International Research Collaboration with Foreign Sovereigns and Their Entities

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International Research Collaboration with Foreign
Sovereigns and Their Entities
Jill M. Williamson, Esq. 1900 K. St.,
N.W. Washington, D.C. 20006 202-419-2115 Jwilliams
on_at_hunton.com
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Introduction

• Goals of todays presentation
• be able to identify when you may be dealing with
  a foreign sovereign
• understand the additional issues raised when
  dealing with a sovereign
• identify strategies to address these issues

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Definition of Sovereign

• Any individual or organization that is An agency
  or organ of the State
• Includes majority-owned corporations and other
  entities
• Includes individuals who are acting on behalf of
  the State
• Unsettled whether tiering counts

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Definition of Sovereign

•  This definition is broad enough to cover foreign
  government-owned corporations, and such
  corporations enjoy the broad grant of immunity
  provided by the act.
•  An individual may also qualify for immunity
  under the act if the individual's employer is a
  foreign state and the individual was acting in
  his or her official capacity and within the scope
  of his or her authority when he or she engaged
  the acts which are the subject of the lawsuit
  owned by agency of government but performs
  essentially governmental function

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Issues that are raised by contracting with a
sovereign

• Enforceability -- Immunity from suit and from
  execution on judgment
• Viability -- Unique ability of a sovereign to
  effect the viability of a contract
• Compliance issues under U.S. (and foreign) law

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Immunity

• As a general rule, under U.S. and most other
  laws, sovereigns are immune from being sued or
  from having judgments enforced against them.
• Common exceptions to these immunities include
•   waiver
•   commercial activity

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ImmunityWaiver

• waiver clause should be explicit and include
  waiver from all defenses available to a sovereign
  including
• immunity from jurisdiction,
• venue, and
• execution of judgment
• waiver from parent agency
• If no waiver, consider other options that wont
  require enforceability such as pre-payment

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Other enforceability issues and options

• dispute resolution clause
•  forum selection
• courts in U.S., Host government or, third
  country
• Note some governments cannot agree to be
  brought before a foreign court
• Arbitration under established centers and rules
• LCIA, IC, AAA, regional centers
• ad hoc mechanisms
• Other ADR - mediation

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Other enforceability issues

•  authority of contracting party
• This will be determined under the local law and
  the rules and regulations of the relevant agency
  or organization
•  enforceable contract provisions
• Yemen government agencies not allowed to agree
  contracts governed by foreign law

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Other enforceability issues

•  Options for addressing authority and
  enforceability issues
• legal opinion
• representations
• indemnification

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Make contracts viable

• The government has the unique ability to change
  the legal and regulatory environment to affect
  their obligations under a contract.
•    Argentina pesification program

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Options for ensuring viability

• Stabilization clause
•  Assurances that no change in the environmental,
  tax, import/export or other laws and regulatory
  framework will be applicable to the project if
  such change will have a material adverse effect
  on the project, or the rights parties.
• Assurances that tariff and concession regimes
  permitting shall remain in full force and effect
  and shall be adjusted only to the extent
  necessary to guarantee the project sponsors no
  less than the agreed expectation.

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Options for ensuring viability

• Expropriation clause
•   Assurances that the host government will not
  expropriate (without prompt, adequate and
  effective compensation) the project or otherwise
  treat the project or the project sponsors in a
  discriminatory manner.
• definition and formula for calculating prompt,
  adequate and effective compensation

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Options for ensuring viability

• Most favored nation clause
•  Assurances that the project will be entitled to
  no worse benefits than any other similar project
  in the host country.

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Options for ensuring viability

• Other protection clauses
• Assurances that the project company will be able
  to open and maintain foreign currency accounts in
  any financial institution within or outside the
  host country.
• Guarantee by the host government of obligations
  of all local governmental instrumentalities (such
  as the central bank, the agencies responsible for
  furnishing water, fuel electric power and other
  utilities to the project) involved in the
  project.
• Host government assistance such as grants of
  real property and utilities at nominal fees,
  exemptions from withholding taxes, income taxes,
  import duties and other taxes.

