FERC Issues Final Rule Regarding Income Tax Allowances in Rate Setting for Pipelines: MLPs Not Precluded from Tax Allowance
Authorization of Retaliatory Measures
The Federal Law “On Retaliation Measures (Countermeasures) for Unfriendly Actions by the United States of America and/or Other Foreign States” (the “Counter-Sanctions Law”) was fast-tracked by the Russian parliament, signed by President Putin and entered into force on June 4, 2018.
As we reported in our April 24, 2018 alert , the initial draft law introduced in the State Duma authorized the Russian Government to undertake rather specific retaliatory measures, many of which attracted active criticism of the Russian public and/or certain lobbying groups. These unpopular measures included prohibition or restrictions on import of pharmaceutical products, a travel and/or employment ban on U.S. citizens and citizens of other “unamicable foreign states,” termination or suspension of international cooperation in the nuclear, aviation and rocket-propulsion industries, etc.
Due to the widespread criticism, the draft law has undergone substantial modifications in its second and third readings (see our May 17, 2017 alert). The bill was revised to omit the unpopular specific measures, and instead the law gives broad authorizations for the Russian President to undertake such measures as he may consider necessary in response to “unamicable actions” of foreign powers. In particular, the Counter-Sanctions Law sets out five broad, generic measures that may be applied to the “unamicable foreign states” and entities under jurisdiction of such states (also capturing entities that are directly or indirectly controlled by such foreign entities):
The Counter-Sanctions Law also authorizes the Russian President to take “any other [retaliatory] measures as may be determined by the Russian President.”
Considering the wide criticism of many specific retaliatory measures proposed by the initial draft of this law and the generic authorizations provided by the final text of the law, it remains unclear what measures (if any) the President chooses to implement. He also arguably did not need an additional authorization for taking such measures.
Criminal Liability for Compliance with or Facilitation of Sanctions
As we reported in our alert, a draft law “On Amendments to the Russian Federation Criminal Code” (the “Amendment”) is also being considered in the State Duma. The Amendment seeks to impose criminal liability for compliance with U.S. and other foreign sanctions against Russian parties.
The current draft of the Amendment, if it were to be adopted, would make it very difficult for the U.S. and EU companies to operate in Russia since their compliance with the U.S./EU sanctions would expose their managers in Russia to criminal liability. Many large Russian companies and financial institutions also generally comply with the Western sanctions, which under the current draft of the Amendment could also be characterized as a criminal activity.
Due to the wide criticism of the bill by the Russian and foreign business communities, the second reading of the Amendment in the State Duma that was initially scheduled for May 17, 2018 has been postponed without indication of a new date, to allow for more consultations and input from various parties and groups that may be affected by the Amendment. It appears likely that this bill, if adopted at all, will be first substantially revised.
We continue to closely monitor the developments.
Most Recent Additional U.S. Sanctions Regarding RussiaOn June 11, 2018, OFAC updated its Specially Designated Nationals and Blocked Persons List (the “SDN List”) by adding additional entities and individuals identified in connection with reported enablement of Russia’s Federal Security Service (the “FSB”), including provision of material and technological support to the FSB. The U.S. government first blocked the FSB in December 2016 under U.S. sanctions measures targeting Russia’s malign and destabilizing cyber activities. These blocking sanctions cut off most business interaction between sanctioned persons and the United States by forbidding U.S. persons to engage in transactions in which sanctioned persons have a direct or indirect interest. The prohibitions cover not just the designated individuals and legal entities but also entities in which one or more blocked persons hold a 50 percent-or-greater ownership interest. These actions confirm that the U.S. government continues to prioritize effective administration of Russia-related sanctions and has no short- or medium-term plans to relax U.S. sanctions policy in this area.