOJ Press Release, Airbus will pay $527 million to the United States for the company’s violations of the International Traffic in Arms and Foreign Corrupt Practices Acts. In this case, Airbus self-reported and voluntarily cooperated with law enforcement after uncovering violations in an internal audit. It is possible an internal report initiated the audit. Cooperation and remedial measures by Airbus were taken into consideration in the settlement terms of the deferred prosecution agreement and benefitted Airbus.

International whistleblowers are crucial to the detection of large-scale corruption and fraud around the world. The SEC and DOJ rely on individuals who decide to anonymously and confidentially blow the whistle on violations of the FCPA. The FCPA allows for foreign nationals to file whistleblower claims in the US and receive an award between 10 and 30 percent of the total amount recovered by the government if a successful enforcement action follows their disclosures.

Copyright Kohn, Kohn & Colapinto, LLP 2020. All Rights Reserved.
For more bribery cases, see the National Law Review Criminal Law & Business Crimes section.

Escalated Tension with Iran Heightens Cybersecurity Threat Despite Military De-Escalation

The recent conflict between the United States and Iran has heightened America’s long-time concern of an imminent, potentially lethal Iranian cyber-attack on critical infrastructure in America.   Below, is the latest information including the United States Government’s analysis on the current standing of these threats as of January 8, 2020. 

CISA Alert

The U.S. Department of Homeland Security’s (DHS) Cybersecurity and Infrastructure Security Agency (CISA) issued Alert (AA20-006A) in light of “Iran’s historic use of cyber offensive activities to retaliate against perceived harm.”  In general, CISA’s Alert recommends two courses of action in the face of potential threats from Iranian actors: vulnerability mitigation and incident preparation.  The Alert specifically instructs organizations to increase awareness and vigilance, confirm reporting processes and exercise organizational response plans to prepare for a potential cyber incident.  CISA also suggests ensuring facilities are appropriately staffed with well-trained security personnel who are privy to the tactics of Iranian cyber-attacks.  Lastly, CISA recommends disabling unnecessary computer ports, monitoring network, and email traffic, patching externally facing equipment, and ensuring that backups are up to date.

Iranian Threat Profile

CISA asserts that Iranian cyber actors continually improve their offensive cyber capabilities. These actors are also increasingly willing to engage in destructive, kinetic, and even lethal cyber-attacks.  In the recent past, such threats have included disruptive cyber operations against strategic targets, including energy and telecommunications organizations. There has also been an increased interest in industrial control systems (such as SCADA) and operational technology (OT).  Refer to CISA’s Alert and the Agency’s “Increased Geopolitical Tensions and Threats” publication for specific Iranian advanced persistent threats to the nation’s cybersecurity.

Imminence of an Iranian Cyber-attack

While CISA urges vigilance and heightened prudence as it pertains to cybersecurity, DHS has been clear that there is “no information indicating a specific, credible threat to the Homeland.”  Nevertheless, the same National Terrorism Advisory System Bulletin publication (dated January 4, 2020) warns that Iran maintains a robust cyber program. This program can carry out attacks with varying degrees of disruption against U.S. critical infrastructure. The bulletin further states that “an attack in the homeland may come with little to no warning.”  There is also a concern that homegrown violent extremists could capitalize on the heightened tensions to launch individual attacks.  With the ongoing tension, it is unlikely that the imminence of an Iranian cyber-attack will dissipate in the near term.

Implications

It is vital for businesses, especially those deemed critical infrastructure, to stay apprised of new advances on these matters.  Given that the Alert calls for organizations to take heightened preventative measures, it is imperative that critical infrastructure entities revisit their cybersecurity protocols and practices and adjust them accordingly.  A deeper understanding of the organizational vulnerabilities in relation to this particular threat will be imperative.

© 2020 Van Ness Feldman LLP

For more on cybersecurity, see the Communications, Media & Internet section of the National Law Review.

Who Must Protect the Ukraine-Trump Whistleblower?

Op-Ed From Stephen M. Kohn of the National Whistleblower Center

As the impeachment proceedings heat-up, and calls for the Ukraine whistleblower to be identified increase, there remains a fundamental question:  Who has the legal responsibility to protect this whistleblower?  The answer will surprise you!

There are very few laws mandating what the President, as part of his required and mandatory job duties, must perform.   Guaranteeing that employees who make protected disclosures under the  Intelligence Community Whistleblower Protection Act (“ICWPA”) are fully protected is one of them.  The Ukraine whistleblower is a a federal employee covered under the ICWPA.  He or she made a protected disclosure under the ICWPA.  Thus, it is up to President Trump to fully and completely protect this individual.  Here’s why:  The ICWPA directs that “[t]he President shall provide for the enforcement of the [Act].” It is as clear and simple as that.  The President “shall” “enforce” the whistleblower law that makes it illegal to retaliate against intelligence community whistleblowers.

