The Second Circuit’s recent decision in United States v. Hoskins may impact enforcement of U.S. economic sanctions programs. The Hoskins decision precludes the government from charging a foreign national acting abroad with violating the Foreign Corrupt Practices Act (“FCPA”) through theories of conspiracy and accomplice liability. This holding is equally applicable to U.S. sanctions law.
Three Factors in Hoskins Analysis
We provided an in-depth summary of the Second Circuit’s opinion and its effect on the FCPA here. In sum, the Department of Justice attempted to use the conspiracy and accomplice statutes to argue that Lawrence Hoskins, a U.K. national acting outside the United States, violated U.S. law. The Second Circuit held that the “government may not expand the extraterritorial reach of the FCPA by recourse to the conspiracy and complicity statutes.” The Second Circuit explained its decision by relying on three main factors:
(i) the presumption against extraterritorial application of U.S. statutes—and the need for Congress to clearly express its intent to override the presumption;
(ii) the plain language of the FCPA limiting potential defendants to defined categories; and
(iii) the legislative history of the FCPA, which demonstrated clearly Congress’ intent to limit the statute’s extraterritorial reach.
Application of Factors to U.S. Sanctions
Sanctions statutes, such as the International Emergency Economic Powers Act (“IEEPA”), and their respective implementing regulations fail the first Hoskins factor when the government seeks to apply them extraterritorially against a foreign defendant who does not act in the United States. Legislation must evidence with clarity Congress’ intent to overcome the presumption against extraterritorial application to foreign defendants. Neither the various sanctions statutes nor their implementing regulations reflect such an intent.
To the contrary, the second Hoskins factor demonstrates that, like the FCPA, sanctions are crafted with “surgical precision.” Congress empowers the executive branch to enact implementing regulations targeted to specific conduct. These regulations define categories of potential defendants. Just as the FCPA set out “every other possible combination of nationality, location, and agency relation,” so too do the sanctions regimes. Take, for example, Iranian sanctions. Implementing regulations found in the Iranian Transactions and Sanctions Regulations (“ITSR”) define a “U.S. person” as precisely as the FCPA defines its defendants:
any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.
This definition evidences a clear intent to exclude foreigners acting abroad from the reach of this regime.
The third factor examined by the Second Circuit is Congress’ intent to limit extraterritorial jurisdiction. This intent is best demonstrated by the legislative history of IEEPA, which was enacted as part of an effort to limit an overly broad prior statute, the Trading With the Enemy Act of 1917, and the executive branch’s extensive use of that statute. As a result, the powers that IEEPA “grant[s] to the President are explicitly defined and circumscribed.” United States v. Arch Trading Co. Precisely because the primary sanctions implemented under IEEPA apply only to U.S. citizens globally and foreign persons within the United States, the President separately implemented certain secondary sanctions to target specific foreign persons for foreign conduct, but only under limited circumstances. See, e.g., Iran Freedom and Counter-Proliferation Act of 2012 and Iran Threat Reduction and Syria Human Rights Act of 2012. Both Congress and the President have demonstrated that when they want U.S. sanctions to apply to foreign persons, they know how to do so explicitly.
Furthermore, Hoskins’ concerns for fair notice and due process apply equally to U.S. sanctions as to the FCPA. A foreign national should not be exposed to the complex and “shapeless” theories of conspiracy and complicity liability in the United States in relation to sanctions any more than in relation to the FCPA.
Approach Each Sanctions Regime with Care
The applicability of Hoskins to sanctions depends, in part, on the particular sanctions regime. The nuances among Iranian, North Korean, Venezuelan, and the numerous other sanctions regimes must be approached with care. When determining the particular effect of U.S. sanctions, it is important to seek guidance from experienced counsel who can advise regarding the reach of the sanctions regimes and, if necessary, defend against any potential enforcement action.