International Compliance
A Local Challenge
Dr. Andreas Löhdefink
Stockholm, 29 January 2014
Content
Part 1:
The Embargo and Sanctions Framework (Overview)
Definitions
II.
Overview of worldwide embargoes and sanctions
III. Example: The Iran sanction regime of the European Union
IV. Practical consequences
I.
Part 2:
Page
6
8
12
17
Global Health Insurance Policies – International Legal Considerations
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
Commercial background
Typical structure of sales process and policy underwriters
Primary issues
Violation of local law by insurance company
Violation of local law by insured person
Conflicts of law issues
Selected Examples: Turkey
Selected Examples: United Arab Emirates
Selected Examples: USA
Selected Examples: Europe
Approach legal review
19
20
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23
24
25
26
27
29
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Back-up: The Iran Sanction Regime of the European Union
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International Compliance – A Local Challenge
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Part 1
The Embargo and Sanctions
Framework (Overview)
How are you dealing with these guys?
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From the press
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I. Definitions (1/2)
Economic sanctions
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restrict freedom in foreign trade by prohibiting the trade of certain goods and the
provisions of certain services
are ordered for foreign and security policy reasons against:

legal and natural persons ("personal")

countries ("country-specific")
Prohibition of any trade whatsoever with or for the benefit of the addressee
full embargo
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I. Definitions (2/2)
Three types of economic sanctions
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Financial sanctions – freezing of funds and other assets
Trade sanctions – products

Arms embargoes (e.g. military equipment, nuclear technology)

Other goods embargoes (oil of Iranian or Syrian origin, "blood diamonds")

Dual-use items
Trade sanctions – services

Prohibition of technical and financial aid
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Investments

Prohibition of fulfillment of claims

Transport

Travel restrictions

Insurance (Iran, Syria)
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II. Overview of worldwide embargoes and sanctions (1/4)
United Nations (UN)
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stipulate implementation at national level

economic sanctions focus mostly on weapons of mass destruction and military
equipment

are based on "restricted lists":
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II. Overview of worldwide embargoes and sanctions (2/4)
European Union (EU)

direct implementation by regulations

extensive list of people whose funds must be frozen (as well as travel restrictions for
individuals)

various types of trade sanctions

well-aimed sanctions – no total prohibitions
United States (USA)
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implementation by means of Implementing Regulations, legislation or by the
Office of Foreign Assets Control (OFAC)
prohibition of dealing with an extensive list of natural and legal persons
(Specially Designated Nationals List (SDN))

total prohibition to trade with countries (including brokerage)

trade sanctions including investments, services, financing of imports/exports
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II. Overview of worldwide embargoes and sanctions (3/4)
Potential legal consequences of a violation
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Sanctions of a violation depend on applicable national laws
Wide range of sanctions, including:

penalties and fines

imprisonment
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forfeiture of assets and funds

close-down of business
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II. Overview of worldwide embargoes and sanctions (4/4)
Overview
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III. Example: The Iran sanction regime of the European Union (1/5)
Overview
The Council Regulation (EU) No. 267/2012 concerning restrictive measures against Iran
provides for certain restrictions with respect to economic relationships with Iran:
The Council Regulation
(EU) No. 267/2012
Export and import
restrictions
Restrictions on
financing of certain
enterprises
Freezing of funds and
economic resources
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International Compliance – A Local Challenge
Restrictions on
insurance and
re-insurance
Restrictions on
transport
Restrictions on
transfers of funds and
on financial services
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III. Example: The Iran sanction regime of the European Union (2/5)
Latest Developments
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Suspension of certain sanctions for a period of six months
(until July 20, 2014)
Suspension includes:

Prohibition on the provision of insurance and transport in relation to Iranian crude oil sales
to its current customers

Prohibition on the import, purchase or transport of Iranian petrochemical products and
related services

Prohibition on the provision of vessels to enable the transport of Iranian crude oil and
petrochemical products

Ban on trade in gold and precious metals with the Iranian government, its public bodies
and the Central Bank of Iran

