In the past month, I have received a number of inquiries regarding the new sanctions regulations and potential legal avenues for challenging such sanctions designations and related freezing orders. Litigating against the government in such matters, however, is an incredibly difficult, next to impossible task, which I have to date declined. Before even attempting to do so, any prospective litigant needs to understand that the chances for victory are slim to none, especially for foreign nationals. Such is my view based on some review of applicable case law cited here.
Indeed, various people have tried in the past to challenge the U.S. Treasury department’s sanctions designations but failed. As the DC Circuit Court explained in Olenga v. Gacki, 507 F.Supp.3d 260 (D. D.C. 2020):
From the earliest days of our nation’s history, its leaders “have viewed economic sanctions as ‘the most likely means of obtaining our objects without war.’ ” Rakhimov v. Gacki , No. 19-cv-2554, 2020 WL 1911561, at *1 (D.D.C. Apr. 20, 2020) (quoting James Madison, “Political Observations,” National Archives (Apr. 20, 1795) (subsequent procedural history omitted)). In 1917, six months after the United States entered World War I, Congress enacted the Trading with the Enemy Act (“TWEA”), 50 U.S.C. app. § 1 et seq. , which gave the President broad authority to impose economic sanctions, including comprehensive embargoes, in response to both peacetime emergencies and times of war. See Regan v. Wald , 468 U.S. 222, 225–26, 104 S.Ct. 3026, 82 L.Ed.2d 171 (1984). Then in 1977, Congress altered the legal framework governing economic sanctions through IEEPA. The new law “limit[ed] the President’s power to act pursuant to [TWEA] solely to times of war,” but also permitted the President to declare and respond to national emergencies in times of peace. Id. at 227–28, 104 S.Ct. 3026.
The peacetime powers granted to the President under IEEPA are “essentially the same” as the wartime powers under TWEA, “but the conditions and procedures for their exercise are different.” Id. at 228, 104 S.Ct. 3026. Under IEEPA, the President may “declare[ ] a national emergency” in response to “any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States.” 50 U.S.C. § 1701. Once such an emergency is declared,…
the President may, under such regulations as he may prescribe … investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States[.]…
Olenga v. Gacki, 507 F.Supp.3d 260 (D. D.C. 2020). “These provisions of IEEPA ‘delegate[ ] broad authority to the President to act in times of national emergency with respect to property of a foreign country.’ Dames & Moore v. Regan , 453 U.S. 654, 677, 101 S.Ct. 2972, 69 L.Ed.2d 918 (1981).” “Pursuant to a redelegation of authority from the Secretary of the Treasury, see 31 C.F.R. § 547.802, OFAC has promulgated regulations to implement these executive orders, see generally 31 C.F.R. pt. 547.” The regulations prohibit U.S. people or entities from engaging in transactions with SDNs. 31 C.F.R. § 547.201.
A blocked person may “seek administrative reconsideration” of his designation or may “assert that the circumstances resulting in the designation no longer apply.” Id. § 501.807; see also id. § 547.101. As part of the reconsideration process, the blocked person “may submit arguments or evidence that the person believes establishes that insufficient basis exists for the designation.” Id. § 501.807(a). The designated person “also may propose remedial steps on the person’s part, such as corporate reorganization, resignation of persons from positions in a blocked entity, or similar steps, which the person believes would negate the basis for designation.” Id. And the blocked person may request a meeting with OFAC to discuss his designation, although such meetings are not required. Id. § 501.807(c). OFAC reviews the submitted materials and “may request clarifying, corroborating, or other additional information.” Id. § 501.807(b). At the conclusion of its review of the request for reconsideration, OFAC “will provide a written decision to the blocked person.” Id. § 501.807(d). As the D.C. Circuit has observed, a “designated person can request delisting as many times as he likes.” Zevallos v. Obama , 793 F.3d 106, 110 (D.C. Cir. 2015).
The first question to consider in making any challenge to the OFAC designation is whether the foreign person who has been placed on the SDN list has any constitutional rights at all.
For example, there is Supreme Court precedent that “non-resident aliens who have insufficient contacts with the United States are not entitled to Fifth Amendment protections.” Jifry v. FAA , 370 F.3d 1174, 1182 (D.C. Cir. 2004) (citing Johnson v. Eisentrager , 339 U.S. 763, 771, 70 S.Ct. 936, 94 L.Ed. 1255 (1950) ). But in Jifry , the D.C. Circuit declined to decide whether the plaintiffs were “entitled to constitutional protections because, even assuming that they [were], they ha[d] received all the process that they [were] due under [circuit] precedent.” 370 F.3d at 1183. Other courts have also concluded that foreign plaintiffs with no documented ties to the United States lacked entitlement to the Constitution’s procedural protections. See Rakhimov , 2020 WL 1911561, at *5 ; Fulmen Co. v. OFAC , No. 18-cv-2949, 2020 WL 1536341, at *5 (D.D.C. Mar. 31, 2020).
Even assuming that the prospective litigant does have standing and some due process rights, it is possible that the information to which he or she or it has access in order to challenge the OFAC designation is limited. The DC Circuit has explained that “where an OFAC determination is supported by classified information, the D.C. Circuit has ‘authorized’ use of an alternative process of judicial review that provides the designee with notice and an opportunity to be heard but permits OFAC to submit the classified material to the court ex parte and in camera.”
Olenga v. Gacki, 507 F.Supp.3d 260 (D. D.C. 2020). Further, the Courts will definitely give deference to the sanctions designation determination made by the government. “The Court must uphold OFAC’s action so long as it ‘considered the relevant factors and articulated a rational connection between the facts found and the choice made.’ Nat’l Ass’n of Clean Air Agencies v. EPA , 489 F.3d 1221, 1228 (D.C. Cir. 2007) (quotation marks and citation omitted).” Olenga v. Gacki, 507 F.Supp.3d 260 (D. D.C. 2020). The Court’s review is even more deferential where matters of foreign policy and national security are concerned. The D.C. Circuit has shown “extreme” deference to blocking orders, which fall “at the intersection of national security, foreign policy, and administrative law.” Islamic Am. Relief Agency v. Gonzales , 477 F.3d 728, 734 (D.C. Cir. 2007) ; see also Zarmach Oil Servs. v. U.S. Dep’t of the Treasury , 750 F. Supp. 2d 150, 155 (D.D.C. 2010) (“[C]ourts owe a substantial measure of deference to the political branches in matters of foreign policy, including cases involving blocking orders.” (internal quotation marks and citation omitted)).
For these reasons, unless there is some really unique circumstance or strong showing to be made, any attempt to overturn OFAC’s designations is bound to crash hard against a sharp cliff. As with any administrative process, anyone wishing to try needs to build as strong and compelling of a record as possible to prove that their designation was wrong for whatever reason. But again, absent truly remarkable circumstance, overturning the agency’s determination shall be close to impossible in my view.