Every intelligence community whistleblower, whether they be a Democrat, Republican or Independent, is entitled to the same protection from the President.  In the case of the Ukraine whistleblower, the law does not permit the political implications of the whistleblower’s disclosure to have any impact on the mandatory duty of President Trump to fully “enforce” that whistleblower’s right to be free from any retaliation.  The President is required to put his biases or self-interest aside and defend the right of intelligence community whistleblowers to report abuses of authority.  This includes wherever those abuses are committed, including the Oval Office. Under the ICWPA the buck stops with President Trump, impeached or not.

Unlike other whistleblower laws which give the federal courts or independent agencies, like the Merit Systems Protection Board or the Department of Labor, the authority to protect whistleblowers, the ICWPA places that solemn duty directly on the shoulders of the President.  It is the unique legal responsibility of the President.  The President must ensure that the identity of the intelligence community whistleblowers who file  complaints with the Inspector General pursuant to the Inspector General Act, are fully protected.  It is the President who must ensure that every person within the executive branch of government protect the job security of ICWPA whistleblowers.  It is the obligation of the President to punish those who fail to do so.

The ICWPA anti-retaliation law is not limited simply to preventing whistleblowers from being fired.  The law defines the types of “adverse action” the President must shield whistleblowers from, including  “any change in working conditions.”   In the case of the Ukrainian “quid pro quo” whistleblower, the catastrophic impact on the whistleblower’s ability to perform his or her job duties that would be triggered by violating his right to confidentiality is obvious.  This would include undermining his or her ability to work oversees, be promoted to a covert agent (if not one already), or effectively interact with employees in the White House.

Furthermore, breaching the confidentiality of whistleblowers is well established as an “adverse action” under whistleblower law.  Federal courts and administrative agencies as divergent as the SEC and Department of Labor have ruled that revealing the name of a whistleblower is an adverse action.  Anyone with experience working with whistleblowers knows that once their identity is revealed, their working conditions will never be the same, and they will have a target on their back for the rest of their careers.

The procedures applicable to the Ukraine whistleblower actually informed the whistleblower, in writing, that he or she could file a confidential complaint to the Inspector General.   The actual form submitted guaranteed this right.  Once the complaint was filed and accepted by the Inspector General, the whistleblower protections afforded under the ICWPA kicked in.  As a matter of law, it became President Trump’s obligation to “enforce” the ICWPA and ensure that the Ukraine whistleblower suffer no retaliation. It became the President’s non-discretionary duty to ensure the whistleblower suffered no harm.   This may be hard to believe, but the law is the law.

Given the highly public attacks on the whistleblower emanating from the White House it is now incumbent upon President Trump to instruct all employees within the federal government to comply with the ICWPA.  He must take steps to have his Congressional supporters, “stand down” and stop their continued drum beat to “out” the whistleblower.  Regardless of where you stand on impeachment, the President must enforce the requirements of the ICWPA and protect the whistleblower.

When Donald Trump signed onto the job of President, protecting intelligence community whistleblowers became one of his few mandatory job duties.  Like other employees who work for the taxpayers, he many not like all of his required jobs.  Like other employees he may find some parts of his job difficult or distasteful.  But he has no discretion in this matter.  It is a requirement.  He must ensure that the whistleblower is not retaliated against, that the whistleblower’s identity remains confidential, and that the whistleblower can continue in his or her career, free from stigma.    He must hold those who retaliate accountable.  That is part of the job he wanted.  That is the job he must perform.

Copyright Kohn, Kohn & Colapinto, LLP 2019. All Rights Reserved.

Employee Video Surveillance: Position of the European Court of Human Rights

On October 17, 2019, the European Court of Human Rights (ECHR) approved the installation of a Closed-Circuit Television (“CCTV”) surveillance system which was used to monitor supermarket cashiers without informing those employees of the fact that it had been installed.

In this case, a Spanish supermarket manager decided to install cameras in the supermarket because of suspected thefts. He installed (i) visible cameras pointing at the supermarket’s entrance and exit of which he had informed the staff and (ii) hidden cameras pointing at the cash registers of which neither employees nor staff representatives had been informed.

The hidden cameras revealed that thefts were being committed by several employees at the cash registers. The concerned employees were dismissed. Some of them brought an action before the Spanish Labor court arguing that the use of CCTV without their prior knowledge was a breach to their right to privacy and that such evidence could not be admitted in the dismissal procedure.

Like French law, Spanish law requires the person responsible for a CCTV system to inform the concerned employees of the existence, purpose, and methods of the collection of their personal data, prior to implementation of the system.

The case was brought before the ECHR, which gave a first decision on January 9, 2018, concluding that Article 8 of the European Convention for the Protection of Human Rights, relating to the right to privacy, had been breached. The case was then referred to the Grand Chamber.

