Presentation is loading. Please wait.

Presentation is loading. Please wait.

International Compliance A Local Challenge Dr. Andreas Löhdefink Stockholm, 29 January 2014.

Similar presentations


Presentation on theme: "International Compliance A Local Challenge Dr. Andreas Löhdefink Stockholm, 29 January 2014."— Presentation transcript:

1 International Compliance A Local Challenge Dr. Andreas Löhdefink Stockholm, 29 January 2014

2 Content Part 1:The Embargo and Sanctions Framework (Overview) I. Definitions6 II. Overview of worldwide embargoes and sanctions8 III. Example: The Iran sanction regime of the European Union12 IV. Practical consequences17 Part 2:Global Health Insurance Policies – International Legal Considerations I. Commercial background19 II. Typical structure of sales process and policy underwriters20 III. Primary issues21 IV. Violation of local law by insurance company22 V. Violation of local law by insured person23 VI. Conflicts of law issues24 VII. Selected Examples: Turkey25 VIII. Selected Examples: United Arab Emirates26 IX. Selected Examples: USA27 X. Selected Examples: Europe29 XI. Approach legal review30 Back-up: The Iran Sanction Regime of the European Union 2 29/1/2014International Compliance – A Local Challenge Page

3 Part 1 The Embargo and Sanctions Framework (Overview)

4 How are you dealing with these guys? International Compliance – A Local Challenge 4 29/1/2014

5 From the press International Compliance – A Local Challenge 5 29/1/2014

6 I. Definitions (1/2)  Economic sanctions  restrict freedom in foreign trade by prohibiting the trade of certain goods and the provisions of certain services  are ordered for foreign and security policy reasons against:  legal and natural persons ("personal")  countries ("country-specific")  Prohibition of any trade whatsoever with or for the benefit of the addressee full embargo International Compliance – A Local Challenge 6 29/1/2014

7 I. Definitions (2/2) Three types of economic sanctions  Financial sanctions – freezing of funds and other assets  Trade sanctions – products  Arms embargoes (e.g. military equipment, nuclear technology)  Other goods embargoes (oil of Iranian or Syrian origin, "blood diamonds")  Dual-use items  Trade sanctions – services  Prohibition of technical and financial aid  Investments  Prohibition of fulfillment of claims  Transport  Travel restrictions  Insurance ( Iran, Syria ) International Compliance – A Local Challenge 7 29/1/2014

8 II. Overview of worldwide embargoes and sanctions (1/4) United Nations (UN)  stipulate implementation at national level  economic sanctions focus mostly on weapons of mass destruction and military equipment  are based on "restricted lists": International Compliance – A Local Challenge 8 29/1/2014

9 II. Overview of worldwide embargoes and sanctions (2/4) European Union (EU)  direct implementation by regulations  extensive list of people whose funds must be frozen (as well as travel restrictions for individuals)  various types of trade sanctions  well-aimed sanctions – no total prohibitions United States (USA)  implementation by means of Implementing Regulations, legislation or by the Office of Foreign Assets Control (OFAC)  prohibition of dealing with an extensive list of natural and legal persons (Specially Designated Nationals List (SDN))  total prohibition to trade with countries (including brokerage)  trade sanctions including investments, services, financing of imports/exports International Compliance – A Local Challenge 9 29/1/2014

10 International Compliance – A Local Challenge 10 II. Overview of worldwide embargoes and sanctions (3/4) Potential legal consequences of a violation  Sanctions of a violation depend on applicable national laws  Wide range of sanctions, including:  penalties and fines  imprisonment  forfeiture of assets and funds  close-down of business

11 II. Overview of worldwide embargoes and sanctions (4/4) Overview International Compliance – A Local Challenge 11 29/1/2014

12 III. Example: The Iran sanction regime of the European Union (1/5) Overview The Council Regulation (EU) No. 267/2012 concerning restrictive measures against Iran provides for certain restrictions with respect to economic relationships with Iran: Export and import restrictions Restrictions on financing of certain enterprises Restrictions on insurance and re-insurance The Council Regulation (EU) No. 267/2012 Restrictions on transport Freezing of funds and economic resources Restrictions on transfers of funds and on financial services International Compliance – A Local Challenge 12 29/1/2014

