Tag: United Nations

European Citizens Sue States for Breach of Human Rights Resulting from Failure to Take Stronger Climate Action

On September 27, 2023, six “Portuguese young people” were heard by the European Court of Human Rights (ECtHR) in a lawsuit against 32 European governments, including all EU member states, alleging that their failure to act fast enough against climate change has violated the applicants’ human rights to life, physical and mental wellbeing. The applicants claim that the respondents are failing to fulfil their obligations under the Paris Agreement to limit global warming.

The original application cites a number of contributions to climate change made by the respondent states: (i) permitting the release of emissions within national territory and offshore areas over which they have jurisdiction; (ii) permitting the export of fossil fuels extracted on their territory; (iii) permitting the import of goods, the production of which involves the release of emissions into the atmosphere; and (iv) permitting organizations within their jurisdiction to contribute to the release of emissions overseas. Taken together, the applicants say, the respondents have contributed to climate change and, while mitigation measures have been adopted, contributions to adverse climate change continues. The applicants are seeking an order from ECtHR requiring the respondent governments to take more ambitious action.

Describing the impact on them, the applicants say that climate change has contributed to harm to human health. In an expert report commissioned to supplement their application, the applicants say that Portugal is already experiencing the impact of climate change, including an increase in mean and extreme high temperatures, with heatwaves becoming more frequent. As a result, the region is also prone to wildfires – 120 people died and 500,000 hectares of land were burned during wildfires preceded by heatwaves. Responding to the application, a lawyer on behalf of Greece claimed that climate change cannot be directly linked to an adverse impact on human health, stating “[the] effects of climate change, as recorded so far, do not seem to directly affect human life or human health.” Lawyers on behalf of Portugal stated that the applicants failed to provide evidence of the specific damages caused by climate change on their lives.

The case was originally filed in September 2020. The September 27 hearing was one of the largest before the ECtHR, with 22 judges and 86 government lawyers, and took place following one of the hottest summers on record in Europe. A decision is expected in 2024.

Taking the Temperature: The claims made in this case echo certain conclusions reached in the United Nations’ first global stocktake on parties’ achievements under the Paris Agreement. The UN acknowledged that although significant progress has been made, there is a crucial need for nations to significantly enhance their clean energy ambitions if they are to achieve their Paris-aligned objectives.

In July 2023, we discussed the Grantham Institute’s report on trends in climate litigation and the types of strategies being employed by claimants. One of these included so-called government framework actions in which plaintiffs focus on a government’s response to climate change and potentially, its failure to implement policies or legislation. The case brought by the six Portuguese young people falls squarely within this category.

In June 2023, we discussed the lawsuit filed by, among others, Greenpeace and 12 Italian citizens against ENI S.p.A. alleging that ENI knew of the detrimental effect of fossil fuel burning since around 1970 but through “lobbying and greenwashing” continued to encourage extraction, thereby contributing to climate change, and violating the citizens’ rights to life, health and private and family life. In March of this year, a group of Swiss citizens accused the Swiss government of infringing on the right to life and health of elderly women via its climate-related policies. The case is pending in the European Court of Human Rights.

Comparable cases have also been filed in the U.S. In Montana, 16 residents—ranging from ages 2 to 18—commenced litigation claiming that they “have been and will continue to be harmed by the dangerous impacts of fossil fuels and the climate crisis,” and that the defendants have violated the Montana Constitution by fostering and supporting fossil fuel-based energy policies in the state that led to these conditions. In September this year, the court struck down on state constitutional grounds certain provisions of the Montana Environmental Policy Act (MEPA), which restricted Montana from incorporating the impact of greenhouse gas emissions or other forms of climate change in environmental reviews. Similar constitution-based climate-related suits against state governments are pending in other U.S. states.

© Copyright 2023 Cadwalader, Wickersham & Taft LLP
By Jason M. Halper , Sharon Takhar of Cadwalader, Wickersham & Taft LLP
For more news on Climate Change Human Rights Violations, visit the NLR Environmental, Energy & Resources section.

Is Biodiversity Emerging As A Unifying Concept That Can Help Ease The Political Polarization Surrounding ESG?

Highlights

    • In addition to global initiatives by the United Nations, G7, and the U.S., the need for protection against biodiversity loss has become a central focus of the business and investment communities
    • Biodiversity protection is emerging worldwide as a unifying concept that can mitigate the political polarization surrounding ESG and promote constructive dialogue about sustainability
    • A number of steps can be taken to capitalize on the unique attributes and appeal of biodiversity and leverage its potential to serve as a unifying concept

International Biodiversity Day, May 22, 2023, with its theme “From Agreement to Action: Build Back Biodiversity” was a powerful reminder that momentum for biodiversity conservation is accelerating globally. Biodiversity is increasingly being recognized as a potential unifying concept that can help alleviate some of the extreme political divergence over the term ESG.