The issue raised was to find the proportionality and the balance between (i) the reasons justifying the implementation of a CCTV system (i.e., the right of the employer to ensure the protection of its property and the proper functioning of its business) and (ii) the employees’ right to privacy.

The ECHR stated that “domestic courts must ensure that the introduction by an employer of surveillance measures that infringe the employees’ privacy rights is proportionate and is implemented with adequate and sufficient safeguards against abuse”, referring to its previous case law [1].

The ECHR considered that in order to ensure the proportionality of CCTV measures in the workplace, domestic courts should take into account the following factors when balancing the interests involved:

  1. Has the employee been informed of the possibility of being subject to a video surveillance measure?
  2. What is the extent of the video surveillance and what is the degree of intrusion into the employee’s private life?
  3. Has the use of video surveillance been justified by the employer on legitimate grounds?
  4. Was there an alternative surveillance system based on less intrusive means and measures available to the employer?
  5. What were the consequences of the surveillance for the employee who was subject to it?
  6. Was the employee concerned by the video surveillance measure offered adequate guarantees?

Therefore, prior notification to the employees is only one of the criteria taken into account in the balance of interests.

In this particular case, the ECHR approved the examination of proportionality of the video surveillance measure. The Judges decided that despite the lack of prior notification to the employees, the CCTV was (i) justified by suspicions of theft, (ii) limited in space (only a few checkout counters), and (iii) limited in time (10 days). The Court also noted that very few people watched the recordings and then concluded that the degree of intrusion into the employees’ privacy was limited.

Consequently, the Grand Chamber considered that there was no violation of the employees’ privacy rights.

Although this decision does not directly concern France, it remains very interesting since French regulations (i.e., the Data Protection Act, the General Data Protection Regulations, and the Labor Code) provide:

  • that the monitoring measures implemented by an employer must not impose restrictions on the employees’ rights and freedoms which would neither be proportionate nor justified by the nature of the task to be performed (Article L. 1121-1 of the Labor Code); and
  • that concerned employees and staff representatives must be informed prior to the implementation of a video surveillance system (Article L. 1222-4 of the Labor Code).

According to French case law, any system that is not compliant with the above is considered illicit and the information collected could not be used as evidence of an employee’s misconduct [2].

The ECHR’s decision seems to challenge French case law: where the absence of prior notification to employees is considered as an overwhelming obstacle by French judges, the ECHR considers that it is merely one of the several criteria to be taken into account to assess the proportionality of the infringement to the employee’s right to privacy.

The question that remains is: what will be the impact of the ECHR’s decision in France?

NOTES

[1] ECHR, Grand Chamber, September 5, 2017, n°641996/08, Bărbulescu c. Roumanie; ECHR, decision, October 5, 2010, 420/07, Köpke c. Germany.

[2] See French Supreme Court, June 7, 2006, n°04-43866 ; French Supreme Court, September 20, 2018, n°16-26482.

Copyright 2019 K & L Gates

ARTICLE BY Christine Artus of K&L Gates.
For more on employee privacy rights, see the National Law Review Labor & Employment Law section.

Foreign Judgments in Israel: Recognition and Enforcement

As a basic rule in international law, a judgment rendered in one country is not recognized, per se, in another country in which its recognition is enforcement or recognition is sought. The foreign judgment must first undergo a process of integration, sometimes called ‘domestication,’ dictated by the laws of the integrating country before it can be recognized or enforced. The difference in status between a foreign and a local, or domestic, judgment necessitates this integration:[1]

“Where it exists, it is a sign that a local governmental organ – judicial or otherwise – has granted the foreign judgment an entry visa and has set the degree of its validity here according to the pertinent rules of the local law.” Justice Cheshin observed in C.A. 970/93 Attorney General of Israel v. Agam[2]:

Thus, for a foreign judgment to serve as, e.g., as a collateral estoppel in Israeli litigation, an Israeli court must first recognize, and thus integrate, the foreign judgment. Until this is done, the foreign judgment has no status in Israel, for the purpose of either recognition or enforcement. It can even be said that “a foreign judgment not yet declared enforceable holds the same status as mere pleadings.”[3]

General

A foreign judgment lacks validity, and must undergo a process of integration, before it can be recognized or enforced in Israel. Israeli law’s methods of integration are detailed in the Foreign Judgments Enforcement Law, 5718-1958 (Enforcement Law). This establishes a distinct normative framework on whose sole basis the courts in Israel may recognize a foreign judgment or declare it enforceable. The Enforcement Law establishes a series of conditions regarding the nature of the judgment, the manner of its execution, and its integration into Israeli law. Should these conditions be met, a court shall declare the judgment enforceable in Israel. Thus, inter alia, the Enforcement Law establishes conditions under which an Israeli court may declare a foreign judgment enforceable: the requirement of reciprocity of enforcement, according to which a foreign judgment would not be declared enforceable if the rendering country’s law does not enforce the judgments of Israeli courts; the time period during which a petition to enforce a foreign judgment must be filed for an Israeli court to considered it; defenses, any one of which would preclude the enforceability of the foreign judgment; and a restriction on enforcement, according to which a foreign judgment shall not be declared enforceable if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.

