New Outbound Investment Guidance Covers Liability for Lawyers
The Treasury Department recently published more guidance on its outbound investment prohibition and notification rules (see 2412160044), including a new FAQ on how certain portions of the rules apply to in-house lawyers.
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The FAQ, released Jan. 17, appears to carve out in-house lawyers and compliance advisers from certain liability under 850.303 -- the provision that blocks a U.S. person from “knowingly directing" an outbound investment by a "non- U.S. person entity" if they know the deal would normally be blocked if it was carried out by a U.S. person. Treasury said that provision, under certain circumstances, doesn’t block U.S. people from giving certain “legal and compliance advice” to a foreign investor, even at the investment decision-making stage.
The agency described an example scenario in which a U.S. person is working as a lawyer for Company C -- which is a “not a U.S. person” -- and the lawyer doesn’t have the authority to make decisions on behalf of Company C. Treasury said the company's management then orders the lawyer to carry out a “legal analysis” and advise the company on the tax implications of a potential investment, and the company then makes the investment. In this scenario, the lawyer didn’t violate the regulations.
“Absent additional facts, the U.S. person attorney has not knowingly directed an otherwise prohibited transaction under section 850.303(a), because the U.S. person attorney did not have the authority to make decisions on behalf of Company C and did not order, direct, decide upon, or approve the transaction,” Treasury said.