Change of thresholds for authorizing financial transfers to and from Iran (increase by
factor 10)
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III. Example: The Iran sanction regime of the European Union (3/5)
Insurance under Council Regulation (EU) No. 267/2012
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General restrictions on insurance and re-insurance (Art. 35):

Prohibition of insurance or re-insurance, or to broker the provision of insurance or
reinsurance

This does not apply to the provision or brokering based in the EU to individuals acting in
their private capacity except for persons listed in the Annexes
Detailed restrictions on insurance and re-insurance with respect to certain business
areas, transactions and customers:

export credit insurance for sale, supply, transfer or export of goods or technology especially
dual-use items
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insurance for sale, supply, transfer or export of key equipment and technology for the
petrochemical industry (currently suspended) and nuclear developments

insurance for sale, supply, transfer or export of with regard to military goods

others, e.g. insurance for import, purchase or transport of crude oil and petroleum products
of Iranian origin (currently suspended)
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III. Example: The Iran sanction regime of the European Union (4/5)
Restrictions on financing of certain enterprises

Prohibition of the granting of any financial loan or credit, acquisition or extension of a
participation, creation of joint ventures with any Iranian person, entity or body
mentioned in one of the Annexes
Freezing of funds and economic resources

All funds and economic resources belonging to, owned, held or controlled by the
persons, entities and bodies listed in the Annexes of the regulation are frozen
Restrictions on transfers of funds and on financial services
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Procedures for Financial transfers

if above EUR 10,000 or equivalent → notification by the competent authority

if above EUR 400,000 or equivalent → authorization by the competent authority (currently
increased from EUR 40,000)
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III. Example: The Iran sanction regime of the European Union (5/5)
Addressee of this regulation
Iran
Iranians
Iranian entities
as far as listed in any Annex
Iranian bodies
[European] Enterprises who would like to trade in-/directly with the above mentioned
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IV. Practical consequences
Implementation of sanctions compliance program
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Step 1: Due diligence to determine the status quo, and initial risk assessment of
existing business with states/persons affected by sanctions.
Step 2: Incorporation of the ″sanctions″ issue into internal policies such as the Code of
Conduct; where appropriate and relevant, creation of an internal ″foreign trade
legislation″ guidelines also dealing with any other authorizations and certificates
in connection with cross-border transactions.
Step 3: Creation of internal structures for efficient handling of the issue:
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Assessment of risk (due diligence)
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If required implementation of automatic processes
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Process of (pre-)approval by the responsible bodies (sanctions officer, compliance
group)
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Escalation to other practices (management/board)
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Part 2
Global Health Insurance
Policies –
International Legal
Considerations
I. Commercial background
Numerous insurance companies in Europe offer insurance policies that
provide global health insurance coverage
Typical uses for global health insurance policies
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Short-term and long-term travel insurance
Exchange student / au pair / study abroad insurance
Expat insurance
Group insurance for employees sent to locations abroad
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II. Typical structure of sales process and policy underwriters
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Insurance is usually sold to domestic residents prior to their move to a foreign
country, but could also be sold thereafter
Insurance is typically prepaid for a fixed term or debited on a regular basis from a
domestic bank account or otherwise paid by bank transfer to a (domestic) bank
account
Insurance is underwritten by insurer licensed in an EU member state or elsewhere
in the European Economic Area
Underwriting insurer is usually not licensed to conduct insurance business outside
European Economic Area
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Representative offices to facilitate claims process may exist in selected countries,
particularly in the United States
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III. Primary issues
Issues related to insurance company
 Offering worldwide insurance coverage may violate insurance regulatory law of
affected countries
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Various countries impose criminal sanctions for insurance company employees engaging in
unauthorized insurance business
Conflicts of law rules of affected country may provide for jurisdiction in foreign country
and application of substantive foreign law (e.g. contract law or consumer protection
laws)
Issues related to insured person
 The affected country may have mandatory local insurance requirements that the
worldwide insurance policy may not satisfy
 Purchasing insurance from a foreign insurance company may also be a punishable
violation for the customer in the affected country
Taxes and Charges
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IV. Violation of local law by insurance company
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Merely selling a worldwide health insurance policy to a domestic resident who
then moves abroad is usually regarded as permissible by foreign regulators
Typical problems:
Correspondence with customer, collection of premiums, local representatives, etc.
 Amendment of existing policy (minor amendment vs. complete novation, compulsory
amendments)
 New policy with customer already located abroad:

Is sale only restricted to residents in affected country or to anybody? What are the local
requirements regarding residency?
 Does it make a difference if the potential customer proactively contacts the insurance
company?
 What measures need to be taken to ensure that policies are not bought online by residents of
affected country?
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V. Violation of local law by insured person
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Certain countries have mandatory local insurance requirements for residents or
even temporary visitors
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Three models have appeared:
insurance policy must meet certain minimum coverage levels, or
 insurance policy must be recognized by local authorities, or
 insurance policy must be underwritten by locally authorized insurer.
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Violation of insurance requirement may trigger adverse consequences or could be
grounds for removal
Certain countries have made it a (criminal) offence for consumers to buy
insurance from non-locally authorized companies
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VI. Conflicts of law issues
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Conflicts of law issues tend to be less important than regulatory issues:
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German law and German courts provide good and efficient protection for customers
compared to other legal systems
However, there is the danger that
customers could initiate legal action in foreign courts, and
 foreign courts could apply foreign law to insurance policies.
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VII. Selected Examples: Turkey
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Turkish insurance law requires that insurable interests of residents must be insured
by insurance company operating in Turkey
Non-residents can buy foreign insurance which is governed by foreign law
Consequences:
Persons who conduct insurance business in Turkey without license can be sentenced
with up to five years of imprisonment
 Residents who purchase insurance coverage from a foreign insurance company can be
punished with a judicial fine (no defined amount)
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“Resident” is not defined under Turkish law and authorities have so far not
expressed any opinion on the definition of the term (breach of OECD Code?)
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VIII. Selected Examples: United Arab Emirates (UAE)
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Correspondence with customers via a UAE address may amount to conducting
foreign insurance business; German address should be maintained
Prohibition on correspondence and transactions with medical service providers:
only UAE-licensed insurance companies and UAE-licensed medical insurance claims
management companies are permitted to directly correspond or transact with local
medical service providers
 UAE medical insurance claims management companies may not act for non-UAE
licensed insurance companies
 as a result, foreign insurer cannot directly interact with or pay UAE hospitals and
physicians
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IX. Selected Examples: USA (1/2)
New Regulatory Framework under Patient Protection and Affordable Care Act
("Obamacare")
 From January 1, 2014 on, US citizens and foreign citizens in the US who are
considered resident aliens for tax purposes must generally have health insurance
coverage, otherwise tax authorities can collect penalty payment
 Insurance policies must satisfy Minimum Essential Coverage requirement
 Under new rules in effect since August 26, 2013, foreign insurance only qualifies as
"Minimum Essential Coverage" if insurance policy is specifically recognized by U.S.
Department of Health and Human Services ("HHS").
 However, according to guidance published by HHS on October 31, 2013, foreign
regulated group insurance plans are generally deamed to satisfy the Minimum
Essential Coverage requirement.
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IX. Selected Examples: USA (2/2)
For individual health insurance policies the following requirements must be met:
 Plans must meet "Substantially All" requirements that are set forth in guidance, but
many of these requirements are not and cannot reasonably be satisfied by insurer
that is not operating under US regulatory regime
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Prohibition on pre-existing condition exclusions
Prohibition on, and limits regarding, risk adjusted premiums
Full mental health and drug abuse treatment must be provided
Many accounting requirements or issues of plan administration are specifically tailored to
US insurance plans
Discussions with HHS indicated that many issues with regard to foreign insurance
products had not even been considered by US regulators
Still unclear how flexible HHS will apply the "Substantially All"-Test to foreign
insurance products and which documentation it will require. Direct negotiations will
be necessary with HHS in interim period until a clear policy has developed
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X. Selected Examples: Europe