13 III. Example: The Iran sanction regime of the European Union (2/5) Latest Developments  Suspension of certain sanctions for a period of six months (until July 20, 2014)  Suspension includes:  Prohibition on the provision of insurance and transport in relation to Iranian crude oil sales to its current customers  Prohibition on the import, purchase or transport of Iranian petrochemical products and related services  Prohibition on the provision of vessels to enable the transport of Iranian crude oil and petrochemical products  Ban on trade in gold and precious metals with the Iranian government, its public bodies and the Central Bank of Iran  Change of thresholds for authorizing financial transfers to and from Iran (increase by factor 10) 29/1/2014International Compliance – A Local Challenge 13

14 III. Example: The Iran sanction regime of the European Union (3/5) Insurance under Council Regulation (EU) No. 267/2012  General restrictions on insurance and re-insurance (Art. 35):  Prohibition of insurance or re-insurance, or to broker the provision of insurance or reinsurance  This does not apply to the provision or brokering based in the EU to individuals acting in their private capacity except for persons listed in the Annexes  Detailed restrictions on insurance and re-insurance with respect to certain business areas, transactions and customers:  export credit insurance for sale, supply, transfer or export of goods or technology especially dual-use items  insurance for sale, supply, transfer or export of key equipment and technology for the petrochemical industry ( currently suspended ) and nuclear developments  insurance for sale, supply, transfer or export of with regard to military goods  others, e.g. insurance for import, purchase or transport of crude oil and petroleum products of Iranian origin ( currently suspended ) International Compliance – A Local Challenge 14 29/1/2014

15 III. Example: The Iran sanction regime of the European Union (4/5) Restrictions on financing of certain enterprises  Prohibition of the granting of any financial loan or credit, acquisition or extension of a participation, creation of joint ventures with any Iranian person, entity or body mentioned in one of the Annexes Freezing of funds and economic resources  All funds and economic resources belonging to, owned, held or controlled by the persons, entities and bodies listed in the Annexes of the regulation are frozen Restrictions on transfers of funds and on financial services  Procedures for Financial transfers  if above EUR 10,000 or equivalent → notification by the competent authority  if above EUR 400,000 or equivalent → authorization by the competent authority (currently increased from EUR 40,000) International Compliance – A Local Challenge 15 29/1/2014

16 III. Example: The Iran sanction regime of the European Union (5/5) Addressee of this regulation Iran Iranians Iranian entities as far as listed in any Annex Iranian bodies [European] Enterprises who would like to trade in-/directly with the above mentioned International Compliance – A Local Challenge 16 29/1/2014

17 IV. Practical consequences Implementation of sanctions compliance program  Step 1: Due diligence to determine the status quo, and initial risk assessment of existing business with states/persons affected by sanctions.  Step 2: Incorporation of the ″sanctions″ issue into internal policies such as the Code of Conduct; where appropriate and relevant, creation of an internal ″foreign trade legislation″ guidelines also dealing with any other authorizations and certificates in connection with cross-border transactions.  Step 3: Creation of internal structures for efficient handling of the issue:  Assessment of risk (due diligence)  If required implementation of automatic processes  Process of (pre-)approval by the responsible bodies (sanctions officer, compliance group)  Escalation to other practices (management/board) International Compliance – A Local Challenge 17 29/1/2014

18 Part 2 Global Health Insurance Policies – International Legal Considerations

19 I. Commercial background Numerous insurance companies in Europe offer insurance policies that provide global health insurance coverage Typical uses for global health insurance policies  Short-term and long-term travel insurance  Exchange student / au pair / study abroad insurance  Expat insurance  Group insurance for employees sent to locations abroad 19 International Compliance – A Local Challenge 29/1/2014

20 II. Typical structure of sales process and policy underwriters  Insurance is usually sold to domestic residents prior to their move to a foreign country, but could also be sold thereafter  Insurance is typically prepaid for a fixed term or debited on a regular basis from a domestic bank account or otherwise paid by bank transfer to a (domestic) bank account  Insurance is underwritten by insurer licensed in an EU member state or elsewhere in the European Economic Area  Underwriting insurer is usually not licensed to conduct insurance business outside European Economic Area  Representative offices to facilitate claims process may exist in selected countries, particularly in the United States 20 International Compliance – A Local Challenge 29/1/2014