ESG, which encompasses a broad range of environmental, social, and governance factors, has become politically charged and the subject of intense debate and varying interpretations. Biodiversity, on the other hand, is widely recognized as a critical aspect of environmental sustainability and it is increasingly acknowledged as a pressing issue by virtually all stakeholders, including scientists, policymakers, businesses, and communities.

Biodiversity represents the variety of life on Earth, including ecosystems, species, and genetic diversity. It is a tangible and universally valued concept that resonates with people from various backgrounds and ideologies. The preservation, protection and conservation of biodiversity are essential for the health and resilience of ecosystems, as well as for addressing climate change and ensuring the well-being of future generations.

By emphasizing biodiversity within sustainability discussions, stakeholders can find common ground and rally around a shared objective: protecting and restoring the Earth’s natural diversity. Biodiversity provides a unifying language and focus that transcends political divisions, as it highlights the interconnectedness of all life forms. It allows for a more tangible and universally valued point of reference, which can facilitate collaboration and drive collective action towards conservation efforts.

In addition to global initiatives by the United Nations, the Group of Seven (G7), and the U.S., the need for protection against biodiversity loss has also become a central focus of business and investment communities, and appears to be receiving a more favorable reception in the U.S. than the broader concepts associated with and motives attributed to ESG investing. This increased attention has, in turn, opened up a number of practical opportunities for action to leverage the potential of biodiversity as a unifying concept.

International Support for Biodiversity Protection

The United Nations formed the Convention on Biological Diversity (CBD) to promote nature and human well-being. The first draft was proposed on May 22, 1992, which was then designated as International Biodiversity Day. Since the Rio Earth Summit in 1992, nearly 200 countries have signed onto this treaty, which is a legally binding commitment to conserve biological diversity, to sustainably use its components and to share equitably the benefits arising from the use of genetic resources.

In December 2022, at the 15th UN Biodiversity Conference (COP15), the CBD adopted the Kunming-Montreal Global Biodiversity Framework that calls for protecting 30 percent of the planet’s land, ocean, and inland waters and includes 23 other targets to help restore and protect ecosystems and endangered species worldwide, and ensure that big businesses disclose biodiversity risks and impacts from their operations. The Kunming-Montreal framework also focused on increasing funding for biodiversity by at least $200 billion per year (with at least $30 billion per year to developing countries by 2030).

The U.S. is one of just a few countries worldwide that has not yet formally approved the CBD. While President Clinton signed the CBD in 1993, the Senate did not ratify it. Although the U.S. was on the sidelines at COP15 in late 2022, in parallel with the CBD approval of the Kunming-Montreal framework, the U.S. reiterated its support for an ambitious and transformative Global Diversity Framework, outlined in this State Department press release.

In addition to committing to conserve at least 30 percent of U.S. lands and waters by 2030, other U.S. leadership initiatives to mainstream and conserve nature that were announced or reaffirmed at that time include:

    • Conserving forests and combatting global deforestation
    • Prioritizing nature-based solutions to address climate change, nature loss, and inequity
    • Incorporating nature into national economic statistics and accounts to support decision-making
    • Recognizing and including indigenous knowledge in federal research, policy, and decision-making, including protections for the knowledge holder
    • Knowing nature with a national nature assessment that will build on the wealth of existing data, scientific evidence, and Indigenous Knowledge to create a holistic picture of America’s lands, waters, wildlife, ecosystems and the benefits they provide
    • Strengthening action for nature deprived communities by expanding access to local parks, tree canopy cover, conservation areas, open space and water-based recreation, public gardens, beaches, and waterways
    • Conserving arctic ecosystems through increased research on marine ecosystems, fisheries, and wildlife, including through co-production and co-management with Indigenous Peoples

The U.S. also spearheaded efforts to reverse the decline in biodiversity globally by advancing land and water conservation, combating drivers of nature loss, protecting species, and supporting sustainable use, while also enabling healthy and prosperous communities through sustainable development. The U.S. also affirmed its financial commitment to and support for international development assistance to protect biodiversity. Additionally, the U.S. made major policy and financial commitments to protect oceans and advance marine conservation and a sustainable ocean economy.

Of particular importance, the U.S. reaffirmed its commitment to advancing science-based decision making and its support for the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services.