Problem: Conversion of group insurance policy into individual policy after move
Insurance licence granted by home regulator applies in the entire European Economic
Area (EEA) (single-licence-principle), but insurance company must report to regulator if it
intends to provide services in other EEA
 Insurance policy concluded in one EEA state continues to apply if policy holder moves to
another EEA state
 Person covered under group health insurance policy has a right to have policy converted
into individual policy if policy is terminated by policy holder
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What if insured person demands policy conversion into individual policy after
moving to another country? Will insurance company be conducting services in
another EEA country? Will foreign law apply to insurance policy under Rome I
Regulation (conflict of law)? Arguments:
Just a conversion; policy will continue with old terms, no new conclusion of a contract
 Insurance company does not intend to provide services in another EEA state, but is
forced to do so
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XI. Approach of legal review
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Risk based approach vs. full compliance review
Minimizing legal risks by conducting review in key jurisdictions and adapting sales,
handling of customer relations and claims process.
Selection of key jurisdictions ("heat map"):
where are significant numbers of insured persons?
 which jurisdictions are of a particular importance from a business, company or group
perspective?
 which jurisdictions are likely to have specific regulations?
 which jurisdictions might be particularly eager in taking enforcement actions?
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Development of question catalogue
Local surveys, if necessary with assistance of local counsel, in key jurisdictions
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Back-up
The Iran Sanction Regime of the European Union
Export and import restrictions regarding
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goods or technology especially dual-use items
goods and technologies associated with nuclear developments
goods and technologies included in the Common Military List of the EU
key equipment or technologies especially for the following key sectors:

exploration/production of crude oil and natural gas

refining
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liquefaction of natural gas
key equipment and technology for the petrochemical industry
crude oil or petroleum products located or originated in Iran
newly printed or unissued Iranian denominated banknotes and minted coinage
regulation of required authorizations by the individual member states
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Curriculum Vitae
Andreas Löhdefink
Andreas Löhdefink
Frankfurt
T +49.69.9711.1622
F +49.69. 9711.1100
andreas.loehdefink@shearman.com
Education
University of Freiburg
University of Geneva
University of Düsseldorf, Dr. iur.
Bar Admission
Germany
England and Wales
Languages
German, English, French
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Practice

Andreas Löhdefink is a partner in the Mergers & Acquisitions Group in the Frankfurt office of Shearman &
Sterling. He advises domestic and international clients on M&A, private equity, public takeovers, corporate
law, in particular the law of stock corporations and reorganization law, including spin-offs and conversions of
companies, insurance and reinsurance (including supervisory law), capital markets and financial supervisory
law matters. He also represents clients in corporate, M&A-related and commercial matters before arbitration
tribunals and German courts.

Mr. Löhdefink was admitted as a lawyer in Germany in 2003 and in 2010 as a solicitor of the Senior Courts of
England and Wales. In 2005, he received the title Ph.D. (Dr. iur.) from the University of Düsseldorf. He
joined Shearman & Sterling in 2010. Prior to joining Shearman & Sterling, Mr. Löhdefink practised corporate
law and M&A in the Düsseldorf, Frankfurt and London offices of a leading German law firm. He was named
as one of the leading lawyers in Germany (for Insurance & Reinsurance and nomination for M&A) by Who's
Who Legal.
Recent Experience

Nokia on its acquisition of Siemens' 50% stake in their joint venture, Nokia Siemens Networks

ERGO and DKV Deutsche Krankenversicherung on German, European and international insurance
regulatory and contract law issues

International Chemical Investor Group on the acquisition of Clariants international detergents & Intermediates
business, the acquisition of the fine chemicals intermediates and specialty chemicals manufacturer Allessa
GmbH, the acquisition of pharmaceutical ingredients activities of Tessenderlo, the acquisition of a
pharmaceutical plant from Roche, the acquisition of the pharmaceutical intermediates business from
Genzyme Corporation, the sale of a production facility for viscose filament yarn to India and in connection
with a cross-border plant construction project