The Enforcement Law (Article 11) also establishes conditions for recognizing a foreign judgment: “incidentally, while hearing another matter…and for the purpose of that matter”, or primarily and directly. It is significant that the original Enforcement Law, passed by the Knesset in 1958, dealt solely with incidental recognition of foreign judgments, while provisions for direct and primary recognition of foreign judgments were added later, in the Foreign Judgments Enforcement Law (Amendment 2) 5738-1977.

Although lack of good faith or unacceptable conduct do not, pursuant to the Enforcement Law, provide independent cause to refuse recognition or enforcement of a foreign judgment, “however certainly this carries weight in the court’s considerations together with all other conditions”[4] for such recognition or enforcement.

Judgments in Personam, in Rem, and Personal Status Judgments

The recognition or enforcement of a foreign judgment is highly influenced by the traditional classification of judgments into in personam, in rem, and personal status judgments. A judgment in personam obligates a person to perform an act (repay a debt, pay damages, surrender an object, etc.) or to refrain from doing so. A judgment in personam binds, in the sense of creating res judicata, only the parties involved, and by its very nature is given to execution, that is to say, enforcement. A judgment in rem declares or establishes (creates, changes, or cancels) title in immovable or movable property. Such a judgment binds the world, so to speak. It does not place any personal obligation and is therefore not given to execution. This is also true of quasi in rem judgments, which are applicable only to certain parties: for example, an inheritance order that declares certain individuals as heirs, and their resulting title in a certain property. A status judgment is a judgment that declares or establishes (creates, changes, or cancels) the personal status of a person, such as an annulment or a judgment of divorce. Like a judgment in rem, a personal status judgment is not given to execution, as it imposes no personal obligations.

Under the rules of private international law, personal status judgments can be issued by a court in the country of permanent residency or in the country of citizenship.[5] In general, however, there is no international consistency,[6] as personal status is limited to a particular country or a specific legal system. In a case where a Jewish couple, married in, e.g., New York in a civil ceremony, emigrates to Israel, they may be considered unmarried from the perspective of the Jewish law that applies in the Israeli State Rabbinical court. Yet, in the event of divorce, Israeli law may require them to accept a Rabbinic divorce. In some situations,[7] nonetheless, Israeli civil law may recognize the marriage, for example, regarding alimony.[8] A foreign divorce judgment is another example of a split status,[9] as it has no binding validity and lacks evidentiary value until validation from a competent Israeli court.

Another example is mamzerut, a status created by Jewish religious law that disqualifies the mamzer from Jewish marriage. In the Israeli legal system,[10] a mamzer is a child born of a married woman from another man, or a child of relations with a first-order relative, defined and prohibited in religious law. Within the state of Israel, qualification for marriage and divorce between Jews is set by Jewish law, a law that is not applicable in other countries. Therefore, a mamzer may other than in Israel. A parallel example, in certain countries, is a child born out of wedlock. In those countries, such a child is considered illegitimate, whereas in Jewish religious law, the status of a child born out of wedlock is not affected in any way.

Thus, only foreign judgments in personam can be enforced in Israel directly, while foreign in rem and personal status judgments are granted validity through their recognition. However, because all enforcement in and of itself includes recognition, it can be said that all types of judgments can potentially be recognized,[11] although for those judgments that cannot be enforced, the recognition per se is of nearly no value.

What options are available for a party seeking the enforcement, in Israel, of a foreign judgment? In general, the traditional means in English common law for enforcing a foreign debt judgment is by filing a domestic claim based on the foreign judgment. The foreign judgment itself, as opposed to the cause of action in the original forum, becomes the new cause of action. Claims based on foreign judgments were accepted in Palestine under the British Mandate. This expired in 1948 upon the establishment of the State of Israel. However, after enactment of the Enforcement Law, and particularly of its Article 2, it was no longer clear whether this procedure was still available to the holder of a foreign judgment.[12]

In C.A. 101/63 Winter v. Kovetz,[13] the Supreme Court dispersed any doubts, ruling unequivocally, that even given the Enforcement Law, a party might still file a claim in Israel on the basis of a foreign judgment, as opposed to filing a petition pursuant to the Enforcement Law to declare the judgment enforceable.[14] In C.A. 665/72 Mata Khan (Christophilco) v. Schweibel,[15] the Israeli Supreme Court again held that a foreign judgment creditor is permitted to “file a claim based on the original cause at the basis of the judgment, file a claim whose cause of action is the foreign judgment, or file a petition for enforcement in accordance with the enforcement law.”[16]

Enforcement proceedings for a foreign judgment are intended to grant the creditor, whose matter was already heard and adjudicated in a foreign state, tools of enforcement in the state occupied by the debtor or his property. In this way, the objectives behind the enforcement process are attained, including limiting litigation between the parties; honoring their rights; as well as encouraging cooperation and harmony between the various legal systems.

