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Speaker 1: This is Bloomberg Law with June Bresso from Bloomberg Radio.

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Speaker 1: In a case that threatens to undercut President Joe Biden's

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Speaker 1: climate agenda, the Supreme Court considered the reach of the

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Speaker 1: Environmental Protection Agency's power to reduce greenhouse gas emissions, but

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Speaker 1: there was less talk about climate change than about the

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Speaker 1: contours of the so called Major Questions doctrine, a doctrine

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Speaker 1: the Court relied on to block Ocean's vaccine or test

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Speaker 1: mandate and the c d c S eviction moratorium. Jones

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Speaker 1: Is Elena Kagan gave an example which Justice any Coney

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Speaker 1: Barrett then picked up on. The agency has stepped far

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Speaker 1: outside of what we think of as its appropriate lane. Uh,

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Speaker 1: you know the FDA regulating tobacco. That sort of thing,

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Speaker 1: just like something that's like what the FDA regulates tobacco.

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Speaker 1: You know, the FDA staying in its lane. What the

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Speaker 1: FDA can regulate tobacco. Or if you think about the

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Speaker 1: eviction moratorium case from earlier, this term, you know, it

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Speaker 1: was what the CDC can regulate the landlord tenant relationship.

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Speaker 1: Here for thinking about ep A regulating greenhouse gases, Well,

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Speaker 1: there's a match between the regulation and the agency's wheelhouse. Right,

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Speaker 1: How confusing was it all? Justice Stephen Bryer, known for

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Speaker 1: his crazy hypotheticals, jumped into help Justice Samuel Alito with

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Speaker 1: one of his hypotheticals for Attorney Beth Brinkman, something just

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Speaker 1: as Kagan joked about, maybe it's sound a good hypothetical.

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Speaker 1: I think he's saying, your mind. Yeah, in tobacco, I

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Speaker 1: suppose they started off and saying, we are regulating the

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Speaker 1: advertising of four foot cigars smoked through hocus. Okay, now

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Speaker 1: the problem is can you regulate tobacco? And if you

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Speaker 1: can regulate tobacco, that's a very big deal. But they say, no,

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Speaker 1: it isn't. It's just this I n you know, there

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Speaker 1: aren't There are only three in the whole country. So

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Speaker 1: it's a little deal. So it isn't the major question.

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Speaker 1: Doctory you know that helped me, your honor and justice leader.

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Speaker 1: I really don't mean to be not answering your question.

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Speaker 1: Well I won't, I won't belabor it, and I can

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Speaker 1: never equal my my colleagues evocative hypotheticals. You know, it's

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Speaker 1: not always the case, mis Brinkman, that a lawyer responds

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Speaker 1: to one of Justice Prior's hypotheticals by saying, that's really

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Speaker 1: helpful laughter from those who know Justice Briar's hypothetical as well.

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Speaker 1: Joining me is Pat Parento, a professor of environmental law

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Speaker 1: at Vermont Law School. Pat, what's at stake in this

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Speaker 1: case When you're talking about the electricity sector that represents

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Speaker 1: about a third of our total greenhouse gas emissions, So

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Speaker 1: it's incredibly important to regulate that sector and get those

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Speaker 1: emissions down. And within that sector, you know, the single

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Speaker 1: most important category, of course, is coal fired power plants.

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Speaker 1: So this case West Virginia versus e p A, no

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Speaker 1: surprise West Virginia being a huge coal state still even

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Speaker 1: though coal is dying there, it's all about whether e

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Speaker 1: p A has authority to impose the kinds of controls well,

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Speaker 1: a system of controls that will significantly bring those plants

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Speaker 1: into compliance with the Clean Air Act and with President

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Speaker 1: Biden's avowed pledge to make the electricity sector carbon free.

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Speaker 1: So there's a lot writing on this and beyond the

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Speaker 1: greenhouse gas and the climate change implications of the case.

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Speaker 1: Depending on what the court does, it may sweep even

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Speaker 1: more broadly. It may affect all of environmental law. So

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Speaker 1: Republican led states, and as you mentioned, coal companies are

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Speaker 1: trying to head off an e p A rule that

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Speaker 1: isn't even on the books yet. That's right. Originally, the

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Speaker 1: Obama administration proposed something called the Clean Power Plant and

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Speaker 1: it had three different components. It was gonna make plants

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Speaker 1: more efficient, it was going to require more reliance on

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Speaker 1: natural gas plants, and it was going to require bringing

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Speaker 1: on green energy, wind and solar more quickly. That plan

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Speaker 1: never took effect. The Supreme Court put a stay on

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Speaker 1: it before any court had even ruled on whether it

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Speaker 1: was legal or not, and it never went into effect.

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Speaker 1: And then subsequently, of course, the Trump administration proposed something

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Speaker 1: called the Affordable Clean Energy Rule, which it wasn't but

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Speaker 1: that rule would have only achieved maybe maybe one reduction

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Speaker 1: in these emissions, so it was a meaningless rule. The

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Speaker 1: DC Circuit Court vacated the Trump rule and sort of reinstated,

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Speaker 1: or at least gave e p A the option of

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Speaker 1: reinstating the Clean Power Plan. Ep A quickly said, we

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Speaker 1: have no intention of reinstating the Clean Power Plan. We're

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Speaker 1: certainly not going to keep the Affordable Clean Energy Rule

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Speaker 1: on the books. We're going to start a new rulemaking,

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Speaker 1: and that's where they are today. They promised the Court

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Speaker 1: e p. A did that a new rule is forthcoming, right,

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Speaker 1: you know, it's in the mail sort of government promise.

