Four Tools of Modern Economic Statecraft

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The Impact of Modern Economic Statecraft on Cross-Border Trade and Investment: Sanctions, Export Controls, Investment Screening, and Supply Chain Rules

 ● PLI Chronicle: Insights and Perspectives for the Legal Community, March 10, 2023 ●

Anthony Rapa ●

Geopolitical risk is top of mind for companies these days, and it seems that every week brings a new proposed sanction, trade control, or investment restriction. Increasingly, companies and investors are discovering that their cross-border movement of goods, technology, and capital implicates regulatory restrictions of some kind and is subject to governmental scrutiny.

In modern parlance, such measures fall under the rubric of “economic statecraft.” The pace of change is dizzying, and the stakes are high, with each new economic statecraft tool holding the power to cut off business with targeted markets, trigger regulatory scrutiny of transactions, and impact business planning.

Economic statecraft is not new. The earliest recorded example dates back to the 5th century BC, when the Athenian Empire banned the people of Megara, a town allied with Sparta, from trading in harbors and marketplaces controlled by the empire. Another notable example is Napoleon’s Continental System, in which the French emperor sought to prohibit trade between the European continent and Great Britain. A further historical instance, with modern-day implications, is the U.S. embargo of Cuba, which dates back to the early 1960s.

While economic statecraft is not new, what is new is the power of the U.S. government and, increasingly, other governments, to respond swiftly to geopolitical events with economic countermeasures. In the modern landscape, such measures are often multilateral and reinforced through governmental bodies and market gatekeepers such as financial institutions.

Given the prevalence of economic statecraft tools and the geopolitical trends prompting their promulgation, it is important for economic operators engaged in cross-border trade and investment, and those advising them, to understand the nature and scope of the tools at governments’ disposal.

Read more on our website.

Russia Sanctions: 5 Key Points for Companies

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Anthony Rapa ●

The United States, the European Union, and the United Kingdom recently imposed new sanctions on Russia to coincide with the one-year anniversary of Russia’s invasion of Ukraine, a measure that the European Union described as its “10th package of sanctions against Russia” to date.

So, one year in, after 10 rounds of sanctions against Russia, where do things stand? Here are five key points for companies to consider:

1. For any remaining business with or involving Russia, it is imperative to manage compliance carefully.

Although Russia has been described as “the most sanctioned country in the world,” this is not exactly accurate, as there remains a range (arguably, a substantial range) of business with Russia that is permissible. For companies engaged in such business, it is of paramount importance to manage the various vectors of Russia-related risk, including sweeping export controls, sanctions on Russia’s financial system, and the web of multijurisdictional restrictions.

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What Is “Knowing” under the FCA? Supreme Court to Consider Impact of Ambiguous Regulations

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Jennifer A. Short, Bridget Mayer Briggs, and Tjasse L. Fritz ●

Jennifer A. Short headshot image
Bridget Mayer Briggs headshot image
Tjasse L. Fritz headshot image

A successful False Claims Act (“FCA”) claim must show that the defendant submitted a false claim or statement “knowingly.” The “knowing” element—the scienter prong—depends on whether the defendant actually knew that the claim or statement was incorrect, or recklessly disregarded the facts or legal requirements that rendered the claim “false.” But, of course, government regulations, contract terms, and grant requirements can be incredibly complex and difficult to understand. When the ground rules are unclear, how does a company “know” that its claims for payment may be false under the FCA?

What does the FCA say about “knowing”?

The FCA defines “knowing” as (1) having “actual knowledge of the information;” (2) acting “in deliberate ignorance of the truth or falsity of the information;” or (3) acting “in reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729(b). A “specific intent to defraud” is not required for liability under the FCA. 

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Law360: Gov’t Contracts Group of the Year: Blank Rome

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Law360, February 17, 2023

Blank Rome’s Government Contracts group was recently named a 2022 Practice Group of the Year by Law360, which honors “the attorney teams behind litigation wins and major deals that resonated throughout the legal industry this past year.” Blank Rome is one of five firms recognized in the Government Contracts practice group category nationwide. 

Read the group’s full Practice Group of the Year profile, as published in Law360, on our website.

Executive Briefing: U.S. Government Imposes New Round of Sanctions on Russia

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Anthony Rapa ●

On February 24, 2023, the Biden Administration issued a package of sanctions, export controls, and tariffs against Russia, an action timed to coincide with the one-year anniversary of Russia’s invasion of Ukraine. The U.S. measures, which also target Belarus and Iran in certain respects, were implemented in concert with related UK and EU actions.

Sanctions

The U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) designated 22 individuals and 83 entities for asset freeze sanctions, and issued a determination that the Russian metals and mining sector is subject to sanctions under Executive Order 14024. As a result, U.S. persons are prohibited from engaging in transactions and dealings with the 105 newly sanctioned parties and are required to freeze their assets. Furthermore, individuals and entities that OFAC determines are “operating” in the Russian metals and mining sector are subject to potential designation for asset freeze sanctions.

Moreover, OFAC issued FAQ guidance indicating that U.S. persons seeking to divest from Russian investments may need a license from OFAC before paying any recently required “exit tax” to the Russian government under Russian law, potentially complicating divestment efforts.

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Blank Rome’s Black History Month D.C. Easel Project—and a Surprising Connection between the Defense Industry and the 1963 March on Washington

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Justin A. Chiarodo and Robyn N. Burrows ●

In honor of Black History Month, we wanted to highlight one of the most impactful traditions in our Washington, D.C., office: the Black History Month D.C. Easel Project, in which Blank Rome attorneys, staff, and clients work together to create easels depicting notable historic events and figures from D.C.’s rich African American history. Thanks to the leadership and innovation of our partner Saminaz Akhter, the Easel Project has deepened our awareness and appreciation of the significant contributions Black people have made in our Nation’s Capital (you can learn more about the program in this video).