A result of the stated objectives of the enforcement process is that an Israeli court hearing a petition to enforce a foreign judgment does not act as an appellate court over the foreign court, and is inclined to “respect the judgment as is, and not question it.”[17] Thus also, “the court does not require a new, local investigation of the foreign court proceedings; does not examine the factual or legal correctness of the foreign judgment; and does not even take the reasoning of the judgment into account.”[18] Therefore, an error – even a blatant one – in the foreign judgment would not in and of itself preclude the judgment’s enforcement.

[1] Prof. Amos Shapira, Recognition and Enforcement of Foreign Judgments, Iyunei Mishpat 4 (1974) 509 (hereinafter: Shapira, Recognition and Enforcement of Foreign Judgments, or Shapira).

[2]P.D. 49(1) 561, 569 (1995).

[3]Bnk. (T.A.) 1515/04 Bamira v. Greenberg, at §4, (Nevo, Jul. 15, 2004).

[4] See Judge Keret-Meir’s ruling in Bankruptcy File (T.A.) 2193/08 First International Bank of Israel Ltd. v. Gold & Honey (1995) L.P. et al (Nevo, Oct. 30, 2008), §4.

[5] H.C. 36/50 Gottlieb v. Gottlieb P.D. 5 57, 64 (1950); C.A. 472/64 Inavi v. Attorney General of Israel P.D. 19(1) 645 (1965).

[6] Michael Corinaldi, Status, Family, and Succession Laws Between Religion And State 25-26 (2004).

[7]Avigdor Levontin, On Marriage and Divorce Abroad 7, 50-51, 67-68 (1957). See also Menashe Shawa, Personal Law in Israel 153-154, 681 (4th ed., 2001).

[8]C.A. 173/69 Becher v. Goldberg P.D. 23(2) 665 (1969).

[9]Shawa, supra n. 3 at 141-241. See also Menashe Shawa, Direct Recognition of Judgments in Israel, and Applicable Rules Kiryat Hamishpat 2 35 (2002).

[10]Corinaldi, supra n. 3 at 25-26.

[11]Shapira, Recognition and Enforcement of Foreign Judgments 513.

[12]Id. 515-516.

[13]P.D. 17 2032 (1963). See also Shapira, Recognition and Enforcement of Foreign Judgments 516 n. 28.

[14]Shapira, id.

[15]P.D. 27(1) 690 (1984).

[16]Id. at 694.

[17]C.A. 221/78 Ovadia v. Cohen P.D. 33(1) 293, 296 (1978).

[18]D.C.M. (Jm.) 4052/05 Wells Fargo Bank of Minnesota National Association v. Zimmering (Nevo, Dec. 31, 2007), Section 9 of the judgment.

Copyright © 2019 Carmon & Carmon

For more on international law, see the National Law Review Global Law page.

Apollo Settles Alleged Sanctions Violations: Aircraft Lessors Pay Attention

The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury has broad delegated authority to administer and enforce the sanctions laws and related sanctions programs of the United States. As a key component of its enforcement authority, OFAC may investigate “apparent violations” of sanctions laws and assess civil monetary penalties against violators pursuant to five statutes, including the Trading with the Enemy Act and the International Emergency Economic Powers Act.1

An “apparent violation” involves “conduct that constitutes an actual or possible violation of U.S. economic sanctions laws.”2 An OFAC investigation of an “apparent violation” may lead to one or more administrative actions, including a “no action” determination, a request for additional information, the issuance of a cautionary letter or finding of violation, the imposition of a civil monetary penalty and, in extreme cases, a criminal referral.3 Investigations of apparent violations by OFAC often lead to negotiated settlements where a final determination is not made as to whether a sanctions violation has actually occurred.4

Upon the conclusion of a proceeding that “results in the imposition of a civil penalty or an informal settlement” against or with an entity (as opposed to an individual), OFAC is required to make certain basic information available to the public.5 In addition, OFAC may release on a “case-by-case” basis “additional information” concerning the penalty proceeding,6 and it often does. Such additional information will sometimes include informal compliance guidance, cautionary reminders and best practices recommendations. Such information is routinely consumed by corporate compliance officers seeking fresh insight on ever-evolving compliance and enforcement trends, particularly in the context of proceedings relating to industries with which they are involved.