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Speaker 1: But no, they did say they anticipate promulgating a new

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Speaker 1: rule before the end of the year. So you're right.

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Speaker 1: At the current time, there is no rule on the books.

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Speaker 1: Nobody is required to do anything, which of course raises

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Speaker 1: the question why in the world the Court take the case.

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Speaker 1: My question, there's no case or controversy is there not

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Speaker 1: to my way of thinking. But the majority of the

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Speaker 1: Court disagrees. They're clinging to the idea that because e p.

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Speaker 1: A didn't officially repeal the Clean Power Plan, it could

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Speaker 1: spring back to life. That was a term that was

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Speaker 1: used at some point. So that's the slender thread that

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Speaker 1: the Supreme Court is using to say this case is

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Speaker 1: still alive controversy. It really isn't. That's a fiction, but

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Speaker 1: they're sticking to it. The majority, the conservative majority of

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Speaker 1: the Court is saying, we think we still have jurisdiction

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Speaker 1: and we're going to issue a ruling. Now, the question

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Speaker 1: is what that ruling going to be. So the Bond

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Speaker 1: Administration backing the e p A, and they have backing

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Speaker 1: from environmental groups and power companies like Consolidated Edison, Exelon,

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Speaker 1: and National Grid USA. Why is the power sector nervous

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Speaker 1: about this? Yeah, because the power sector likes the idea

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Speaker 1: of having flexible options to achieve the reductions, including things

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Speaker 1: like emissions trading. Of course, the power industry has been

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Speaker 1: the subject of emissions trading ever since the acid rain

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Speaker 1: control program from so the industry groups are savvy. They

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Speaker 1: understand that with that kind of a program they can

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Speaker 1: figure out how to achieve emission reductions at the lowest costs.

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Speaker 1: And they're afraid that the Supreme Court may go so

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Speaker 1: far as to prohibit e p A from using emissions

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Speaker 1: trading and averaging because West Virginia's argument is all that

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Speaker 1: e p A can do is imposed controls at individual sources,

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Speaker 1: one plant at a time, which is terribly inefficient and ineffective.

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Speaker 1: It's not going to achieve the kind of reductions that

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Speaker 1: are needed. But that's the whole point, right, I Mean,

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Speaker 1: what West Virginia wants is a rule that's so weak

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Speaker 1: it won't do anything. But the power company parties that

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Speaker 1: joined with e p A are saying, we don't agree

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Speaker 1: with that. We would much rather have E p A

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Speaker 1: give us options, including, by the way, bringing on more

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Speaker 1: wind and solar when that makes sense. So don't take

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Speaker 1: things off the table, you know, don't necessarily force us

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Speaker 1: to go green right away, but give us some options.

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Speaker 1: That's what the companies want. The arguments were really long.

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Speaker 1: Was there one issue that the justices were kicking around most? Yes,

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Speaker 1: that's the major question doctrine. You know, the court has

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Speaker 1: already used that twice this year. They struck down a

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Speaker 1: rule putting a moratorium on evictions because of the CODE epidemic,

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Speaker 1: and they said that the agency didn't have the authority

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Speaker 1: because that was something the agency had never done before.

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Speaker 1: And in another case, OSHA, the agency that regulates occupational

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Speaker 1: exposure and health and safety concerns, also imposed a rule

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Speaker 1: and the court struck that down, saying OSHA, you're not

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Speaker 1: the health agency. You can't be writing a rule that

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Speaker 1: regulates people's exposure to COVID in the workplaces. You can regulate,

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Speaker 1: you know, the strength of ladders that people climb in

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Speaker 1: performance of their duties, but you can't regulate the fact

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Speaker 1: that they might be exposed to a deadly disease. You know.

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Speaker 1: So the Court has already shown that it wants to

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Speaker 1: wield this major question doctrine in a way that strikes

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Speaker 1: down agency rules at the court. The conservative members of

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Speaker 1: the Court believe are going too far, having major impacts

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Speaker 1: on the nation's economy and so forth. But it's a

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Speaker 1: rule they made up, you know, it doesn't come from

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Speaker 1: the Constitution, and it's fairly recent. It's just within this

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Speaker 1: era of the people that have joined the courts, Justice Roberts,

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Speaker 1: Justice course, it's Justice Kavanaugh, now Justice Barrett, and formerly

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Speaker 1: Justice A. Leado and Justice Thomas. They're all of the

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Speaker 1: same mind about limiting agency authority. The so called administrative state.

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Speaker 1: Is that what this is about. That's what this is about.

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Speaker 1: I mean, the Court would never use that term, but

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Speaker 1: that's what it's about. It's a suspicion that agencies who

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Speaker 1: are quote unelectric bureaucrats, you know, taking irrigating a lot

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Speaker 1: of power, and they don't like that. The conservatives believe,

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Speaker 1: I think that those are things that Congress should be doing.

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Speaker 1: And I suppose in a perfect world that's right. But

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Speaker 1: what happens when Congress isn't doing that, which is exactly

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Speaker 1: where we are today. So the major question doctrine is

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Speaker 1: supposed to kick the issues back to Congress and forced

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Speaker 1: Congress to be more explicit about the authority that they're granting. Well,

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Speaker 1: that sounds good, but we know that in environmental law

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Speaker 1: we have not seen updates. Who are major environmental laws

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Speaker 1: like the Clean Air Act, like the Clean Water Act,

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Speaker 1: like the Endangered Species Act. We haven't seen updates in decades,

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Speaker 1: and there's no likelihood that we will. So this notion

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Speaker 1: of quote kicking it back to Congress is illusory. What

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Speaker 1: it really means is there won't be any rule and

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Speaker 1: there won't be any protection. Did you see enough votes

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Speaker 1: there to head off the e p A rule? No? No.