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Options for ensuring viability

• Other protection clauses (cont.)
• Host government assistance such as grants of real
  property and utilities at nominal fees,
  exemptions from withholding taxes, income taxes,
  import duties and other taxes.
• Assurances that the host government will
  expeditiously grant and renew all governmental
  approvals and permits, including work permits,
  visas and other foreign worker permits for
  project participants and their personnel.

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Options for ensuring viability

• Other protection clauses (cont.)
•  Assurances that the project company will have
  the right to procure and purchase full insurance
  and other goods and services abroad if the local
  costs of any such goods and services exceed,
  which, for example, 10 of the foreign cost of an
  equivalent product or service.
• Assurances that the government will not grant any
  competing franchises or concessions while the
  project debt is outstanding.
• Assurance that the host government will not
  unduly interfere with the operation,
  administration and maintenance of the project.

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Compliance issues under U.S. (and foreign) law

• Foreign Corrupt Practices Act
• Department of Treasury, Office of Foreign Assets
  Control
• Other export and non-proliferation controls.

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Foreign Corrupt Practices Act

•  Two sections
• Accounting section applies to companies that have
  stock registered with the SEC
• Bribery section applies to all U.S. companies and
  individuals

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Foreign Corrupt Practices Act

•  Bribery section prohibits
• an offer, promise to pay, pay or authorize
  payment of anything of value
• using interstate commerce
• to a foreign official or a foreign political
  party or party official, candidate for foreign
  political office, or any other person while
  knowing that such person will offer promise or
  give something of value to another person while
  knowing that such person will offer promise or
  give something of value to any person or entity
  mentioned above
• corruptly
• for the purpose of influencing an official act or
  decision
• to obtain or retain business, to direct business
  to any person, or to obtain an improper advantage.

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Foreign Corrupt Practices Act

•  Penalties
• fines of up to 2,000,000 per violation for
  companies
• fines up to 100,000 per violation for
  individuals (not reimbursable by employer)
• imprisonment up to 5 years per violation

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Foreign Corrupt Practices Act

• an offer, promise to pay, pay or authorize
  payment of anything of value
• only need to offer or promise
• or authorize another to do so
• no de minimus standard but
• Bona fide promotional and contract-related
  expenses exempt
• Must not have corrupt intent

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Foreign Corrupt Practices Act

•  using interstate commerce
• interstate or international travel, telephones,
  letters, email, faxes

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Foreign Corrupt Practices Act

•  corruptly
• with bad motive or intent to wrongfully influence
  a foreign official
•  for the purpose of influencing an official act
  or decision
• applies to influence of even the smallest act or
  decision
• applies also to refraining from taking an act or
  decision

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Foreign Corrupt Practices Act

•  to obtain or retain business, to direct
  business to any person, or to obtain an improper
  advantage
• business includes government contracts as well
  as other commercial activities
• improper advantage was added in 1998, refers
  to something to which one is not entitled.

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Foreign Corrupt Practices Act

• Facilitating Payments EXEMPT
• to expedite or secure performance of a routine
  governmental action
• permits or licenses required to do business in a
  foreign country
• work permits or visas
• police protection, mail service, telephone
  service, power and water supply, loading or
  unloading of cargo, protection of perishable
  goods
• schedule routine inspections required by contract
  or related to transporting goods

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Foreign Corrupt Practices Act

•  Joint Venture
• individual or company with 50 or more interest
  must follow the Act
• if no controlling interest, JV agreement should
  contain protective clauses
• internal compliance program
• accounting and cash disbursement controls
• clear policies statements regarding providing
  food, gifts and entertainment
• audit controls to check compliance

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Foreign Corrupt Practices Act

• ways that corrupt practices can be
  operationalized
• Staffing
• Contracting and subcontracting
• Purchasing
• Other privileges, eg. Access to information,
  treatment, etc.

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Foreign Corrupt Practices Act

•  Options
• clause allowing termination of the agreement upon
  discovery of violation of any applicable
  anti-bribery law
• representation and warranty from contracting
  party that no violation of anti-bribery laws has
  occurred
• Indemnification for violations

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Other Compliance Issues

•  Department of Treasury, Office of Foreign Assets
  Control
• Specially Designated Nationals List
• Restricted Entities
• List available at http//www.ustreas.gov/offices/
  enforcement/ofac/sanctions/
• Other export and non-proliferation controls.
• BIS Web Site http//www.bxa.doc.gov/

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Questions