Most recently, the G7 Hiroshima Leaders’ Communique issued at the close of their meeting on May 20 on the cusp of International Biodiversity Day, affirmed that G7 leadership (including the U.S.) welcomed “the adoption of the historic Kunming-Montreal Global Biodiversity Framework (GBF) to halt and reverse biodiversity loss by 2030, which is fundamental to human well-being, a healthy planet and economic prosperity, and commit to its swift and full implementation and to achievement of each of its goals and targets.”
G7 leadership also reaffirmed their commitment “to substantially increase our national and international funding for nature by 2025,” and “to supporting and advancing a transition to nature positive economies.” Notably, they also pressed companies to do so as well while at the same time voicing support for TNFD’s market framework for corporate nature related disclosures:

“We call on businesses to progressively reduce negative and increase positive impacts on biodiversity. We look forward to the publication of the Taskforce on Nature-related Financial Disclosures’ (TNFD’s) market framework and urge market participants, governments and regulators to support its development.”

Similarly, multilateral development banks (MDBs) were urged by the leaders of G7 to increase their support for biodiversity by leveraging financial resources from all sources and “deploying a full suite of instruments.”

Increasing Focus On Biodiversity By The Financial Sector

The financial sector has taken note of the growing international support for biodiversity conservation and protection. A 2023 study by PwC found that “55% of global GDP—equivalent to about US $58 trillion—is moderately or highly dependent on nature.” In its report The Economic Case for Nature, the World Bank found that a partial collapse of ecosystem services would cost 2.3 percent of global GDP ($2.7 trillion) in 2030. Conversely, the report found that implementing policies beneficial to nature and biodiversity conservation (including achieving the “30×30” goal subsequently approved by the CBD in the Kunming-Montreal framework and by Executive Order in the U.S.) could result in a substantial increase in global real GDP by 2030.

According to a 2020 report by the World Economic Forum, protecting nature and increasing biodiversity could generate business opportunities of $10 trillion a year and create nearly 400 million new jobs by 2030. Given this economic potential, it comes as no surprise that a growing number of investors are focusing on deploying capital for nature-based opportunities, and trying to assess whether and to what extent companies are susceptible to biodiversity related risks.

Toward those ends, the financial sector has been monitoring and supporting the development of TNFD’s market framework for nature related disclosures that was most recently endorsed by G7. That private global effort was launched in 2021 in response to the growing need to factor nature into financial and business decisions. The fourth and final beta version was issued in March 2023:

“The TNFD is a market-led, science-based and government supported initiative to help respond to this imperative. The Taskforce is nearing the end of its two-year framework design and development phase to provide market participants with a risk management and disclosure framework to identify, assess, respond and, where appropriate, disclose their nature-related issues. The TNFD framework, including TCFD-aligned recommended disclosures, will be published in September 2023 ready for market adoption.”

While the TNFD framework is not legally binding, the final version will be coming on line just in time for use as a guide for compliance with the EU’s Corporate Sustainability Reporting Directive (CSRD), which was effective in April 2023. It will require a substantial number of European companies and others operating in the EU, to start making disclosures regarding biodiversity and nature in coming years.

One of the more significant catalysts for investment in the protection of biodiversity and nature was the establishment of the Natural Capital Investment Alliance as part of the United Kingdom’s Sustainable Markets Initiative announced in 2020 and the Terra Carta sustainability charter launched by King Charles a year later. The Alliance is a public/private venture that aims to invest $10 billion in natural capital assets. Speaking at the One Planet Summit on biodiversity where the Alliance was announced in January 2021, King Charles stated “… I have created a Natural Capital Investment Alliance to help us arrive at a common language on Natural Capital Investment so that we can start putting money to work and improve the flow of capital.”

According to research by Environmental Finance, total assets held in thematic biodiversity funds more than tripled in 2022, and it is anticipated that momentum and growth will accelerate in response to COP 15 in December 2023, and approval of the Kunming-Montreal framework.

Positioning Biodiversity As A Unifying Concept

While biodiversity is not replacing ESG, it is gaining more attention within the broader ESG framework. Biodiversity conservation is supported by a vast body of scientific research and has a broad consensus among stakeholders. Many companies are incorporating biodiversity considerations into their sustainability strategies, and setting goals for conservation, habitat restoration, and responsible land use. Investors are also factoring biodiversity into their decision-making processes, looking for companies that demonstrate strong biodiversity conservation efforts.

Given the universal importance of biodiversity, it can serve as a focal point for mutual understanding for stakeholders with varying perspectives. Biodiversity conservation provides a unifying language that encourages collaborative efforts towards shared goals of environmental stewardship and the preservation of natural resources. Protection against biodiversity loss is not an ideological issue. To the contrary, it is fundamental, practical, and existential: the need to preserve the natural systems that support life on Earth. Emphasizing the importance of biodiversity shifts the focus to concrete and tangible actions required globally and locally, such as species preservation, and ecosystem protection, which can garner broader support and participation and help bridge political divides.