21 III. Primary issues Issues related to insurance company  Offering worldwide insurance coverage may violate insurance regulatory law of affected countries  Various countries impose criminal sanctions for insurance company employees engaging in unauthorized insurance business  Conflicts of law rules of affected country may provide for jurisdiction in foreign country and application of substantive foreign law ( e.g. contract law or consumer protection laws) Issues related to insured person  The affected country may have mandatory local insurance requirements that the worldwide insurance policy may not satisfy  Purchasing insurance from a foreign insurance company may also be a punishable violation for the customer in the affected country Taxes and Charges 21 International Compliance – A Local Challenge 29/1/2014

22 IV. Violation of local law by insurance company  Merely selling a worldwide health insurance policy to a domestic resident who then moves abroad is usually regarded as permissible by foreign regulators  Typical problems:  Correspondence with customer, collection of premiums, local representatives, etc.  Amendment of existing policy (minor amendment vs. complete novation, compulsory amendments)  New policy with customer already located abroad:  Is sale only restricted to residents in affected country or to anybody? What are the local requirements regarding residency?  Does it make a difference if the potential customer proactively contacts the insurance company?  What measures need to be taken to ensure that policies are not bought online by residents of affected country? 22 International Compliance – A Local Challenge 29/1/2014

23 V. Violation of local law by insured person  Certain countries have mandatory local insurance requirements for residents or even temporary visitors  Three models have appeared:  insurance policy must meet certain minimum coverage levels, or  insurance policy must be recognized by local authorities, or  insurance policy must be underwritten by locally authorized insurer.  Violation of insurance requirement may trigger adverse consequences or could be grounds for removal  Certain countries have made it a (criminal) offence for consumers to buy insurance from non-locally authorized companies 23 International Compliance – A Local Challenge 29/1/2014

24 VI. Conflicts of law issues  Conflicts of law issues tend to be less important than regulatory issues:  German law and German courts provide good and efficient protection for customers compared to other legal systems  However, there is the danger that  customers could initiate legal action in foreign courts, and  foreign courts could apply foreign law to insurance policies. 24 International Compliance – A Local Challenge 29/1/2014

25 VII. Selected Examples: Turkey  Turkish insurance law requires that insurable interests of residents must be insured by insurance company operating in Turkey  Non-residents can buy foreign insurance which is governed by foreign law  Consequences:  Persons who conduct insurance business in Turkey without license can be sentenced with up to five years of imprisonment  Residents who purchase insurance coverage from a foreign insurance company can be punished with a judicial fine (no defined amount)  “Resident” is not defined under Turkish law and authorities have so far not expressed any opinion on the definition of the term (breach of OECD Code?) 25 International Compliance – A Local Challenge 29/1/2014

26 VIII. Selected Examples: United Arab Emirates (UAE)  Correspondence with customers via a UAE address may amount to conducting foreign insurance business; German address should be maintained  Prohibition on correspondence and transactions with medical service providers:  only UAE-licensed insurance companies and UAE-licensed medical insurance claims management companies are permitted to directly correspond or transact with local medical service providers  UAE medical insurance claims management companies may not act for non-UAE licensed insurance companies  as a result, foreign insurer cannot directly interact with or pay UAE hospitals and physicians 26 International Compliance – A Local Challenge 29/1/2014

27 IX. Selected Examples: USA (1/2) New Regulatory Framework under Patient Protection and Affordable Care Act ( "Obamacare" )  From January 1, 2014 on, US citizens and foreign citizens in the US who are considered resident aliens for tax purposes must generally have health insurance coverage, otherwise tax authorities can collect penalty payment  Insurance policies must satisfy Minimum Essential Coverage requirement  Under new rules in effect since August 26, 2013, foreign insurance only qualifies as "Minimum Essential Coverage" if insurance policy is specifically recognized by U.S. Department of Health and Human Services ("HHS").  However, according to guidance published by HHS on October 31, 2013, foreign regulated group insurance plans are generally deamed to satisfy the Minimum Essential Coverage requirement. 27 International Compliance – A Local Challenge 29/1/2014