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Speaker 1: I was hopeful that all of the members of the Court,

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Speaker 1: when they really focused on what they were being asked

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Speaker 1: to do in light of the fact there is no

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Speaker 1: rule to review, might reconsider having taken the case. But

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Speaker 1: there was no indication they were going to do that.

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Speaker 1: So I'm convinced they are going to write a decision.

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Speaker 1: The real question is what are they going to tell

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Speaker 1: the e p A. I mean, the Court is not

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Speaker 1: a rule making body. I mean the conservatives would be

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Speaker 1: the first to say that's a violation of separation of powers.

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Speaker 1: That's outside our lane. We're not supposed to write rules,

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Speaker 1: we're supposed to review rules. So that's my question is

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Speaker 1: what is factuty? Are they gonna say? Are they going

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Speaker 1: to tell the EPA you can do these things but

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Speaker 1: not those things? And on what basis would they do that.

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Speaker 1: They can't say e p A has no power to

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Speaker 1: do anything because of Massachusetts versus e p A. They've

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Speaker 1: already decided e p A has the authority, and they

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Speaker 1: actually said e p A has the duty to regulate

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Speaker 1: once e p A has found that these emissions pose

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Speaker 1: a danger the public health and welfare, which e p

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Speaker 1: A has. The Supreme Court had a chance to review

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Speaker 1: the endangerment finding some time ago and decided not to

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Speaker 1: do that. And then yet in another case, the A

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Speaker 1: e p versus Connecticut case, the Supreme Court specifically cited

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Speaker 1: the provision that's that issue in the West Virginia case

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Speaker 1: as the source of e p AS authority to regulate

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Speaker 1: emissions from power plants. So I think the Court is

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Speaker 1: sort of in a box. They've issued opinions saying e

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Speaker 1: p A has a duty to regulate these emissions and

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Speaker 1: a specific provision from which to do that. And so

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Speaker 1: now what are they going to say about it? They're

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Speaker 1: going to say, well, now we're gonna put some significant boundaries.

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Speaker 1: There was an argument from West Virginia and from the

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Speaker 1: coal industry parties that the rule should be you can't

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Speaker 1: regulate beyond the fence line. And a lot of my colleagues,

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Speaker 1: a lot of lawyers out there, thought that might be

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Speaker 1: the rationale that the court might grab and use. But

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Speaker 1: there was a lot of skepticism towards that, even from

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Speaker 1: Justice Thomas right off the bat, saying that rule doesn't

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Speaker 1: make any sense to me. So I don't think they're

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Speaker 1: going to be able to use something simplistic like you

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Speaker 1: can't regulate beyond the fence line. But again, what exactly

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Speaker 1: are they going to say, and we won't know until

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Speaker 1: June explain that you can't regulate beyond the fence line?

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Speaker 1: What that means on the ground, Yeah, what that would

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Speaker 1: mean is you go to each individual plant and you

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Speaker 1: try to determine what control you know, the the typical

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Speaker 1: Clean Air Act controls are things like scrubbers, right, That's

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Speaker 1: that's how we scrub out pollutants like mercury and other

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Speaker 1: air pollutants, or baghouse filters, you know, another end of

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Speaker 1: stack kind of control for greenhouse gases. That doesn't work.

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Speaker 1: Baghouses don't work. Scrubbers don't worry. That doesn't work. So

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Speaker 1: the only thing you can do with carbon emissions is

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Speaker 1: either capture them right and to question them. You know,

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Speaker 1: that's carbon capture and sequestration that's incredibly expensive. I mean,

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Speaker 1: that's the irony actually of West Virginia's argument. If you

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Speaker 1: take it to its logical extreme, it would mean every

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Speaker 1: single coal fired power plant out there would have to

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Speaker 1: install incredibly expensive carbon capture and sequestration systems, not just

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Speaker 1: one technology and the entire system, and that probably alone

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Speaker 1: would put those plants out of business. So, you know,

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Speaker 1: that kind of an argument of looking at the individual

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Speaker 1: source and looking for sort of conventional technologies just really

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Speaker 1: doesn't work for carbon um What the Trump administration said

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Speaker 1: you could do is improve the heat rate efficiency of

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Speaker 1: the individual plants. In fact, that's what Trump said is

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Speaker 1: all you can do. But the problem with that is

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Speaker 1: if you make plants run more efficiently, guess what, they're

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Speaker 1: going to run more. They're going to run longer and

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Speaker 1: that's going to put more emissions into the air long term.

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Speaker 1: So that's a nonsensical frankly, a strategy by itself. It

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Speaker 1: might make sense in combination, right with some other strategies

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Speaker 1: to actually reduce emissions, but by itself just improving the

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Speaker 1: efficiency these plants is not going to move the needle

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Speaker 1: on carbon pollution. A lot of people were looking at

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Speaker 1: the three newest justices to see, you know what they said.

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Speaker 1: But Justice Neil i And only asked one question, and

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Speaker 1: Justices Brett Kavanaugh and Amy Coney Barrett didn't ask that

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Speaker 1: many questions in this long argument. But did Barrett seem

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Speaker 1: to be considering sort of a middle ground position? I think.