While biodiversity protection is by no means a panacea, there are further steps that can be taken to capitalize on its unique attributes and appeal that can improve the potential for biodiversity to serve as a unifying concept that can help reduce the current political polarization in the U.S. over ESG and promote more constructive dialogue around sustainability:

    • Universal concern – Biodiversity loss affects every individual and society, regardless of political affiliation. It is a shared concern that is oblivious to political boundaries, as the preservation of nature’s diversity is vital for the well-being of all life on Earth. By emphasizing biodiversity as a unifying concept, stakeholders can find mutuality and work together towards its conservation.
    • Inclusivity – Biodiversity requires inclusive engagement by diverse stakeholders and technical and scientific support from local communities, indigenous groups, governments, businesses, civil society organizations and the public. Such engagement fosters dialogue, understanding, and collaboration, breaking down political barriers.
    • Tangible and relatable – Biodiversity is a concrete and tangible concept that people can relate to, unlike some of the more complex ESG concepts, like Scope 3 greenhouse gas (GHG) emissions and Net Zero. It encompasses the variety of species, ecosystems, and genetic diversity, which are easily understandable and relatable to everyday experiences. This relatability can bridge political divides and foster broader support for conservation efforts.
    • Interconnectedness – Biodiversity underscores the interconnectedness of ecosystems and species emphasizing that actions in one area can have cascading far-reaching consequences on others, including ecological, social, and economic effects. Recognizing this interconnectedness can encourage stakeholders to collaborate across sectors and ideologies to address biodiversity loss collectively.
    • Co-benefits and shared values – Biodiversity conservation often aligns with other societal values and goals, such as climate change mitigation, sustainable development, and human well-being. By emphasizing the co-benefits that arise from biodiversity conservation, such as ecosystem services and resilience, stakeholders can rally around shared values and work towards a common vision.
    • Economic implications – Biodiversity loss can have significant economic implications for industries like agriculture, tourism, and pharmaceuticals. It can also have impacts on supply chains and market access. Recognizing the economic value of biodiversity and the potential risks associated with its decline can bring together diverse stakeholders, including businesses and investors, who recognize the importance of integrating biodiversity considerations into their strategies and decision-making processes.
    • Science-based approach – Biodiversity conservation relies on scientific knowledge and research. Emphasizing the scientific evidence on the importance of biodiversity helps build consensus and transcends political biases, providing a foundation for constructive discussions.
    • Local and global perspectives – Biodiversity conservation is relevant at both local and global scales. It allows for discussions that incorporate local knowledge, values, and practices, while recognizing the need for global cooperation to address biodiversity loss and protect shared resources.

To leverage biodiversity as a unifying concept, it is crucial to promote open dialogue, knowledge sharing, and collaboration. Stakeholders should engage in inclusive decision-making processes that respect diverse perspectives and prioritize equitable and sustainable outcomes.

Takeaways

Biodiversity is emerging as a potential unifying concept that can help mitigate the political polarization surrounding the term ESG. While ESG has become a politically charged and debated topic, biodiversity is widely recognized as a critical aspect of environmental sustainability and has broad support across different stakeholders.

By focusing on biodiversity, stakeholders can find common ground in recognizing the importance of preserving nature’s diversity and ensuring the long-term sustainability of ecosystems. Biodiversity loss is a global challenge that affects everyone, irrespective of political affiliation, and it is increasingly acknowledged as a pressing issue by scientists, policymakers, businesses, and communities.

It is important to note that while biodiversity can be a unifying concept, there will still be debates and differing opinions on specific approaches and trade-offs involved in biodiversity conservation. Different stakeholders may have differing priorities, perspectives, and proposed means and methods to address biodiversity loss. The complexity of biodiversity issues, such as balancing conservation with economic development or navigating conflicts between different stakeholder interests, requires careful consideration and dialogue.

© 2023 BARNES & THORNBURG LLP

For more Financial Legal News, visit the National Law Review.

Sustainability: Environmental, Social, and Governance (ESG)

Understanding the environmental, social, and governance (ESG) issues of today’s business world are key to understanding the discussion of sustainability and climate change (a sub-topic of each ESG and sustainability).  For example, a sustainable business that demonstrates strong ESG planning, will often include climate change risk management.

Today’s press informs that mounting pressure from the United Nations participants continues to build a focus on reducing greenhouse gas emissions.  The UN’s 25th Session of the Conference of the Parties (COP25) to the UN Framework Convention on Climate Change was held in Madrid from December 2 – 13.  The U.S. filed a notification of withdrawal from the Paris Agreement on November 4, 2019.  The U.S. State Department has announced it will continue to participate in ongoing climate change negotiations and meetings, such as COP25, to ensure a level playing filed that protects U.S. interests.  Also, the UN released its report noting the emissions gap they observe that demonstrates the difference between amounts of carbon dioxide emitted now and lower levels predicted as necessary to stop global warming.  The question being asked is whether there are missed opportunities to achieve GHG reduction goals.