28 IX. Selected Examples: USA (2/2) For individual health insurance policies the following requirements must be met:  Plans must meet "Substantially All" requirements that are set forth in guidance, but many of these requirements are not and cannot reasonably be satisfied by insurer that is not operating under US regulatory regime  Prohibition on pre-existing condition exclusions  Prohibition on, and limits regarding, risk adjusted premiums  Full mental health and drug abuse treatment must be provided  Many accounting requirements or issues of plan administration are specifically tailored to US insurance plans  Discussions with HHS indicated that many issues with regard to foreign insurance products had not even been considered by US regulators  Still unclear how flexible HHS will apply the "Substantially All"-Test to foreign insurance products and which documentation it will require. Direct negotiations will be necessary with HHS in interim period until a clear policy has developed 28 International Compliance – A Local Challenge 29/1/2014

29 X. Selected Examples: Europe  Problem: Conversion of group insurance policy into individual policy after move  Insurance licence granted by home regulator applies in the entire European Economic Area (EEA) (single-licence-principle), but insurance company must report to regulator if it intends to provide services in other EEA  Insurance policy concluded in one EEA state continues to apply if policy holder moves to another EEA state  Person covered under group health insurance policy has a right to have policy converted into individual policy if policy is terminated by policy holder  What if insured person demands policy conversion into individual policy after moving to another country? Will insurance company be conducting services in another EEA country? Will foreign law apply to insurance policy under Rome I Regulation (conflict of law)? Arguments:  Just a conversion; policy will continue with old terms, no new conclusion of a contract  Insurance company does not intend to provide services in another EEA state, but is forced to do so 29 International Compliance – A Local Challenge 29/1/2014

30 XI. Approach of legal review  Risk based approach vs. full compliance review  Minimizing legal risks by conducting review in key jurisdictions and adapting sales, handling of customer relations and claims process.  Selection of key jurisdictions ("heat map"):  where are significant numbers of insured persons?  which jurisdictions are of a particular importance from a business, company or group perspective?  which jurisdictions are likely to have specific regulations?  which jurisdictions might be particularly eager in taking enforcement actions?  Development of question catalogue  Local surveys, if necessary with assistance of local counsel, in key jurisdictions 30 International Compliance – A Local Challenge 29/1/2014

31 Back-up

32 The Iran Sanction Regime of the European Union Export and import restrictions regarding  goods or technology especially dual-use items  goods and technologies associated with nuclear developments  goods and technologies included in the Common Military List of the EU  key equipment or technologies especially for the following key sectors:  exploration/production of crude oil and natural gas  refining  liquefaction of natural gas  key equipment and technology for the petrochemical industry  crude oil or petroleum products located or originated in Iran  newly printed or unissued Iranian denominated banknotes and minted coinage  regulation of required authorizations by the individual member states International Compliance – A Local Challenge 32 29/1/2014

33 Curriculum Vitae

34 Andreas Löhdefink Practice  Andreas Löhdefink is a partner in the Mergers & Acquisitions Group in the Frankfurt office of Shearman & Sterling. He advises domestic and international clients on M&A, private equity, public takeovers, corporate law, in particular the law of stock corporations and reorganization law, including spin-offs and conversions of companies, insurance and reinsurance (including supervisory law), capital markets and financial supervisory law matters. He also represents clients in corporate, M&A-related and commercial matters before arbitration tribunals and German courts.  Mr. Löhdefink was admitted as a lawyer in Germany in 2003 and in 2010 as a solicitor of the Senior Courts of England and Wales. In 2005, he received the title Ph.D. (Dr. iur.) from the University of Düsseldorf. He joined Shearman & Sterling in Prior to joining Shearman & Sterling, Mr. Löhdefink practised corporate law and M&A in the Düsseldorf, Frankfurt and London offices of a leading German law firm. He was named as one of the leading lawyers in Germany (for Insurance & Reinsurance and nomination for M&A) by Who's Who Legal. Recent Experience  Nokia on its acquisition of Siemens' 50% stake in their joint venture, Nokia Siemens Networks  ERGO and DKV Deutsche Krankenversicherung on German, European and international insurance regulatory and contract law issues  International Chemical Investor Group on the acquisition of Clariants international detergents & Intermediates business, the acquisition of the fine chemicals intermediates and specialty chemicals manufacturer Allessa GmbH, the acquisition of pharmaceutical ingredients activities of Tessenderlo, the acquisition of a pharmaceutical plant from Roche, the acquisition of the pharmaceutical intermediates business from Genzyme Corporation, the sale of a production facility for viscose filament yarn to India and in connection with a cross-border plant construction project  Allianz on the envisaged acquisition of a risk carrier and service companies in the health insurance sector  Munich Re on insurance supervisory and insolvency law issues Andreas Löhdefink Frankfurt T F Education University of Freiburg University of Geneva University of Düsseldorf, Dr. iur. Bar Admission Germany England and Wales Languages German, English, French International Compliance – A Local Challenge 34 29/1/2014