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Speaker 1: I think if there's any hope here to retain some

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Speaker 1: authority for e p A to write a meaningful rule,

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Speaker 1: it lies with Chief Justice Roberts, and there's a good

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Speaker 1: likelihood actually that he may write the opinion in this case,

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Speaker 1: and with Justice Barrett, because yes, she was cautious, and

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Speaker 1: she didn't tip her hand at all about which way

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Speaker 1: she was leaning, and she asked the kinds of questions

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Speaker 1: of the petitioners, questions that would suggest she wasn't buying

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Speaker 1: everything they were saying even Justice Kavanaugh, who when he

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Speaker 1: was on the d C circuit, he heard arguments challenging

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Speaker 1: the Clean Power Plan, and he made it pretty clear

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Speaker 1: he had very little used for the Clean Power Plan

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Speaker 1: and was prepared to use this major question doctrine to

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Speaker 1: strike it down. But when he was asking questions, particularly

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Speaker 1: of the lawyers arguing for the industry position, he was

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Speaker 1: acknowledging that emissions trading and you know, some of these

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Speaker 1: more flexible approaches did make sense. And in some of

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Speaker 1: his earlier opinions, you know, he's shown a keen interest

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Speaker 1: in looking at the costs and benefits of various ways

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Speaker 1: of regulating. So I think he's going to hesitate to

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Speaker 1: join in an opinion that would take away that kind

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Speaker 1: of authority for epated shape a more flexible rules. So

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Speaker 1: there's enough, I think play among the justices here that

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Speaker 1: maybe the e p A could come out of this

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Speaker 1: case not with everything they would like to have, but

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Speaker 1: with at least enough to write a decent rule. That's

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Speaker 1: what we're hoping. Those of us who want to see

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Speaker 1: us make some progress towards controlling carbon pollution are hoping

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Speaker 1: the Court will pause before it writes something that just

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Speaker 1: strips p A of any meaningful authority to do that.

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Speaker 1: Did it seem as if it was particularly just as

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Speaker 1: Aldo was against the e p A. Here, Yes, Justice

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Speaker 1: Aldo has been you know, he was the same way

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Speaker 1: with the Maui and Clean Water Act case. He descended

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Speaker 1: a long, long distent. His descent was longer than the

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Speaker 1: majority opinion that Justice Brier wrote, you know, um saying

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Speaker 1: that yes, under certain circumstances, dp A can regulate discharges

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Speaker 1: through groundwater that affect lakes and rivers and so forth.

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Speaker 1: Alito said, no, they don't. They don't have that authority period.

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Speaker 1: So so Alito's questions were as typically, um, you know,

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Speaker 1: a little bit over the top because of what Alado

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Speaker 1: was saying. You know, if we if we grant e

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Speaker 1: p A this broader authority that e p A wants,

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Speaker 1: where does it lead? I mean, does it lead to

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Speaker 1: e p A regulating everybody's house and telling everybody what

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Speaker 1: kind of energy they could use? And that's ridiculous, right,

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Speaker 1: But that is the way that Alito thinks about agency authority.

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Speaker 1: He worries about the abuse of authority. That's where he

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Speaker 1: always goes with his question. He sort of takes the

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Speaker 1: extreme example of what a kind of renegade agency would do.

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Speaker 1: You know, if we're not really careful in controlling their authority,

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Speaker 1: they're likely to go overboard. That's where he was coming from.

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Speaker 1: And the liberal justices were supportive of the e P

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Speaker 1: a sort of, but I think they knew that, they

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Speaker 1: knew what the writing on the wall was. They didn't

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Speaker 1: fight on what we call the justiciability question there. There's

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Speaker 1: all kinds of reasons why the court shouldn't take this case,

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Speaker 1: for example standing. You know, how many times do environmental

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Speaker 1: groups groups get thrown out of court because they can't

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Speaker 1: adequately prove standing. They can't prove how they're hurt by

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Speaker 1: what the agency is doing or not doing. There's no

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Speaker 1: hurt here at all. Okay, so nobody's being required to

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Speaker 1: do anything, right, So you would have thought the liberal

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Speaker 1: members of the court would have been hammering on the

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Speaker 1: standing question. Nothing almost nothing on that. In fact, Corsage

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Speaker 1: was the only one to raise the standing question and

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Speaker 1: he didn't press it at all, Like he said, one

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Speaker 1: question and he was done. So no, you know, Justice

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Speaker 1: Brier actually surprising, well maybe not surprisingly. He's an administrative

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Speaker 1: law professor, so he he was quibbling over why e

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Speaker 1: p A hadn't actually repealed the clean Power Plan. They

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Speaker 1: you know, the e p A probably in hindsight, should

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Speaker 1: have done that right uh, and taking it off the

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Speaker 1: board completely. But because by leaving it sort of out there,

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Speaker 1: even though there they have no intention of proceeding with it,

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Speaker 1: it gave it gave the majority of the court, the

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Speaker 1: conservatives on the court a handle on the case. And

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Speaker 1: Briar was was was quizzing the Solicitor General on why

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Speaker 1: didn't e p A just take that rule off the books?

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Speaker 1: That was about all you got from the liberal a side.