Domestic and international companies are in the process of reviewing their ESG reports to assess last year’s accomplishments and in setting goals and action items for the new year of 2020 and beyond.  Climate change and other sustainability concerns like waste management are clearly on the minds of many.  There is no single formula for a well-developed ESG strategy and report, since each is as unique as the individual company about which the report speaks.  There are common ESG themes, however.  The UN Sustainability Goals provide a convenient list of well-refined issues against which a company (or individual) can assess their opportunities and vulnerabilities.  The goals set forth a number of environmental, social, and governance topics worthy of note to include: poverty, hunger, good health, education, gender equality, clean water, affordable and clean energy, decent work and economic growth, industry/innovation/infrastructure, reduced inequality, sustainable cities/communities, responsible consumption and production, climate action, life below water, peace and justice, and partnership to achieve the goal.  These are the types of issues to consider when exploring ESG and sustainability.  Consultation of the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) can also assist.  Keep in mind that there is no one gold standard metric against which to measure ESG ratings or accomplishments.  The reason for that is simple, each company has a different complement of skills, talents, and opportunities or stated differently, ESG risks and solutions.

If you were to review a few ESG reports found on corporate websites, it will become apparent the differences and unique qualities of each reporting company.  Geographic locations of operations can define the ESG goals.  If operating in major metropolitan cities as opposed to emerging countries, the corporate responsibilities are quite varied.  If manufacturing consumer products, packaging is an attractive target for reduction in waste.  However, if manufacturing items used in the value chain, perhaps an ESG goal is managed through energy consumption during manufacturing or delivery of products.  If providing medical services, the ESG goals can be energy, water, supply chain, waste, etc.  Just as each of us possess capabilities and assets we can use to invest in our future, the same is true for companies.  We must acknowledge the unique accomplishments and actively invite the benefits gained from a collective effort.

The final item listed by the UN Sustainability goals is partnership, meaning the efforts and benefits should be shared.  We all must work together to achieve the change we need.  All contributions must be welcomed to build the sense of common good.

© Steptoe & Johnson PLLC. All Rights Reserved.

For more on global sustainability efforts, see the National Law Review Environmental, Energy & Resources Law section.

The Day of North Korea Sanctions: the UN Imposes the Toughest North Korea Sanctions Yet While OFAC and State Designate More North Korean Entities

After weeks of negotiations and a Putin-backed delay, the UN Security Council unanimously adopted resolution 2270 on March 2, 2016, imposing new sanctions against North Korea. According to U.S. Secretary of State John Kerry, the resolution imposes the strongest set of UN sanctions in over two decades. This article provides a summary of the new UN North Korea sanctions followed by an overview of the most recent developments in North Korea sanctions under US law.

New UN North Korea Sanctions

The new sanctions require:

  • An asset freeze on all funds and other economic resources owned or controlled by the North Korean government or the Worker’s Party of Korea, if associated with its nuclear or ballistic missile program or other prohibited activities
  • A ban on the opening and operation of North Korean banks abroad
  • A ban on foreign financial institutions opening new offices in North Korea under all circumstances, unless first approved by the Sanctions Committee, and a requirement for UN Member States to order the closing of existing branches if there is credible information indicating the associated financial services are contributing to North Korea’s illicit activities
  • Designation of 16 new individuals and 12 entities (including North Korea’s Ministry of Atomic Energy and the Reconnaissance Energy Bureau)
  • A ban all public and private financial trade support to North Korea if there are reasonable grounds to believe there is a link to proliferation
  • Sectoral sanctions on North Korean trade in natural resources banning the export of all gold, titanium ore, vanadium ore and rare earth metals and banning the supply of all types of aviation fuel, including rocket fuel
  • A ban on the export of coal, iron, and iron ore used for North Korea’s nuclear or ballistic missile programs
  • Inspection of all cargo going to and from North Korea, not just those suspected of containing prohibited items
  • Expanding the arms embargo to include small arms and light weapons
  • A ban leasing or chartering vessels or airplanes, providing crew services to North Korea, and registering vessels
  • Expanding the list of luxury goods (prohibited for export to North Korea) to include luxury watches, aquatic recreational vehicles, snowmobiles worth more than $2,000, lead crystal items and recreational sports equipment
  • A sweeping ban on the transfer of any item if a UN Member State has reason to believe the item can contribute to the development and capabilities of the North Korean armed forces, except for food and medicine

China, a permanent member of the Security Council, joined the unanimous vote despite prior reluctance to strengthen UN sanctions against North Korea. It remains yet to be seen how China will enforce the sanctions.