35 Andreas Löhdefink Recent Experience (continued)  BE Aerospace on the acquisition of Interturbine  Sany Heavy Industry on the acquisition of Putzmeister  Qatar Holding LLC on on its investments in Volkswagen AG, Porsche Automobil Holding SE and Hochtief AG  Warburg Pincus on the acquisition of a minority stake in United Internet AG  General Electric on an M&A project  Silverfleet and Orizon on the corporate restructuring of the Orizon / jobs in time group  Barclays Capital in connection with its fairness opinion in the public takeover of EnBW  Barclays Capital as investment bank in connection with a contemplated public takeover  Conergy on corporate law and corporate governance issues  Sasol on German corporate law and financing issues in connection with a joint venture  Arnhold and S. Bleichroeder and First Eagle Investment Management on securities trading law and discloure issues  Swiss Life on the public takeover of AWD  Talanx on the acquisition of minority stakes in, and a strategic partnership with, Swiss Life, and acquisition of a minority stake in MLP  Talanx and Gerling on the sale of its Lloyd’s activities  Swiss Life on the acquisition of a qualified minority stake in MLP  Swiss Life on the structuring of its German business with respect to corporate and supervisory law  Talanx on the acquisition of the primary insurance activities of Gerling  Protektor on the acquisition of the life insurance business of Mannheimer and the establishment of the German life insurance rescue fund International Compliance – A Local Challenge 35 29/1/2014

36 Andreas Löhdefink Recent Experience (continued)  Inmet Mining Corporation on an unsolicited offer to purchase all of the outstanding common shares of Petaquilla Minerals Ltd.  Silverfleet and Orizon on corporate law issues  Grass Valley on its German operations  Biocartis NV regarding the worldwide sale and distribution of Molecular Diagnostics Platforms  Deutsche Telekom on its merger with T-Online  Implementation of leveraged employee stock programs, featuring third-party financing and employee investment guarantees  International employee stock and option plans  Top five private equity firm on the attempted acquisition of a German blue chip  British private equity firm on the public takeover of a German provider of precision optics and optomechanics  Various private equity firms and sovereign wealth funds on the (envisaged or completed) acquisition of stakes in, or public takeover of, publicly listed German corporates, and the financing of such acquisitions. Clients include Warburg Pincus, Advent, Allianz Capital Partners, Apollo, Bain Capital, Candover, EQT, Goldman Sachs, KKR, Qatar Investment Authority/Qatar Holding LLC  German-based international software company on the public takeover of another German-based software company  Leading global supplier of technology and services on the public takeover of a solar energy company  German-based leading international market research group on an attempted "merger of equals" with a UK based international market research group  Car component supplier on a debt and equity restructuring International Compliance – A Local Challenge 36 29/1/2014

37 Andreas Löhdefink Recent Experience (continued)  Large German publicly listed utility company in the context of the establishment of a utility investment fund by a German bank and on the sale of participations in utilities to the fund  German publicly owned bank on the establishment of a “Bad Bank”  International investment bank on a cash-settled total return swap for a qualified minority stake in a German DAX-30 company in connection with a public takeover  Administrator of German entity of an insolvent international banking group with regard to financial reporting and disclosure obligations and the delisting of securities in various European jurisdictions  International banking group on the acquisition of a German depositary bank  Large German publicly listed utility company in connection with litigation regarding a minority participation in a local utility supplier Professional Affiliations  Gesellschaftsrechtliche Vereinigung (VGR)  Deutsch-Amerikanische Juristen-Vereinigung e.V. (DAJV)  Deutsch-Britische Juristenvereinigung e.V.  American Chamber of Commerce in Germany e.V. International Compliance – A Local Challenge 37 29/1/2014


Download ppt "International Compliance A Local Challenge Dr. Andreas Löhdefink Stockholm, 29 January 2014."

Similar presentations


Ads by Google