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Speaker 1: Talk about the possibilities of a ruling here. You could

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Speaker 1: have them dismiss the case. You could have them issue

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Speaker 1: a narrow ruling a broad ruling. What are the possibilities

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Speaker 1: they won't dismiss the case. That's pretty clear now. It

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Speaker 1: does come down to a narrow or broad ruling, and

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Speaker 1: it does come down to will they call out some

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Speaker 1: things that would be permissible. For example, could they say,

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Speaker 1: you know, e e p A can consider a regulation

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Speaker 1: that extends beyond the fence line, but not one that

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Speaker 1: tries to restructure the country's energy system, you know, not

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Speaker 1: one that that requires use of renewable energy, not one

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Speaker 1: that tries to regulate the way the grid system of

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Speaker 1: the country works and dispatch you know, gas power or

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Speaker 1: clean power something like that. Those were things that the

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Speaker 1: Clean Power Plan included as options. They weren't necessarily man

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Speaker 1: the eights, but they were options. And it may be

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Speaker 1: that the opinion in this case kind of goes through

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Speaker 1: what the Clean Power Plan was considering and knocks individual

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Speaker 1: pieces of it out and then leaves it to e

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Speaker 1: p A to decide what can it do once the

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Speaker 1: court has said what it can't do. I still have

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Speaker 1: trouble imagining how an opinion like that reads and how

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Speaker 1: you would write it. But that's maybe what we'll see

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Speaker 1: is is kind of an opinion that limits e p

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Speaker 1: as authority at the boundary, at the sort of the

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Speaker 1: outer edge of its its potential authority, but leaves enough

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Speaker 1: that e p A can figure out a rule that

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Speaker 1: will make do some good. Thanks for those insights, Pat.

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Speaker 1: That's Professor Pat Parento of the Vermont Law School. Our

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Speaker 1: interests are maintained the strongest unified economic impact campaign that

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Speaker 1: on food and in all history, and I think we're

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Speaker 1: well on the way to doing that. President Joe Biden

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Speaker 1: says they is determined to continue its economic assault on

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Speaker 1: Russian President Vladimir Putin over his war in Ukraine. The

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Speaker 1: latest round targets Russia's wealthy as oligarchs and their families

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Speaker 1: with direct sanctions, adding to the ever growing list of

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Speaker 1: sanctions against Russia, all in the hope that financial pain

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Speaker 1: will force Putin to end his war. The rush of

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Speaker 1: sanctions means that lawyer's phones are ringing off the hook

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Speaker 1: with calls from clients struggling to figure out how to

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Speaker 1: deal with them. Joining me as someone who's been taking

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Speaker 1: those calls, Chase Knicki, a partner, Cleary Gottlieb start by

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Speaker 1: telling us how significant the sanctions are in size and scope.

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Speaker 1: So the sanctions that we've seen to date are somewhat

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Speaker 1: unprecedented from a sanctions perspective, in the sense of, you know,

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Speaker 1: a country with such economic ties, with countries like the

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Speaker 1: United States, in the UK and the European Union being

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Speaker 1: subject to the level in this amount of sanctions, largely

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Speaker 1: targeting in many ways the Russian financial sector, including major

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Speaker 1: Russian financial and institutions, as well as most recently the

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Speaker 1: Central Bank of Russia and those sanctions, from what we're

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Speaker 1: hearing from clients and otherwise hearing in the market, are

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Speaker 1: having the intended effect of really isolating Russia from an

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Speaker 1: economic perspective. Chase, would you say this situation is different

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Speaker 1: in that usually you have a slower ramp up of

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Speaker 1: sanctions over time, but here you have several stages in

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Speaker 1: a compressed period of time, and more escalations are possible. Exactly,

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Speaker 1: That's right, and it used to be the case. You know,

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Speaker 1: look at the programs that apply to countries like Iran

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Speaker 1: and even North Korea and Cuba. Those countries are just

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Speaker 1: completely off limits for US persons. The US government, at

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Speaker 1: least in recent years, hasn't really been taking that kind

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Speaker 1: of broader, comprehensive approach, but instead is imposing at least

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Speaker 1: what I call all sort of smart sanctions, narrowly tailored sanctions.

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Speaker 1: You typically do see those in a more piecemeal way,

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Speaker 1: where you know a sanction will be imposed, the US

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Speaker 1: government will see whether that sanction is having the impact

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Speaker 1: that they wanted to, and then if it's not, an

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Speaker 1: additional sanction might be imposed. But you're absolutely right here.

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Speaker 1: In the last week or so with the Russia stanctions program,

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Speaker 1: it's just been a deluge of individual sanctions but all

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Speaker 1: kind of at the same time, and having to wrap

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Speaker 1: your arms around exactly what all those mean and what's

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Speaker 1: the landscape looked like from various perspectives. It's not just

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Speaker 1: U S sanctions, it's e U S sanctions, its UK sanctions.

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Speaker 1: Countries around the world are imposing sanctions on Russia, and

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Speaker 1: so it really is a multinational effort that you need

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Speaker 1: to be thinking about when you're thinking about multinational companies

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Speaker 1: engaging in transactions with Russia. Have the Treasury and Commerce

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Speaker 1: Departments made it clear what the new restrictions are in

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Speaker 1: many ways, Yet there was a period of chaos, you know,

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Speaker 1: last week when the sanctions started to come out, primarily

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Speaker 1: because they were coming out in a fast and unpredictable way.

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Speaker 1: And I think it wasn't necessarily that the types of

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Speaker 1: sanctions that were being imposed were difficult to understand. It

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Speaker 1: was just the number and the sheer volume of them,

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Speaker 1: and making sure that folks were wrapping their arms around

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Speaker 1: everything that applies. And I think, now, you know, here

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Speaker 1: we are a number of days after the first sanctions

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Speaker 1: came into place, I think we're starting to get a

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Speaker 1: better sense of what the landscape looks like. The landscapes

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Speaker 1: starting to become much clearer with respect to the rules

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Speaker 1: of the road, at least as they are today, And

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Speaker 1: I think as new sanctions continue to be imposed, it's

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Speaker 1: much easier to wrap your arms around how that particular

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Speaker 1: sanctions bolts onto, if you will, the existing sanctions programs

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Speaker 1: and becomes quite frankly, just the piece of the sanctions pie.

