Export enforcement & disclosures, February 2013

Enforcement trends and disclosures in
export controls and sanctions
Trade Compliance Seminar – Export Controls
12 February 2013
Jasper Helder
Partner, International Trade
jasper.helder@bakermckenzie.com
+ 31 (0) 6 46 17 94 82

Baker & McKenzie Amsterdam N.V. is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the
common terminology used in professional service organisations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly,
reference to an "office" means an office of any such law firm.
© 2013 Baker & McKenzie Amsterdam N.V.

Agenda
– What are the enforcement trends in export controls and
sanctions?
– What can you do if you discover a violation?
– How do you make sure disclosures are successful?

© 2013 Baker & McKenzie Amsterdam N.V. 2

EU Export Controls
and Sanctions
Enforcement © 2012
Baker &
McKenzie
Antidumping and Countervailing Duties
© 2013 Baker & McKenzie Amsterdam N.V. 3 3

EU Background
– Enforcement is regulated by national laws, on national
level (but may be prompted by EU exchange of
information)
 No EU rules on penalties (national criminal laws)
 No EU rules in respect of enforcement (national codes of
criminal procedure)
– Common denominators between EU Member States,
but also substantial differences
– Different cultures: from ‘Informed Compliance’ to
‘Enforced Compliance’

EU Enforcement
– Administrative enforcement
 Audits
 Withdrawal of licenses
– Criminal enforcement
 Investigations (commonly by Customs, who mostly are
authorized to conduct criminal investigations)
 Prosecution (often by general Prosecution Authorities)
 Settlement (in some EU Member States) with Prosecutor
/ Customs


EU Enforcement
– National administrations may have duty to report
violations to prosecuting authorities → may impede
voluntary self disclosures
– Prosecuting authorities may have discretion to refrain
from prosecution → transparency varies between EU MS
– Just because cases aren’t publicized as much does not
mean that there is no enforcement; companies try to
settle investigation out of Court to avoid negative
publicity


NL Enforcement
– Not many Court cases (yet)
– More and more settlements with Public Prosecutor
 Many remain confidential, but
 Need to be made public if:
 More than EUR 50,000, or
 In a ‘sensitive’ case
– In particular ‘Iran’ is high on the enforcement agenda


Enforcement trends: ‘globalization’
– Increased international co-operation
– New export control laws in countries outside the EU and US: In
the last several years, Mongolia, Malaysia, Thailand, Philippines,
United Arab Emirates, etc. are all either considering or have
passed Strategic Trade Acts
– Extraditions: Granting extraditions for US export violations
(Singapore, Hong Kong, Germany, Czech Republic, United
Kingdom)


Recent US Enforcement in the Netherlands
– United States v. ABN AMRO (May 2010)- $500 million criminal
forfeiture for violations of US export control laws and the Bank
Secrecy Act
– United States v. Urlich Davis (May 2012)- 6 months imprisonment
and $2,000 fine for conspiring to defraud the United States and
violate a temporary denial order
– United States v. ING Bank (June 2012)- $619 million criminal
forfeiture for violations of US export control laws
– United States v. Aviation Services International (June 2012)- owners
sentenced to time-served and probation for violations of US export
control laws


EU Examples

Germany UK
Oberlandesgericht Stuttgart (16 October 2008) October 2010: Ms, Caroline Egley-Turner, a
Gotthard L. sentenced to 5 and a half years for businesswoman originally from New Zealand,
procurement support of ultracentrifuges for Libya and arranged for electric stun guns to be supplied from
AQ Kahn network (forfeited proceeds of Euro 3.5 the US to the New Zealand police force, sentenced to
million) six months imprisonment, suspended for twelve
months. A confiscation order for £24,802.51 was
made against the defendant, who was ordered to pay
£36,197.49 costs.
Netherlands See:
Court of Appeal Amsterdam (30 January 2009) http://www.bis.gov.uk/policies/export-control-organisation/eco-pre
X BV; unlicensed exports of graphite, pressure
gauges, triethanolamine and O-rings; penalty of €
85,000.
Court of Appeal Amsterdam (30 January 2009)
Person Z (managing director and shareholder of X
BV); unlicensed exports of graphite, pressure
gauges, triethanolamine and O-rings; penalty of €
85,000; imprisonment for 18 months, 6 months of
which suspended; probation period of 2 years.


What if you
discover a
violation? © 2012
Baker &
McKenzie

What NOT to do if you discover a violation
– Nothing (…)
– Pass the ‘hot potato’ and the blame
– Discuss widely in the business or externally
– ‘Call the cops!’
– Explain away or work around
– Delete the evidence
– “Repair after the fact”


What to do if you discover a violation?
– Can you still undo the violation?
 Block shipment/order
– Check for pending transactions with similar risks
 If necessary: stop them
– Investigate the facts and causes
 Think about legal privilege & external auditors
– Assess the risk
– Determine how future violations can be avoided
 Remedial action

Remediation
– Disciplinary Actions
– Increased Live Training
– Improved Code of Conduct and Specific Policies and
Procedures
– Improved Internal Controls
– Increased Internal Audits
– Rotation of Certain Positions
– Audit Committee Interaction


Voluntary
Disclosures © 2012
Baker &
McKenzie

Deciding to disclose or not
– Carefully consider legal situation
– Avoid premature disclosure – is it possible to conclude that some or
all of the transactions are not violations?
– Are the items actually controlled?
 Careful review of relevant control entry and exemptions / decontrol
notes
 Consider classification request (suitably backed up by legal, technical
and policy advocacy to push for NLR response)
– Were any licences in place?
– Do any defences apply?
– Were the relevant legislative provisions in force at the date the
transaction took place?
– Who was the “exporter” with licensing obligations? Consider title to
the items, control over the items, contractual obligations.

