On September 12, 2018, President Trump issued a new Executive Order, “Imposing Certain Sanctions in the Event of Foreign Interference in a United States Election” (the “Order”). The Order authorizes the designation as Specially Designated Nationals (“SDNs”) of parties that engage in foreign interference in US elections. While the Order provides the authorization and criteria for such designations, it does not designate any additional parties as SDNs at this time. The Order also requires additional review of the nature and extent of any foreign interference in each US federal election, including the upcoming midterm Congressional elections. Although it is not targeting any particular country or government, the Order comes as the US Congress debates additional sanctions on Russia’s largest banks and energy companies and the purchase of Russian sovereign debt in response to alleged Russian interference in the 2016 US elections.
New Designation Authorization
The most significant provision of the Order authorizes the designation as SDNs of any persons found to have engaged in, sponsored, concealed, or otherwise been complicit in foreign interference in a United States federal election. Parties that support such activities or SDNs designated under this Order, as well as parties owned or controlled by or acting on behalf of such SDNs, can also be designated under the Order. US Persons (i.e., entities organized under US laws and their non-US branches; individuals and entities physically located in the United States; and US citizens and permanent resident aliens, wherever located or employed) would be prohibited from engaging in virtually any transactions with SDNs designated under this Order.
“Foreign interference” is defined to include any covert, fraudulent, deceptive, or unlawful actions or attempted actions of a foreign government, or of any person acting as an agent of or on behalf of a foreign government, undertaken with the purpose or effect of influencing, undermining confidence in, or altering the result or reported result of, the election, or undermining public confidence in election processes or institutions. No parties were designated in the Order, and it is unclear if or when such designations might occur.
New Post-Election Review Process
The Order also creates a new process for reviewing US federal elections to identify and potentially respond to instances of foreign interference. The process begins with an assessment by the Director of National Intelligence (“DNI”) of whether any foreign government acted with the intent or purpose of interfering in that election and the nature of such interference. This assessment must be completed within 45 days of each US federal election. After receiving this assessment, the Attorney General and Secretary of Homeland Security are required to deliver a report regarding any foreign interference to the President and other senior officials. This report must be issued within 45 days of receiving the DNI’s assessment.
Upon receiving the assessment and report (i.e., up to 90 days after each US federal election), the Secretary of the Treasury may designate parties as SDNs pursuant to the Order’s new designation authorizations as described above. In addition, the Secretaries of State and the Treasury are required to prepare recommendations for the President in response to any foreign interference. These recommendations should include proposed sanctions against the largest business entities in a country found to have interfered in a US election, including at least one entity from the financial services, defense, energy, technology, and transportation sectors in that country. The Order contemplates a menu of potential sanctions that the President could, but is not required to, then impose against those entities.
Finally, although the Order only applies directly to US federal elections (i.e., those for federal office), it does provide that information indicating foreign interference in a state, tribal, or local election may be included in the required reports or reported through independent reports. The Order, however, does not specifically provide for sanctions in response to such interference. Such interference could presumably be the focus of a separate executive order or other actions if found.
For additional information, please contact the authors, Bart M. McMillan, Joseph A. Schoorl, Lloyd Grove, or any member of the US Outbound trade practice with whom you normally work