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Speaker 1: So clients I think are getting a little bit more

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Speaker 1: comfortable with understanding exactly what the contours of the sanctions are.

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Speaker 1: Of course, all subjects to change if new sanctions are imposed.

430
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Speaker 1: Can you broadly describe the sanctions US companies are dealing with?

431
00:26:04,720 --> 00:26:07,800
Speaker 1: They sort of fall into two primary buckets, if you will,

432
00:26:07,840 --> 00:26:10,119
Speaker 1: And one is there are a number of parties in

433
00:26:10,200 --> 00:26:13,840
Speaker 1: Russia that have been subjects to blocking sanctions, a number

434
00:26:13,880 --> 00:26:17,679
Speaker 1: of Russian financial institutions, a number of Russian individuals. Those

435
00:26:17,840 --> 00:26:21,360
Speaker 1: entities and individuals are off limits for US companies as

436
00:26:21,359 --> 00:26:24,280
Speaker 1: a general matter, and so US companies need to understand

437
00:26:24,280 --> 00:26:27,639
Speaker 1: the extent to which they have relationships or other exposure

438
00:26:27,880 --> 00:26:31,439
Speaker 1: to those entities and individuals in take appropriate action. The

439
00:26:31,560 --> 00:26:35,320
Speaker 1: second bucket are entities that are not subject to these

440
00:26:35,359 --> 00:26:40,840
Speaker 1: so called comprehensive blocking SDN sanctions, but more limited perhaps

441
00:26:41,000 --> 00:26:44,800
Speaker 1: debt and equity related restrictions. And so US companies are

442
00:26:44,840 --> 00:26:48,600
Speaker 1: not prohibited from engaging in transactions with those entities, but

443
00:26:48,720 --> 00:26:51,520
Speaker 1: they are prohibited from engaging in certain types of activities

444
00:26:51,560 --> 00:26:54,119
Speaker 1: with those entities, and making sure that what the U.

445
00:26:54,200 --> 00:26:56,960
Speaker 1: S company is doing doesn't cross over the line of,

446
00:26:57,040 --> 00:26:59,960
Speaker 1: for example, providing new debt or equities to those entities.

447
00:27:00,359 --> 00:27:02,840
Speaker 1: So what are your clients calling you about or what

448
00:27:02,880 --> 00:27:06,120
Speaker 1: are they most confused about? We do get questions all

449
00:27:06,160 --> 00:27:08,600
Speaker 1: over the map. You know, some are easier than others.

450
00:27:08,640 --> 00:27:11,840
Speaker 1: Some require judgment calls because there's just, you know, lack

451
00:27:11,920 --> 00:27:15,400
Speaker 1: of clarity. There's potentially some uncertainty with respect to whether

452
00:27:15,400 --> 00:27:18,840
Speaker 1: a particular activity is covered by sanctions. But we usually

453
00:27:18,840 --> 00:27:21,879
Speaker 1: start with the basics. In the basics are along the

454
00:27:21,920 --> 00:27:26,240
Speaker 1: lines of, well, what jurisdiction does this particular activity or

455
00:27:26,240 --> 00:27:30,919
Speaker 1: this transaction fall under. If it falls under U S jurisdiction,

456
00:27:31,080 --> 00:27:34,480
Speaker 1: for example, it involves a US company, or the transaction

457
00:27:34,560 --> 00:27:37,240
Speaker 1: is going to be processed in US dollars, here's the

458
00:27:37,280 --> 00:27:40,560
Speaker 1: set of rules that apply as of today. If the

459
00:27:40,600 --> 00:27:44,440
Speaker 1: transaction doesn't involve US jurisdiction, but it involves UK jurisdiction

460
00:27:44,560 --> 00:27:48,880
Speaker 1: or EU jurisdiction. It's helping companies understand exactly what set

461
00:27:48,920 --> 00:27:52,280
Speaker 1: of rules apply to them on a case by case basis.

462
00:27:52,440 --> 00:27:54,399
Speaker 1: And then once we kind of have an understanding of

463
00:27:54,400 --> 00:27:58,240
Speaker 1: what those particular rules that apply are, does this transaction

464
00:27:58,359 --> 00:28:00,960
Speaker 1: or some party that's involved in the trans actions trip

465
00:28:01,080 --> 00:28:03,199
Speaker 1: any of these sanctions and if so, what do we

466
00:28:03,280 --> 00:28:05,439
Speaker 1: do about it? Is it a nonstarter? Can we just

467
00:28:05,520 --> 00:28:08,719
Speaker 1: not complete the transaction or their ways the transaction can

468
00:28:08,760 --> 00:28:12,080
Speaker 1: be completed that are undertaken in compliance with, you know,

469
00:28:12,119 --> 00:28:17,040
Speaker 1: the applicable sanctions regime. So a US company that was

470
00:28:17,080 --> 00:28:21,159
Speaker 1: in the process of making an acquisition in Russia or

471
00:28:22,240 --> 00:28:25,840
Speaker 1: a joint venture with a company in Russia, does that

472
00:28:25,920 --> 00:28:30,200
Speaker 1: have to stop or does it depend? It depends if

473
00:28:30,240 --> 00:28:35,200
Speaker 1: if those transactions don't involve any sanctioned parties um or

474
00:28:35,240 --> 00:28:37,960
Speaker 1: if it does involve a stanction party, if the particular

475
00:28:38,040 --> 00:28:40,560
Speaker 1: sanctions that apply to that party are not implicated by

476
00:28:40,560 --> 00:28:45,040
Speaker 1: the transaction, there's no legal prohibition on continuing and pushing