U.S. North Korea Sanctions

Separately, the United States took action earlier against North Korea. We speculate that this action helped align the UNSC members toward the unanimous vote on UNSCR 2270. On February 18, 2016, President Barack Obama signed into law the North Korea Sanctions and Policy Enhancement Act of 2016. The bill had easily passed through both Houses of Congress on the heels of the most recent nuclear test and rocket launch by North Korea.

Then on March 2, the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) named two entities and 10 individuals to its list of Specially Designated Nationals and Blocked Persons. On the same day, the State Department designated three entities and two individuals for activities related to weapons of mass destruction (WMD).

Over the next few months, OFAC is expected to issue new North Korea regulations to implement other provisions of the new statute.

The Act

The new statute provides for both mandatory and discretionary designations. These sanctions are directed at activities by U.S. Persons, which includes any United States citizen, permanent resident alien, any entity organized under the laws of the United States or any jurisdiction within the United States (foreign branches of U.S. companies, that means you too), and any person in the United States.

In addition, any transaction by any non-U.S. persons supporting any of the designated entities or prohibited activities must be carefully scrutinized, especially if the transactions involve the U.S. financial system in any way.

Mandatory Designations

The Act requires the designation and freezing of all assets subject to U.S. jurisdiction of any person that engages in any of the following activities relating to North Korea:

  • Nuclear and ballistic missile proliferation
  • Dealings in North Korean metals and products tied to WMD activities, the Korean Workers’ Party, armed forces, intelligence, or the operation of political prison camps
  • “Significant financial transactions” related to weapons of mass destruction
  • Undermining cybersecurity
  • Internal repression
  • Forced labor
  • Censorship
  • Human rights violations

In addition, the Act requires the President to decide on the designation of North Korea as a Primary Money Laundering Concern in the coming months.

As a result, companies must ensure that no company activity supports the activities of entities designated under the above act provisions. Compliance programs, including those related to anti-money laundering, should be reevaluated as the sanctions are not simple reiterations of previous measures. These mandatory designations will make it all the more necessary that companies maintain reasonable and proportionate due diligence and screening procedures to prevent facilitating the enumerated activities.

Discretionary Designations

Before we reach the current regulation regime, we will leave you with the remaining provisions of the Act that have not yet been implemented. While no one holds the OFAC crystal ball, these provisions may rear their head and are worth considering in advance of promulgation.

1. Blocking sanctions

The Act explicitly codified the blocking of assets of the Government of North Korea, the Workers’ Party of Korea, and North Korean Specially Designated Nationals (SDNs). While this sanction is essentially already in effect under the various executive orders, the explicit restrictions would prohibit the use of the U.S. financial system in connection with any transaction with the Government of North Korea, the Workers’ Party of Korea, or SDNs of North Korea.

2. UN Security Council resolutions

The Act also authorizes designation as an SDN of any person who supports a person designated pursuant to an applicable UN Security Council resolution. The potential implications of this Act provision deserve attention as the recent resolution imposed the toughest set of sanctions yet.

3. Bribery

If you thought the FCPA was the sole concern out of U.S. soil relating to bribery of foreign officials, think again. The Act also authorizes designation of any person who knowingly contributes to bribery of a North Korean official, or to misappropriation, theft, or embezzlement of public funds by, or for the benefit of, a North Korean official.

4. Sanctions grab bag

The Act also authorizes the President to prohibit any person already designated under the above three categories from transactions in foreign exchange or credit or payments subject to U.S. jurisdiction, procurement, and/or travel by the designated person’s officers and shareholders.

Refresher: Pre-Existing OFAC Regulations

The new Act builds upon the pre-existing U.S. sanctions against North Korea. For further background, see Trading Up: Newly Implemented North Korea and Libya Sanctions.

Blocking sanctions

The regulations provide for the continued the blocking of property and interests in property of certain persons with respect to North Korea that had been blocked pursuant to the Trading with the Enemy Act (TWEA) as of June 2000.Further, the regulations block property and interests in property of persons listed in the Annex to E.O. 13551 and of individuals and entities determined by Treasury in consultation with the State Department to have engaged in activities related to:

  • The import, export, or reexport of arms or related materiel from North Korea

  • The import, export, or reexport of luxury goods to North Korea

  • Money laundering, counterfeiting of goods or currency, bulk cash smuggling, narcotics trafficking, or other illicit economic activity supporting the Government of North Korea or its senior officials

  • Providing support for or goods or services of any of the above-listed activities or any person whose property and interests in property are blocked pursuant to E.O. 13551

  • Owning, controlling, or acting on behalf of any person whose property and interests in property are blocked pursuant to E.O. 13551

Vessels

The regulations prohibit U.S. persons from registering, owning, leasing, operating, insuring or otherwise providing support to North Korean vessels.

Imports to North Korea

Lastly in terms of prohibitions, the regulations prohibit imports of goods, services, and technology (including those used as components of finished products of, or substantially transformed in, a third country) from North Korea without an OFAC licenses or applicable exemption.

