Wednesday, August 01, 2007

House Passes HR 957

On July 31, 2007, the House passed HR 957 by a vote of 415-11. The bill adds to the list of those that can be sanctioned for making investments that increase Iran's ability to develop it petroleum resources. The Ways and Means and Financial Services Committees spent a lot of time on this bill and below is a useful summary of changes prepared by Financial Services.


(1) Section 2 would only apply prospectively (so that contracts that were entered into legally would not be made illegal) but would also apply to companies that have already acquired companies that do business with Iran if that company expands its contracts, a new contract is entered into, or a contract is automatically rolled over which otherwise could have been cancelled. (See “Exception,” beginning on page 3, Line 15).

(2) Under section 2, which keys off of two executive orders and the International Emergency Economic Powers Act, W&M wanted to make sure that the waiver authority in the two executive orders and the IEEPA were preserved with regard to this section. What we learned is that there are no waivers under the E.O’s in question. Rather, the President reserves the right to issue licenses through the Treasury Department to allow the transaction in question. That is the form the waiver takes; so if an entity acquires a company and wishes to continue doing business with Iran, it would apply for a licenses, Treasury would issue it, and then the business could continue without any penalties against the company. That is, in effect, a waiver of penalties against the company.

So the construction clause on Page 4, Line 5 preserves this right of the President to issues licenses with regard to a particular companies activities, which is tantamount to a waiver because in such cases, no civil penalties would apply.,

(3) Under definitions on page 4, the definition of “parent company” was (1) an entity is a “parent company” of another entity if it owns, directly or indirectly, more than 50 percent of the equity interest in that other entity and is a United States person.”

We pointed out that depending on the type of shares held, an entity could hold less than 50% of the shares of a particular entity and still be “controlling” the entity, depending on how the other shares are listed and what voting rights are attached. The inverse is also true (i.e., one could hold more than 50% of the equity shares and not be “controlling.” So a change was made: see page 4, lines 15-17.

(4) Under section 1 of the bill as reported, the definition of “petroleum resources” was expanded to “petroleum by-products” and “liquefied natural gas.”
Petroleum by-products seemed unnecessarily broad, so we asked for it to be changed to “petroleum refining capacity.” See page 2, line 18.

(5) Under section 1 of the bill, “export credit agencies” is specifically added under the list of entities under which sanctions may be imposed under Iran Sanction Act. Chairman Frank’s concern was that a sanction against a foreign credit agency could be construed to attach to the entire government of a specific credit export agency and not just to the export credit agency itself. Ms. Ros-Lehtinen strongly opposed making this clarification/ distinction in the text of the bill (and the bill’s report was already written), but she, at the last minute, did finally agree to the construction language in page 2, Line 20, which provides some clarification.

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