On November 7, 2019, OFAC released enforcement information that has caught the attention of the aircraft leasing community, particularly U.S. aircraft lessors and their owned or controlled Irish lessor subsidiaries.7 The matter involved a settlement by Apollo Aviation Group, LLC8 of its potential civil liability for apparent violations of OFAC’s Sudanese Sanctions Regulations (SSR) that existed in 2014–5.9 Although the amount of the settlement was relatively modest, the enforcement activity by OFAC in the proceeding has attracted scrutiny by aircraft lessors because, for the first time in recent memory, a U.S. aircraft lessor has paid a civil penalty to OFAC for alleged sanctions violations.

At the time of the apparent violations, Apollo was a U.S. aircraft lessor which became involved in two engine leasing transactions that came back to haunt it.

In the first transaction, Apollo leased two jet engines to a UAE lessee which subleased them to a Ukrainian airline with which it was apparently affiliated. The sublessee, in turn, installed both engines on an aircraft that it “wet leased”10 to Sudan Airways, which was on OFAC’s List of Specially Designated Nationals and Blocked Persons within the meaning of the “Government of Sudan.” Sudan Airways used the engines on flights to and from Sudan for approximately four months before they were returned to Apollo when the lease ended. Meanwhile, in a separate transaction, Apollo leased a third jet engine to the same UAE lessee, which subleased the engine to the same Ukrainian airline, which installed the engine on an aircraft that it also wet leased to Sudan Airways. Sudan Airways used the third engine on flights to and from Sudan until such time as Apollo discovered how it was being used and demanded that the engine be removed from the aircraft.

Both leases between Apollo and its UAE lessee contained restrictive covenants “prohibiting the lessee from maintaining, operating, flying, or transferring the engines to any countries subject to United States or United Nations sanctions.”11 Thus, by allowing the engines to be installed by its sublessee on aircraft that were eventually wetleased to Sudan Airways, and flown to and from Sudan during the country’s embargo, the lessee presumably breached the operating restrictions and covenants imposed by Apollo in the leases. Moreover, once Apollo learned that the first two engines had been used, and the third engine was being used, for the benefit of Sudan Airways, it demanded that the third engine be removed from the aircraft that the sub-lessee had wet-leased to Sudan Airways, and this was done.12

One might reasonably conclude from these facts that Apollo acted like a good corporate citizen. So what did Apollo do wrong from a sanctions compliance standpoint?

OFAC stated that Apollo may have violated section 538.201 of the SSR, which at the time “prohibited U.S. persons from dealing in any property or interests in property of the Government of Sudan,”13 as well as section 538.205 of the SSR, which at the time “prohibited the exportation or re-exportation, directly or indirectly, of goods, technology or services, from the United States or by U.S. persons to Sudan.”14

What are the takeaways and possible lessons to be drawn by aircraft lessors from this settlement based upon these alleged violations and the facts upon which they were based?

First, according to OFAC, Apollo did not “ensure” that the engines “were utilized in a manner that complied with OFAC’s regulations,” notwithstanding lease language that effectively required its lessee to comply.15 OFAC is clearly suggesting here that aircraft lessors have a duty to require sanctions compliance by their lessees. And, in view of the fact that many sanctions programs are enforced on a strict liability basis, OFAC’s comment that Apollo failed to “ensure” compliance by its lessee and sublessees makes sense. Apollo was not in a position to avoid civil liability by hiding behind the well-drafted language of its two leases. If a sanctions violation occurred for which Apollo was strictly liable, the mere fact that its lessee’s breach of the lease was the proximate cause of the violation would not provide a safe harbor.

As an example of Apollo’s alleged failure to “ensure” legal compliance, OFAC observed that Apollo did not obtain “U.S. law export compliance certificates from lessees and sublessees,”16 a comment which is somewhat puzzling. To our knowledge, there is nothing in the law requiring a lessor to obtain export compliance certificates, at least not in circumstances where an export or re-export license is not otherwise required in connection with the underlying lease transaction. Moreover, as a practical matter, it would be difficult, at best, for an aircraft lessor to force the direct delivery of certificates from a sublessee or sub-sub-lessee with whom it lacks privity of contract. In view of the foregoing, one assumes that OFAC was looking for Apollo to install procedures by which its lessee would self-report on a regular basis its own compliance (and compliance by downstream sublessees) with applicable export control laws and the relevant sanctions restrictions contained in the lease.

Second, OFAC found that Apollo “did not periodically monitor or otherwise verify its lessee’s and sublessee’s adherence to the lease provisions requiring compliance with U.S. sanctions laws during the life of the lease.”17 In this regard, OFAC observed that Apollo never learned how and where its engines were being used until after the first two engines were returned following lease expiration and a post-lease review of engine records, including “specific information regarding their use and destinations,” actually conducted.