Allianz on the envisaged acquisition of a risk carrier and service companies in the health insurance sector

Munich Re on insurance supervisory and insolvency law issues
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Andreas Löhdefink
Recent Experience (continued)

BE Aerospace on the acquisition of Interturbine

Sany Heavy Industry on the acquisition of Putzmeister

Qatar Holding LLC on on its investments in Volkswagen AG, Porsche Automobil Holding SE and Hochtief AG

Warburg Pincus on the acquisition of a minority stake in United Internet AG

General Electric on an M&A project

Silverfleet and Orizon on the corporate restructuring of the Orizon / jobs in time group

Barclays Capital in connection with its fairness opinion in the public takeover of EnBW

Barclays Capital as investment bank in connection with a contemplated public takeover

Conergy on corporate law and corporate governance issues

Sasol on German corporate law and financing issues in connection with a joint venture

Arnhold and S. Bleichroeder and First Eagle Investment Management on securities trading law and discloure
issues

Swiss Life on the public takeover of AWD

Talanx on the acquisition of minority stakes in, and a strategic partnership with, Swiss Life, and acquisition of a
minority stake in MLP

Talanx and Gerling on the sale of its Lloyd’s activities

Swiss Life on the acquisition of a qualified minority stake in MLP

Swiss Life on the structuring of its German business with respect to corporate and supervisory law

Talanx on the acquisition of the primary insurance activities of Gerling

Protektor on the acquisition of the life insurance business of Mannheimer and the establishment of the German
life insurance rescue fund
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Andreas Löhdefink
Recent Experience (continued)

Inmet Mining Corporation on an unsolicited offer to purchase all of the outstanding common shares of
Petaquilla Minerals Ltd.

Silverfleet and Orizon on corporate law issues

Grass Valley on its German operations

Biocartis NV regarding the worldwide sale and distribution of Molecular Diagnostics Platforms

Deutsche Telekom on its merger with T-Online

Implementation of leveraged employee stock programs, featuring third-party financing and employee
investment guarantees

International employee stock and option plans

Top five private equity firm on the attempted acquisition of a German blue chip

British private equity firm on the public takeover of a German provider of precision optics and optomechanics

Various private equity firms and sovereign wealth funds on the (envisaged or completed) acquisition of
stakes in, or public takeover of, publicly listed German corporates, and the financing of such acquisitions.
Clients include Warburg Pincus, Advent, Allianz Capital Partners, Apollo, Bain Capital, Candover, EQT,
Goldman Sachs, KKR, Qatar Investment Authority/Qatar Holding LLC

German-based international software company on the public takeover of another German-based software
company

Leading global supplier of technology and services on the public takeover of a solar energy company

German-based leading international market research group on an attempted "merger of equals" with a UK
based international market research group

Car component supplier on a debt and equity restructuring
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Andreas Löhdefink
Recent Experience (continued)
 Large German publicly listed utility company in the context of the establishment of a utility investment fund
by a German bank and on the sale of participations in utilities to the fund
 German publicly owned bank on the establishment of a “Bad Bank”
 International investment bank on a cash-settled total return swap for a qualified minority stake in a
German DAX-30 company in connection with a public takeover
 Administrator of German entity of an insolvent international banking group with regard to financial
reporting and disclosure obligations and the delisting of securities in various European jurisdictions
 International banking group on the acquisition of a German depositary bank
 Large German publicly listed utility company in connection with litigation regarding a minority participation
in a local utility supplier
Professional Affiliations
 Gesellschaftsrechtliche Vereinigung (VGR)
 Deutsch-Amerikanische Juristen-Vereinigung e.V. (DAJV)
 Deutsch-Britische Juristenvereinigung e.V.
 American Chamber of Commerce in Germany e.V.
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