The theme for last year’s easels was civil demonstrations and protests, including the 1919 Red Summer riot, the 1939 Marian Anderson concert at the Lincoln Memorial, the 1958/59 Youth March for Integrated Schools, the 2020 George Floyd protests, and the 1963 March on Washington for Jobs and Freedom. Our research on the origins of the 1963 March on Washington revealed a surprising connection to the defense industry that we wanted to spotlight for our “Sustained Action” readership.

The seeds for the March on Washington were sown decades earlier, when A. Phillip Randolph (head of the Brotherhood of Sleeping Car Porters and an early leader of the civil rights movement) proposed a mass march on Washington, D.C., to highlight segregation and discrimination in the U.S. Armed Forces and the defense industry.

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Corporate Counsel: Five Geopolitical and International Trade Issues for U.S. Businesses to Watch in 2023

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Corporate Counsel, February 14, 2023

Anthony Rapa and Justin A. Chiarodo ●

Last year marked an inflection point in the geopolitics of the 21st century, with the Biden administration declaring the post-Cold War era “definitively over” against the backdrop of Russia’s invasion of Ukraine and the U.S.-China strategic competition. That dynamic drove a range of national security and economic statecraft policies in 2022—notably including broad sanctions against Russia and semiconductor export controls regarding China—that will create heightened legal and business risks for companies with international supply and distribution chains. These risks will be particularly acute for companies and investors operating in highly regulated industries, including aerospace, defense, manufacturing, technology, and financial services. We highlight below five key geopolitical and international trade issues to watch in 2023.

1. Trade war becomes tech war.

The U.S. strategic competition with China will continue in 2023 and beyond, with a continued focus on limiting the flow of advanced and emerging technologies. U.S. authorities are expected to build on key China-related measures implemented in 2022, which included sweeping semiconductor export controls, designations of Chinese companies on restricted lists, and FCC equipment bans.

Perhaps counterintuitively, total U.S.-China trade in 2022 reportedly was at or around an all-time high, and the Biden administration has stated that “[w]e do not seek conflict or a new Cold War.” U.S. Secretary of State Antony Blinken’s planned visit to China in 2023, postponed after the U.S. shot down a Chinese high-altitude balloon drifting through U.S. airspace, had been intended to build on dialogue between President Biden and Chinese president Xi Jinping on the sidelines of the G20 summit in Indonesia last November.

Key takeaway: Expect stronger enforcement measures to weigh on China trade for the foreseeable future. Companies should revisit the risk profile of their international supply chains—including whether any of their technology is subject to the new export controls or could be the subject of future controls—and consider enhancements in their supplier diligence and risk management practices.

Read more on our website.

Amplifying Our Clarion Call

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Justin A. Chiarodo, Dominique L. Casimir, and Krystal Studavent Ramsey  ●

Krystal Studavent Ramsey headshot image

We are thrilled to kick off our new Government Contracts Navigator blog series, “Sustained Action: DEI in Government Contracting,” which shines a light on diversity, equity, and inclusion initiatives and progress in the government contracts industry and at Blank Rome. As we wrote back in 2020, working to promote diversity, equity, and inclusion is not a one-time exercise but a practice—one to which we are committed for the long run.

We approach this effort fully embracing that we bring our own backgrounds, journeys, and perspectives to a complicated area, and that fostering an environment of mutual respect and the free exchange of ideas is critical to promoting the understanding of different viewpoints and implementing solutions that make a difference.

“Sustained Action” is our next step in this journey. This post focuses on our recent participation in the American Bar Association Public Contract Law Section’s (“ABA PCL”) 10 Day Tune Up, and other initiatives we are driving at Blank Rome in 2023. The 10 Day Tune Up was a follow-up program to the successful 2020 program that we wrote about previously, the 21-Day Racial Equity Habit-Building Challenge© (“21-Day Challenge”).

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Nevada Publishes 2023 Drug Price Transparency Lists

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Merle M. DeLancey, Jr. ●

On January 31, 2022, the Nevada Department of Health and Human Services (“DHHS”) released its annual drug lists in accordance with its Drug Transparency Reporting Program. DHHS published four drug lists: List #1 Essential Diabetes Drug Summary List; List #2 Essential Diabetes Drug List with WAC; List #3 Essential Diabetes Drug List (with Significant Price Increase); and List #4 Over $40 Drug List (with Significant Price Increase). (Nevada Drug Transparency Drug Lists 2023)

Drug manufacturers with drugs identified on Lists #2, #3, and/or #4 are required to submit reports to the Transparency Program on or before April 1, 2023. The reporting templates and instructions can be found here: Manufacturers. Do not wait until late March to prepare the reports because the information requested is detailed and will likely require input from multiple divisions or functions within a company. Examples of the information required to be reported include: total cost of producing the drug; total administrative expenditures related to the drug; profit manufacturer earned from the drug; percentage of manufacturer’s total profit attributed to drug during marketing period for drug; and, for lists #3 and #4, an explanation for the applicable drug’s price increase.

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Blank Rome’s Government Contracts Group Named Practice Group of the Year by Law360

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We are pleased to announce that our Government Contracts group has been named a Practice Group of the Year by Law360, which honors “the attorney teams behind litigation wins and major deals that resonated throughout the legal industry this past year.”

Learn more on our website.

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