477
00:28:45,080 --> 00:28:48,440
Speaker 1: forward on those types of transactions. But what we've seen

478
00:28:48,520 --> 00:28:51,320
Speaker 1: by and large with our experience with clients that were

479
00:28:51,840 --> 00:28:57,080
Speaker 1: in those situations for you know, perhaps non legal reasons,

480
00:28:57,520 --> 00:29:00,800
Speaker 1: waiting to see how the situation unfold, to make sure

481
00:29:00,840 --> 00:29:04,400
Speaker 1: that no additional sanctions could impact the transaction. We've seen

482
00:29:04,440 --> 00:29:08,960
Speaker 1: a lot of pullback, people pressing pause on those transactions

483
00:29:09,000 --> 00:29:11,000
Speaker 1: to wait to see how things shake out so that

484
00:29:11,040 --> 00:29:14,080
Speaker 1: they can feel comfortable. But if they do proceed forward

485
00:29:14,080 --> 00:29:18,280
Speaker 1: with the transaction that one's allowed under the current rules

486
00:29:18,320 --> 00:29:21,520
Speaker 1: into there won't be some drastic change in the rules

487
00:29:21,760 --> 00:29:23,760
Speaker 1: a week from now, two weeks from now that could

488
00:29:23,760 --> 00:29:29,560
Speaker 1: significantly change the ability to complete that transaction. What government agency,

489
00:29:29,600 --> 00:29:34,760
Speaker 1: if ANNIE is looking at the compliance with sanctions, So

490
00:29:34,880 --> 00:29:37,440
Speaker 1: from a US perspective, it's the U. S. Department of

491
00:29:37,520 --> 00:29:41,240
Speaker 1: the Treasury, Office of Foreign Assets Control. That's the agency

492
00:29:41,360 --> 00:29:45,000
Speaker 1: within the US Treasury Department that's charged with implementing and

493
00:29:45,120 --> 00:29:48,800
Speaker 1: enforcing these sanctions UM. And so that's the entity that

494
00:29:49,240 --> 00:29:52,800
Speaker 1: you would go before. For example, if you believe you

495
00:29:52,840 --> 00:29:57,040
Speaker 1: may have violated sanctions, there's a possibility to disclose those

496
00:29:57,080 --> 00:29:59,400
Speaker 1: sanctions to the U. S. Government and you get credit

497
00:29:59,840 --> 00:30:03,400
Speaker 1: for doing so. Um. Other times, O fact will otherwise

498
00:30:03,440 --> 00:30:07,400
Speaker 1: become aware of potential activities that could potentially result in

499
00:30:07,520 --> 00:30:10,960
Speaker 1: violations of sanctions and reach out to the parties to

500
00:30:11,000 --> 00:30:15,240
Speaker 1: develop additional information. The interesting piece from a US perspective

501
00:30:15,320 --> 00:30:18,320
Speaker 1: is it is it's just not thinking about am I

502
00:30:18,560 --> 00:30:22,720
Speaker 1: violating U S. Sanctions. The US also has so called

503
00:30:22,800 --> 00:30:26,880
Speaker 1: secondary sanctions that it can impose, and these are sanctions

504
00:30:26,920 --> 00:30:29,920
Speaker 1: that provide the US government with the authority to impose

505
00:30:29,960 --> 00:30:35,000
Speaker 1: sanctions on non US parties for engaging in activities wholly

506
00:30:35,000 --> 00:30:39,480
Speaker 1: outside of US jurisdiction if those activities are targeted under

507
00:30:39,480 --> 00:30:43,640
Speaker 1: secondary sanctions, and there are a number of secondary sanctions

508
00:30:43,640 --> 00:30:46,680
Speaker 1: authorities that apply to Russia. And so when we're advising

509
00:30:47,280 --> 00:30:49,959
Speaker 1: non US companies, it's not just a matter of making

510
00:30:50,000 --> 00:30:53,560
Speaker 1: sure that what they're doing is outside US jurisdiction, but

511
00:30:53,640 --> 00:30:56,920
Speaker 1: it's also advising on the extent to which there's secondary

512
00:30:56,960 --> 00:31:00,440
Speaker 1: sanctions risk. For example, if there's a U S sanctioned

513
00:31:00,520 --> 00:31:04,520
Speaker 1: party involved, that creates potential risk of secondary sanctions for

514
00:31:04,680 --> 00:31:07,720
Speaker 1: engaging in transactions with that particular party, even if it's

515
00:31:07,760 --> 00:31:12,000
Speaker 1: undertaken wholly outside of US jurisdiction. If a company or

516
00:31:12,040 --> 00:31:15,880
Speaker 1: a person violates sanctions, does the Justice Department ever go

517
00:31:16,000 --> 00:31:22,800
Speaker 1: after them? Yes, there are potential civil penalties for sanctions violations.

518
00:31:22,840 --> 00:31:26,360
Speaker 1: Typically civil related penalties are handled at the OH fact

519
00:31:26,400 --> 00:31:30,040
Speaker 1: at the Treasury agency level, but there also are potential

520
00:31:30,040 --> 00:31:34,560
Speaker 1: criminal penalties for violations of sanctions for you know, willful conduct.

