Syria Sanctions Relief Poses Compliance, Contract Clause Challenges, Advisers Say
Despite the Trump administration easing certain sanctions against Syria, companies should still be carrying out careful due diligence and should be aware of other legal risks they could face before doing any business in the country, industry advisers said this week.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
“This is a very temporary measure,” David Tannenbaum, director of Blackstone Compliance Services, said during a June 16 webinar hosted by Holland & Knight. “We're very much still in this wait-and-see period.”
The Treasury Department in May lifted certain financial sanctions against the country (see 2505230073), and a Bureau of Industry and Security official said the agency is drafting a rule that could remove certain Syria-related export controls (see 2506100052). But law firms have warned that exporters and other companies are still subject to strict export license requirements for many items subject to the Export Administration Regulations, except for food and medicine classified as EAR99 (see 2505280012).
Tannenbaum said some companies are conflicted about whether to do business in Syria. “Some of my clients are going back, some aren't,” he said. Even though certain transactions with Syria are authorized under a Treasury general license, Tannenbaum noted that there are many other parties active in Syria that are still subject to sanctions, including Russian entities moving stolen Ukrainian grain into the country and terrorist groups such as Hezbollah.
If a U.S. company, for example, inadvertently participates in a Syria-related transaction involving a foreign terrorist organization, Tannenbaum said, the American company can be sued by victims of terrorism under the Anti-Terrorism Act for “materially supporting” the organization.
“That's one of those conflicts of law questions that is left unresolved here,” he said. “If we are lifting one aspect of sanctions, are we going to get bogged down in other legal issues if we deal with Syria?”
He also said “one of the big questions” is whether companies may start to face challenges invoking a contract’s sanctions clause to avoid a Syria-related transaction. Those clauses typically allow companies to back out of a transaction if there is a sanction nexus, but they may not necessarily apply if Treasury’s Syria-related general license covers the deal.
“Is it going to be harder to use one of those sanctions clauses to get out of a transaction that a company is simply just uncomfortable with, but it cannot identify a specific sanctions nexus regarding it?” Tannenbaum said.
Manny Levitt, an international trade lawyer with Holland & Knight, also noted that the U.S. has “framed” its lifting of Syria sanctions as a “tentative initial measure.” Although there’s no expiration date, “it can be stepped back if the situation changes on the ground.”
Andrew McAllister, also a Holland & Knight trade lawyer, compared the situation with the one with Cuba. The Obama and Biden administrations lifted certain sanctions against Cuba, but Trump has reinstated them, including earlier this year when the administration added the country back to the State Department's state sponsors of terrorism list (see 2501220008).
“These things can be quite fluid, and at a moment's notice things get dialed back,” McAllister said. “So that makes it very hard for businesses looking for some level of certainty.”
Tannenbaum noted that the reason Treasury issued a general license instead of revoking its Syria sanctions program is so the agency can “have a very quick snap back” if the “situation devolves.” He also said companies aren’t guaranteed a wind-down period.
“There are all of these other sanctions risks out there -- whether it's the presence of other foreign terrorist organizations, whether it's Iran-related sanctions risk, whether it's human rights related, or whether it's simply just because of Syria’s close relationship with Russia -- that people have to be concerned about,” he said. “That highlights the importance of good due diligence before engaging in any one of these transactions.”