Authorizations

The preexisting regulations also provided authorization for the provision of certain legal services, emergency medical services, and entries in certain accounts for normal service charges by U.S. financial institutions.

The Takeaway

Interactions with North Korea are an increasingly dangerous minefield of sanctions. The new North Korea sanctions add to an already restrictive program. As a result, we recommend additional review and specialized controls as the new sanctions reach new heights (or depths, depending your level of preparation).

Article By Lisa C. Mays, J. Scott Maberry & Reid Whitten of Sheppard, Mullin, Richter & Hampton LLP

Copyright © 2016, Sheppard Mullin Richter & Hampton LLP.

UN Secretary-General Election

After ten years in office, Ban Ki-moon, the UN Secretary General (UNSG),  will retire from the UN at the end of 2016. The race for his successor is already underway. Last December, the Presidents of the Security Council (UNSC) and of the UN General Assembly (UNGA) sent out a joint letter soliciting candidates from member countries.

The UN consists of 193 member states, traditionally divided into geographical groups, such as African, Latin American, etc. Certain important positions, including that of the UNSG, rotate among these groups, although this happens by custom and precedent rather than by some written rule of the UN Charter. After the Middle Eastern group (Boutros Boutros-Ghali), the African group (Kofi Annan) and the Asian group (the incumbent), the rotation system would have the Eastern European group take up the office of the Secretary General for the next four years (with the possibility of reelection).

Several candidates have already been put forward in response to the letter of the two presidents. Croatia has nominated Vesna Pusić, until recently the country’s first deputy prime minister and minister for foreign affairs. Alas, her government collapsed soon after her nomination was submitted and it is unclear whether she still enjoys her country’s support.

The former Yugoslav Republic of Macedonia has nominated its former foreign minister and a former UNGA President, Srgjan Kerim. And Montenegro has nominated Igor Lukšić, its current foreign minister.

The letter of the two presidents invites candidates to come forward by the end of July, though it doesn’t actually specify when the nomination process would close. A number of other candidates will emerge, and several are waiting in the wings. The ex-Yugoslav contingent is complemented by Danilo Türk from Slovenia, a former UN Assistant Secretary-General and a former President of his country, who declared his candidacy some two years ago, as well as by Vuk Jeremić, the former Serbian Foreign Minister who is reputed to have made quite a mess of his job as President of the UN General Assembly (2012-13).

Bulgaria is the home of no fewer than two potential candidates: Irina Bokova, the Director-General of UNESCO, and Kristalina Georgieva, a second-term European Commissioner and currently a Vice-President of the Commission. Bokova used to be favored by her government – but her government, too, has since changed and the new Bulgarian government, with a right-of-center orientation, prefers Georgieva.

Nowhere is it stated that a country could not put forward two candidates (however strange that would be). This sheds some light on the situation in Slovakia which also features two potential candidates: Miroslav Lajčák and Ján Kubiš. Lajčák is currently the country’s Deputy Prime Minister and Foreign Minister. Kubiš is a veteran of a number of international organizations. He has served as the Secretary General of the Organization for Security and Cooperation in Europe (OSCE), as EU’s special envoy for Central Asia, as Slovak Foreign Minister, etc. Currently, he serves as Ban Ki-moon’s Special Representative in Afghanistan.

This plethora of candidates and possible candidates may thin out as months pass – while others may throw their hat in. Consider that none of the past eight Secretaries-General has been a female. Is it a woman’s turn now? As much sympathy as the idea evokes, there is no rule to force it. Kristalina Georgieva, however, is considered by many as the ideal candidate, gender considerations aside.

In a novel approach, candidates will be asked to make presentations during open hearings that the current UNGA President intends to hold. Following Art. 97 of the UN Charter, their merits will then be considered by the Security Council which will recommend its favorite to the General Assembly. It has not been specified when this is supposed to happen but late fall is the likely time. This is based on the assumption that the US would want the decision made before its own elections. Also, Russia will want to take care of the matter during its October chairmanship of the Security Council.

Even though the UNSC only makes a recommendation, its views are critical. Its recommendation has always been followed. Moreover, the UNSC customarily submits only a single recommendation – no options left for the 193 nations. This follows from a 1946 resolution of the UNGA according to which submitting a single recommendation is “desirable”. And in the Security Council, it will be its five permanent members (the “P5”) who will carry the day.

Some skeptical but wise voices argue that the whole selection may boil down to a bargain between the US and Russia. In the past, the US has not expressed its views before actual decision time.  It might be inclined toward a female candidate and Kristalina Georgieva could be viewed favorably.