521
00:31:34,720 --> 00:31:37,960
Speaker 1: In those circumstances, you would see the Department of Justice

522
00:31:38,000 --> 00:31:41,560
Speaker 1: intervene when you're talking about potential criminal penalties. But it

523
00:31:41,600 --> 00:31:44,400
Speaker 1: sounds like what's happening now is a lot of confusion

524
00:31:44,720 --> 00:31:48,480
Speaker 1: rather than willful exactly. And these are you know, unfortunately

525
00:31:48,480 --> 00:31:51,800
Speaker 1: the U S. Sanctions are strict liability laws, and so

526
00:31:51,920 --> 00:31:56,320
Speaker 1: from a civil liability perspective, there's no intent required to

527
00:31:56,400 --> 00:31:59,480
Speaker 1: violate sanctions. If you violate sanctions, you violate sanctions whether

528
00:31:59,520 --> 00:32:02,040
Speaker 1: you intend to who are not. And you know, what

529
00:32:02,120 --> 00:32:05,920
Speaker 1: we see oftentimes from o FAX perspective is that you know,

530
00:32:06,000 --> 00:32:10,240
Speaker 1: they use their enforcement discretion in those cases. So if

531
00:32:10,280 --> 00:32:13,520
Speaker 1: it really is a situation where you know, the party

532
00:32:13,600 --> 00:32:16,880
Speaker 1: was really trying to just understand the sanctions was an

533
00:32:16,920 --> 00:32:20,760
Speaker 1: inadvertent violation, but it's still nonetheless a violation, you may

534
00:32:20,800 --> 00:32:24,880
Speaker 1: not see o FAX pursue a penalty action in that case. Um,

535
00:32:24,880 --> 00:32:27,560
Speaker 1: but may you know, decide to issue what we call

536
00:32:27,960 --> 00:32:31,400
Speaker 1: a warning letter for example, recognizing and acknowledging that a

537
00:32:31,480 --> 00:32:35,360
Speaker 1: violation occurred, but not pursuing any sort of civil enforcement.

538
00:32:36,080 --> 00:32:39,040
Speaker 1: All these questions mean a lot of legal work and

539
00:32:39,120 --> 00:32:43,320
Speaker 1: lawyers like you being inundated with calls. It means that

540
00:32:43,400 --> 00:32:46,920
Speaker 1: my calendar is full of thirty to sixty minute calls,

541
00:32:47,000 --> 00:32:49,240
Speaker 1: back to back to back, starting early in the morning,

542
00:32:49,240 --> 00:32:51,600
Speaker 1: going until late at night. If there are no more

543
00:32:51,640 --> 00:32:56,080
Speaker 1: sanctions imposed, how long do you think before this becomes

544
00:32:56,080 --> 00:32:59,440
Speaker 1: just a simple process for you and people start to

545
00:32:59,520 --> 00:33:02,280
Speaker 1: understand and what's going on? Or is that not going

546
00:33:02,320 --> 00:33:05,920
Speaker 1: to happen for quite some time. Yeah, it's a good question.

547
00:33:06,080 --> 00:33:08,840
Speaker 1: I was actually thinking about that earlier today, and how

548
00:33:08,920 --> 00:33:10,959
Speaker 1: long my life is going to be like this? And

549
00:33:11,000 --> 00:33:13,920
Speaker 1: I think, you know, if no more sanctions are imposed,

550
00:33:13,960 --> 00:33:15,920
Speaker 1: you know, it's tough to you know, definitely say for sure,

551
00:33:15,960 --> 00:33:19,200
Speaker 1: but I would say within a matter of weeks, maybe

552
00:33:19,240 --> 00:33:21,520
Speaker 1: a month, I think folks will you know, I think

553
00:33:21,560 --> 00:33:24,360
Speaker 1: the initial chaos will die down. Folks will have a

554
00:33:24,360 --> 00:33:26,480
Speaker 1: good sense of at least how the sanctions apply to

555
00:33:26,640 --> 00:33:29,000
Speaker 1: them UM and can move forward, and they will have

556
00:33:29,040 --> 00:33:32,720
Speaker 1: done all their contingency planning UM and implemented the various

557
00:33:32,760 --> 00:33:35,160
Speaker 1: measures that they've you know, they thought about implementing the

558
00:33:35,240 --> 00:33:39,200
Speaker 1: mitigate or eliminate their risks. So I don't think three

559
00:33:39,240 --> 00:33:41,080
Speaker 1: months from now, my my schedule is going to be

560
00:33:41,120 --> 00:33:44,520
Speaker 1: as full on Russia's sanctions questions is today. But you know,

561
00:33:44,560 --> 00:33:46,400
Speaker 1: I think there's certainly going to be a number of

562
00:33:46,400 --> 00:33:49,840
Speaker 1: additional weeks from here where companies are still trying to

563
00:33:49,840 --> 00:33:52,000
Speaker 1: wrap their arms around the extent to which these apply

564
00:33:52,160 --> 00:33:55,160
Speaker 1: to them. Well, thanks for taking our call, Chase. That's

565
00:33:55,240 --> 00:33:58,200
Speaker 1: Chase Kinnicky of Cleary Guttlieb, And that's it for this

566
00:33:58,320 --> 00:34:01,080
Speaker 1: edition of The Bloomberg Law Show. Remember you can always

567
00:34:01,080 --> 00:34:04,000
Speaker 1: get the latest legal news on our Bloomberg Law Podcast.

568
00:34:04,280 --> 00:34:07,280
Speaker 1: You can find them on Apple Podcasts, Spotify, and at

569
00:34:07,480 --> 00:34:12,480
Speaker 1: www dot Bloomberg dot com, slash podcast Slash Law, and

570
00:34:12,560 --> 00:34:15,279
Speaker 1: remember to tune into The Bloomberg Law Show every week

571
00:34:15,440 --> 00:34:18,960
Speaker 1: night at ten pm Wall Street Time. I'm June Grosso,

572
00:34:19,120 --> 00:34:20,719
Speaker 1: and you're listening to Bloomberg