In view of the foregoing, OFAC stressed the importance of “companies operating in high-risk industries to implement effective, thorough and on-going, risk-based compliance measures, especially when engaging in transactions concerning the aviation industry.”18 OFAC also reminded aircraft and engine lessors of its July 23, 2019, advisory warning of deceptive practices “employed by Iran with respect to aviation matters.”19 While the advisory focused on Iran, OFAC noted that “participants in the civil aviation industry should be aware that other jurisdictions subject to OFAC sanctions may engage in similar deception practices.”20 Thus, according to OFAC, companies operating internationally should implement Know Your Customer screening procedures and “compliance measures that extend beyond the point-of-sale and function throughout the entire business of lease period.”21

As a matter of best practices, aircraft lessors should implement risk-based sanctions compliance measures throughout the entirety of a lease period, and most do. Continuous KYC screening by lessors of their lessees and sublessees is a common compliance practice. Periodic reporting by lessees as to the use and destination of leased aircraft and engines appears to be a practice encouraged by OFAC.22 Lessors can also make it a regular internal practice to spot check the movement of their leased aircraft through such web-based platforms as Flight Tracker and Flight Aware. If implemented by lessors, such practices may enable early detection of nascent sanctions risks and violations by their lessees and sublessees.

Finally, OFAC reminded lessors that they “can mitigate sanctions risk by conducting risk assessments and exercising caution when doing business with entities that are affiliated with, or known to transact business with, OFAC-sanctioned persons or jurisdictions, or that otherwise pose high risks due to their joint ventures, affiliates, subsidiaries, customers, suppliers, geographic location, or the products and services they offer.” Such risk assessment is an integral part of the risk-based sanctions compliance program routinely encouraged by OFAC, as outlined in its Framework for OFAC Compliance Commitments on May 2, 2019.23 For aircraft and engine lessors, conducting pre-lease due diligence on the ownership and control of prospective lessees and sublessees, as well as the business they conduct, the markets they serve, the equipment they use and the aviation partners with whom they engage, are key to identifying and understanding the sanctions risks that a prospective business opportunity presents.

1 See U.S. Department of the Treasury, Office of Foreign Assets Control, Inflation Adjustment of Civil Monetary Penalties, Final Rule, 84 Fed. Reg. 27714, 27715 (June 14, 2019).

2 31 C.F.R. Part 501, Appendix A, Section I.A.

3 31 C.F.R. Part 501, Appendix A, Section II.

4 31 C.F.R. Part 501, Appendix A, Section V.C.

5 31 C.F.R. §501.805(d)(1). Such information includes “(A) [t]he name and address of the entity involved, (B) [t]he sanctions program involved, (C) A brief description of the violation or alleged violation, (D) [a] clear indication whether the proceeding resulted in an informal settlement or in the imposition of a penalty, (E) [a]n indication whether the entity voluntarily disclosed the violation or alleged violation to OFAC, and (F) [t]he amount of the penalty imposed or the amount of the agreed settlement.” Id. OFAC communicates all such information through its website. 31 C.F.R. § 501.805(d)(2).

6 31 C.F.R. § 501.805(d)(4).

7 See OFAC Resource Center, Settlement Agreement between the U.S. Department of the Treasury’s Office of Foreign Assets Control and Apollo Aviation Group, LLC (Nov. 7, 2019) (https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Page…) (the Settlement Announcement).

8 In December 2018, Apollo was acquired by The Carlyle Group and currently operates as Carlyle Aviation Partners Ltd. According to the Settlement Announcement, neither The Carlyle Group nor its affiliated funds were involved in the apparent violations at issue. See id. at 1 n.1.

9 See 31 C.F.R. Part 538, Sudanese Sanctions Regulations (7-1-15 Edition). Note that most sanctions with respect to Sudan were effectively revoked by general license as of October 2, 2017, thereby authorizing transactions previously prohibited by the SSR during the time period of the apparent violations by Apollo. However, as is true when most sanctions programs are lifted, the general license issued in the SSR program did not “affect past, present of future OFAC enforcements or actions related to any apparent violations of the SSR relating to activities that occurred prior to the date of the general license.” Settlement Announcement at 1 n.2. See also OFAC FAQ 532 (https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#sudan_whole). 

10 A “wet lease” is “an aviation leasing arrangement whereby the lessor operates the aircraft on behalf of the lessee, with the lessor typically providing the crew, maintenance and insurance, as well as the aircraft itself.” See Settlement Announcement at 1 n.3.

11 Id. at 1.

12 Unfortunately, Apollo did not learn that the first two engines were used in violation of lease restrictions until they were returned following lease expiration and it conducted a post-lease review of the relevant engine records. 