On the other hand, the Russians often oppose any European Union diplomat, for any position. This logic would make them oppose just about anyone mentioned above, except for some of the West Balkan candidates – after all, it was a powerful Russian lobbying campaign which hoisted Vuk Jeremić of Serbia into the GA Presidency a couple of years ago. Additionally, the Russians might support someone who studied in Moscow, in their Diplomatic Institute (MGIMO), including the two Slovak diplomats or Irina Bokova. They have their files.

So – the race for the next UN Secretary General is in flux and nothing will be decided very soon. Before the end of the year, however, one of the fairly obscure Eastern European names mentioned above may turn into an important international actor.

Article By Karel Kovanda of Covington & Burling LLP

© 2016 Covington & Burling LLP

United Nations: A Renewed Focus on Climate Change This Week in New York

Covington BUrling Law Firm

Regardless of your perspective on the subject, expect significantly increasing media and public attention around climate change and greenhouse gas emissions this week.

The Secretary General of the United Nations, Ban Ki-moon, is convening a Climate Summit on Tuesday in conjunction with the meeting of the UN General Assembly in New York.  More than 120 world leaders are expected to attend this gathering, making it significant and historic to have so much focus on this issue.  The Climate Summit prompted activists to put together a People’s Climate March on Sunday calling for action by the assembled world leaders.  Hundreds of thousands of people reportedly joined the march in New York — creating media and popular momentum– and demonstrations also occurred in cities around the world.

This focus on climate change has come to be known as Climate Week in New York City.  One of the most notable features of it is the role that businesses are playing in promoting private sector innovation for clean energy solutions, accounting for their climate-related activities, and even advocating for clearer governmental climate emissions policies.  The week is filled with dozens of meetings and forums featuring such business approaches.  Today, for example, Apple’s CEO Tim Cook will be joining Climate Week opening day events to discuss his company’s approach, and dozens of CEOs will be attending a Private Sector Forum tomorrow at the UN.  These meetings include financial firms and investors, as well as greenhouse gas emitters.  The Carbon Disclosure Project (CDP) will be at the New York Stock Exchange on Tuesday to release its annual survey of company reporting on carbon emissions, showing that some 70% of the S&P 500 companies voluntarily report on their carbon emissions.  Several major companies are expected to announce commitments to power 100% of their operations from renewable energy.

The business discussions in New York will increasingly center on a call for companies to put an internal price on carbon, as a complement to efforts to have governments establish regulatory mechanisms — such as emissions limits or trading schemes — that likewise impose such a price.  A carbon price is believed to sharpen the business focus on climate change risks, costs and opportunities.  The UN Global Compact and the World Bank are promoting leadership criteria for companies based on such reporting.  Indeed, a just released report  from the Carbon Disclosure Project (CDP) shows that some 150 companies have developed internal carbon pricing schemes.  It would not be surprising for calls for company pricing policies to increasingly appear in future shareholder resolutions.

This increasing private sector focus complements the accelerating pace of the official UN negotiations.  Interestingly, the Climate Summit is merely an effort by the Secretary General to enhance the focus on the climate treaty negotiations, which are happening elsewhere.  The next step is the annual meeting of the parties of the UN Framework Convention on Climate Change in Lima, Peru in early December to continue with drafting a framework.  Countries will then submit emissions reduction commitments in the Spring, with an effort  to reach a global agreement at the Paris meeting of the parties in December 2015.  Yesterday, the Major Economies Forum of the largest nations met to tackle these issues and discuss next steps to accomplish such an agreement.  Several observers see this meeting as a demonstration of the increasing importance of this issue, as for the first time that meeting consisted of country Foreign Ministers (Secretary of State Kerry attended) rather than simply energy or environmental officials.  Issues around addressing the growing emissions from rapidly developing economies, such as China and India — which currently sit outside of the existing UN framework — remain central to the ultimate success of this endeavor.

Key to the United States’ position are the significant emissions reductions that would be derived from the Environmental Protection Agency’s recently proposed rules for existing power plants. They are a central piece in fulfilling the President’s international pledge in 2009 that the United States would reduce its carbon emissions by 17% by the year 2020.  The President’s speech this week will be important in setting a trajectory for how much further the United States may be willing to go after 2020.

The UN’s chief climate change official, Christian Figueres, speaking at a small gathering yesterday, regards the week’s activities as an indication that the climate issue may be reaching a tipping point.  She characterizes the public demonstrations as a statement that the nations of the world “must” address climate change, the business actions as a demonstration that governments “can” address climate change, and believes that governmental leaders are now poised to assert that they “will” address it.  While the outcomes may not be fully settled for some time, companies can expect to see a renewed public focus on these issues and will likely find that they present a range of increasing risks and opportunities.

ARTICLE BY

Gary S. Guzy
OF
Covington & Burling LLP
© 2014 Covington & Burling LLP