– How serious is the violation?
– Is a disclosure to government authorities required by contract,
foreign regulation or materiality from a securities law perspective?
– Importance of notifying the government first
– Risk of current / former employees, business partners or customers
disclosing infringements as part of their own disclosure or whistle-
blowing
– Likelihood of detection
– Compliance culture
– Multi-jurisdictional investigations – how disclosure in one jurisdiction
will affect non-disclosure in other jurisdictions
– Voluntary cooperation – has it previously been credited? How certain
and predictable is it?

– National administrations may have duty to report violations to
Prosecuting Authorities
– Prosecuting Authorities may not have discretion to refrain from
prosecution
– What response to expect: transparancy varies between EU MS
 Guidelines for prosecution not commonly established or publicly
available
 No public reporting on concrete cases in most EU MS
 Where settlements occur, these are not commonly published
 Where settlement is possible, no published guidelines for
amounts/measures
– In some EU MS, legal entities can not be prosecuted for export
controls violations, only individuals
 Legal representatives (appointed directors/officers) liable
 Company staff directly involved in relevant transactions (most EU MS)

Disclosure pros and cons
– Benefits of making a voluntary – Disadvantages of making a
disclosure: voluntary disclosure:
 Fines and penalties may be  Government involvement
lower may increase scope of
 Cooperative resolution may investigation
be less onerous, costly and  Timing of the process will be
distracting to business dictated by the government
 Greater control over the  Compliance program likely
timing of the process to be reviewed
 Avoid risk of disclosure by  The authorities may conduct
third party their own investigations
 Being seen by the  Potential additional scrutiny
authorities to be doing the by law enforcement
right thing agencies in other countries
 Greater expectation from
authorities that voluntary
disclosures are made

Considerations in the Netherlands
– No regulated context or procedures
– ‘Black or white’ statutes: either criminal prosecution or no action
– But: there always is the possibility of license withdrawal (though
rarely applied)
– Appropriate internal trade compliance programmes and
responsabilities are expected from business, and will be reviewed
after disclosure
– Few resources, so response and follow up can take long (but quick
response signifies your case is considered as serious)
– If government investigation follows: state your case in the
investigation phase as there is very little awareness of the area with
prosecutors
– Test for follow up: “would the transaction have been licensed if
applied for?”

Proceeding with a voluntary disclosure
– Consider whether to use internal or external resources
– Ensure attorney/client privileged information is not inadvertently
produced
– Structure of voluntary disclosure:
 Full and frank → including supporting documents
 What happened?
 Why did it happen?
 Why will it not happen again? → steps taken to rectify in short
and longer term
 Aggravating and mitigating circumstances


Wrap up: Voluntary Disclosures
– Benefits of voluntary disclosure
 avoid prosecutions
 reduced penalties
 expectation from authorities
– Ensure well prepared – a poor disclosure will worsen
situation and reduce gov’t confidence
– Full and frank
– Aggravating and mitigating circumstances
– Timely filings, coordinated with filings in other countries


Speaker Practice Focus
Economic sanctions and EU export controls (dual-use and military products and
technologies) and interaction with US sanctions and US export controls rules (e.g. ITAR and
EAR).

Representative legal matters:
• Voluntary self-disclosure concerning prohibited transactions with an EU-sanctioned party,
including negotiation of a settlement with Dutch authorities.
• Advising various clients on compliance with the transfer of funds provisions under EU
Jasper Helder sanctions against Iran and related voluntary self-disclosures.
Partner International Trade • Advised a client on the EU sanctions against Iran and the restrictions for key technologies
for the oil & gas sector, as well as the interaction of the EU sanctions with US government
procurement regulations, CISADA and other US Iran sanctions.
• Representing clients in litigation for contract performance and damages by EU, Iranian and
Syrian parties concerning contracts suspended or terminated due to EU sanctions against
Syria and Iran.
• Advised various clients on EU and national blocking laws in relation to US Cuba sanctions
and related US voluntary self-disclosures.
• Advising oil & gas exploration services and offshore construction clients on the
procurement of global export licenses under EU export controls regulation for equipment
hubs supporting their global operations.
• Assisting with simultaneous voluntary self-disclosures to US and Dutch authorities in
respect of unlicensed exports of military items and technical violations under ITAR.
• Obtaining exemptions from authorities in EU countries for exportation of commodities and
related payments under the EU sanctions against Ivory Coast.

Thank you for your
attention

– Jasper Helder
– Partner, International Trade
– jasper.helder@bakermckenzie.com
– + 31 (0) 6 46 17 94 82

© Baker & McKenzie 2012. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In
accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a
Indirect Tax Steering Committee I Annual Meeting NY 2012
partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.

Export enforcement & disclosures, February 2013

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