13 The alleged application of section 538.201 to Apollo in the circumstances confirms the broad interpretive meaning that OFAC often ascribes to terms such as “interest,” “property,” “property interest” and “dealings,” which appear in many sanctions programs.

14 The alleged application of section 538.205 to Apollo in the circumstances suggests that a U.S. lessor of aircraft and jet engines may be tagged with the “re-export” of such goods and related services from one foreign country to another, notwithstanding the existence of a contractual daisy-chain of lessees, sub-lessees, and/or wetlessees that actually direct and control such flight decisions. In the context of U.S. export control laws, the Export Administration Regulations (EAR) define the term “re-export” to include the “actual shipment or transmission of an item subject to the EAR from one foreign country to another foreign country, including the sending or taking of an item to or from such countries in any manner.” 15 C.F.R. § 734.14(a)(1). Thus, for export control purposes, the flight of an aircraft subject to the EAR from one foreign county to another foreign country constitutes a “re-export” of the aircraft to that country. 

15 Settlement Announcement at 1.

16 Id.

17 Id., at 1–2.

18 Id. at 3. (emphasis added).

19 Id. See OFAC, Iran-Related Civil Aviation Industry Advisory (July 23, 2019) (https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20190723.aspx)

20 Id.

21 Id. (emphasis added).

22 In Apollo, OFAC reacted favorably to certain steps alleged to have been taken by Apollo to minimize the risk of the recurrence of similar conduct, including the implementation of procedures by which Apollo began “obtaining U.S. law export compliance certificates from lessees and sublessees.” Id.

23 See https://www.treasury.gov/resource-center/sanctions/Documents/framework_ofac_cc.pdf.

© 2019 Vedder Price

ARTICLE BY John E. Bradley of Vedder Price.
More sanctions actions on the National Law Review Antitrust & Trade Regulation law page.

U.S./China Trade “Deal” Short on IP/Trade Secret Specifics

With the announcement last week of a tentative partial trade agreement with China, the U.S. appears to be headed to a somewhat easing of tensions between the two superpowers.  Terms of the agreement are vague, with references to a reduction in tariffs, increase in agricultural purchases by China, and agreements to return to the bargaining table.

What is missing, though, are references to increases in protection of U.S. intellectual property: trade secrets, patents, copyrights, and trademarks, long espoused by the U.S.  This silence is in stark contrast to the stated goal of the U.S. that protection of U.S. intellectual property in China is among the key components to a successful and permanent trade deal.

The importance of such protection has been made manifest in several recent events.  The National Association of Manufacturers was hacked over the summer and blame was placed by investigators on Chinese nationals.  Earlier in the year, a former employee of a U.S. cast iron plant was sentenced to one year in prison after being arrested at the airport, en route to China with files of confidential information of his former employer.  Furthermore, China’s trademark register is full of foreign trademarks registered in China by its citizens.

China apparently has verbally committed as a part of an overall trade package to tighten up enforcement efforts in the IP arena.  But how does China quantify that commitment?  Such requires a change in the Chinese government’s mindset, its enforcement policies, and its recognition of the protectability of foreign trade secrets and other IP rights.  None of these can be reduced to tariff percentages, bushels or other common trade terms.  What can China offer in the way of a concrete plan to bolster protection of foreign confidential information?  Indeed, the silence of the parties as to this important issue is probably an indication of the difficulty the parties are having in reaching a verifiable agreement on IP.  With trust levels between the nations at their nadir, one can easily see how resolution of the IP protection issue may be a major stumbling block to a lasting trade agreement.  Will it become prohibitive?  Time will tell.

© 2019 Jones Walker LLP

More on IP agreements on the National Law Review Intellectual Property law page.

British Member of “The Dark Overlord” Hacking Organization Extradited to Face Conspiracy and Identify Theft Charges in the United States

Beginning in 2016, the computer hacking organization known as “The Dark Overlord,” began to target victims in the St. Louis, Missouri area, including various health care providers, several accounting firms, and a medical records company.  By remotely accessing these victims’ computer networks without authorization, The Dark Overlord was able to obtain sensitive records and information, which it then threatened to release unless the companies paid a ransom in bitcoin.

Following a lengthy investigation conducted by the Federal Bureau of Investigation and British authorities, United Kingdom national Nathan Wyatt was extradited to the United States and appeared before a federal district court in eastern Missouri on Wednesday, December 18, 2019, to face charges of aggravated identity theft, threatening damage to a protected computer, and conspiracy.  While Wyatt is the first member of The Dark Overlord to face prosecution, government officials have expressed a hope that this will signal to other cyber hackers targeting American companies that they will not be able to use territorial borders to evade justice and prosecution by the United States.

Copyright © 2019 Robinson & Cole LLP. All rights reserved.