Okko Business Pe v. Lew

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

OKKO Business PE,

Plaintiff,

v.

Civil Action No. 1:14-cv-925 (CKK)

JACOB J. LEW et al.,

Defendants.

MEMORANDUM OPINION

(September 28, 2015)

Plaintiff OKKO Business PE (“Plaintiff”) brings this action challenging the Office of

Foreign Assets Control (“OFAC”)’s denial of Plaintiff’s application for a license to unblock a

wire transfer of 200,000 Euros originating from Plaintiff. The intended beneficiary of the wire

transfer was UE Belarusian Oil Trading House (“UEB”), a Belarusian entity designated by the

President as a target of U.S. sanctions. Presently before the Court is Defendants’ [11] Motion for

Summary Judgment. Upon consideration of the pleadings,1 the relevant legal authorities, and the

record as a whole, the Court GRANTS Defendants’ Motion for Summary Judgment. The Court

1 While the Court renders its decision on the record as a whole, its consideration has focused on

the following documents: Plaintiff’s Complaint (“Compl.”), ECF No. 1; Defendants’ Motion for

Summary Judgment (“Defs.’ Mot.”), ECF No. 11; Plaintiff’s Opposition to Defendants’ Motion

for Summary Judgment (“Pl.’s Opp’n”), ECF No. 13; Defendants’ Reply in Support of

Defendants’ Motion for Summary Judgment (“Defs.’ Reply), ECF No. 15. The Court considers

the Revised Kuchabskyy Declaration, Exhibit 1 to Plaintiff’s Opposition, (“Rev. Decl.”) as well

as the Declaration of John E. Smith, attached to Defendant’s Motion for Summary Judgment

(“Smith Decl.”) to the extent that they provide background regarding the particular decisions at

issue here. See Clifford v. Pena, 77 F.3d 1414, 1418 (D.C. Cir. 1996); Zarmach Oil Servs., Inc. v.

U.S. Dep't of the Treasury, 750 F. Supp. 2d 150, 152-53 (D.D.C. 2010). In an exercise of its

discretion, the Court finds that holding oral argument in this action would not be of assistance in

rendering a decision. See LCvR 7(f).

1

enters judgment for Defendant. Accordingly, this action is DISMISSED in its entirety.

I. BACKGROUND

The International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C. §§ 1701-1706

authorizes the President to declare a national emergency when any “extraordinary threat” to the

United States arises that originates in substantial part in a foreign state. “Such a declaration

clothes the President with extensive authority set out in 50 U.S.C. § 1702.” Holy Land Found.

for Relief & Dev. v. Ashcroft, 333 F.3d 156, 159 (D.C. Cir. 2003). Under Section 1702, the

President may “investigate, regulate, or prohibit” transactions in foreign exchange, banking

transfers, and importation or exportation of currency or securities by persons or with respect to

property, subject to the jurisdiction of the United States. 50 U.S.C. § 1702(a)(1)(A).

Furthermore, the President may,

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. . . .

50 U.S.C. § 1702(a)(1)(B).

In June 2006, the President, pursuant to his authority under the IEEPA, declared a

national emergency as to Belarus. The President found that the actions and policies of certain

members of the Government of Belarus and other persons to undermine Belarus’ democratic

processes, to commit human rights abuses, and to engage in public corruption, constituted an

extraordinary threat to the national security and foreign policy of the United States. See Exec.

Order No. 13405, 71 Fed. Reg. 35485 (June 16, 2006) (“E.O. 13405”). In response to this threat,

the President blocked “all property and interests in property” of persons listed on the Annex to

E.O. 13405 as well as any persons subsequently determined by the Secretary of Treasury to meet

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one or more of the criteria in E.O. 13405. Id. On May 15, 2008, OFAC added UEB to the list of

entities that met one or more of the criteria in E.O. 13405. Administrative Record (“A.R.”)

000019. OFAC’s decision was based on information providing reasons to believe that UEB acts

as a clearinghouse for financial, contractual, and web-based transactions on behalf of Belarus’

largest petrochemical conglomerate, which in turn is controlled by Belarusian President

Alexander Lukashenko—an individual listed by the President on the Annex to E.O. 13405. 2

In 2010, OFAC, acting pursuant to authority delegated by the President, see E.O. 13405

§ 5, and the Secretary of the Treasury, see 31 C.F.R. § 548.802, promulgated regulations

(“Belarus regulations)” to implement E.O. 13405. See generally 31 C.F.R. Pt. 548. The Belarus

regulations provide that unless otherwise authorized, “all property and interests in property [of a

person designated under E.O. 13405] that hereafter come within . . . the possession or control of

U.S. persons, including their overseas branches . . . may not be transferred, paid, exported,

withdrawn or otherwise dealt in.” 31 C.F.R. § 548.201(a). The same or similar blocking

language is used in most OFAC sanctions regulations. 3

2 According to the OFAC press release announcing the decision, UEB operates an online auction

trading system and is a clearinghouse for financial, contractual, and web-based transactions on

behalf of the petrochemical conglomerate, Belneftekhim Concern, and its subsidiaries. See

Treasury Designates Three Entities of Major Petrochemicals Conglomerate in Belarus, May 15,

2008, available at http://www.treasury.gov/press-center/press-releases/Pages/hp978.aspx.

Belneftekhim Concern was previously added to the List of Specially Designated Nationals and

Blocked Persons on November 13, 2007, based upon OFAC’s determination that it is controlled

by Belarusian President Alexander Lukashenko. See Treasury Targets Lukashenko-controlled

Petrochemical Conglomerate, November 13, 2007, available at http://www.treasury.gov/press-

center/press-releases/Pages/hp676.aspx.

3 See, e.g., 31 C.F.R. § 537.201(a) (Burmese Sanctions Regulations); 31 C.F.R. § 538.201(a)

(Sudanese Sanctions Regulations); 31 C.F.R. § 542.201(a) (Syrian Sanctions Regulations); 31

C.F.R § 544.201(a) (Weapons of Mass Destruction Proliferators Sanctions Regulations); 31

C.F.R. § 560.211(a) (Iranian Transactions and Sanctions Regulations); 31 C.F.R. § 594.201(a)

(Global Terrorism Sanctions Regulations).

3

On April 3, 2012, Plaintiff, a privately-owned corporation located in Ukraine, entered

into a deposit agreement with UEB. AR 000001. The purpose of the agreement was to

participate in an auction organized by UEB to purchase certain oil products. AR 000002. Under

the agreement, UEB would serve as the “Auction Organizer” and Plaintiff would be a “Bidder.”

AR 000005. In order to participate in the auction, each bidder was required to deposit 200,000

Euros into UEB’s bank account. AR 000008. This deposit served as a “guarantee that the

Bidder [would] carry out the actions stipulated” in the agreement. AR 000008. Bidders were not

entitled to dispose of their deposits after entry into UEB’s bank account, and UEB retained each

deposit over the course of the auction. AR 000010. In the event that the bidder lost or did not

take part in the auction, UEB would return the deposit to the bidder within five banking days

upon receiving a written demand from the bidder. AR 000010-11. Alternatively, if the bidder

won, UEB would return the deposit to the bidder after the execution of a separate supply

agreement between the seller and bidder. AR 000010. If the bidder won, but refused to carry out

its obligations, UEB would transfer the bidder’s deposit to the seller. AR 000011.

On May 4, 2012, Plaintiff, as a potential bidder, initiated a transfer of 200,000 Euros from

its account with CITI Bank Ukraine to UEB’s bank account in Belarus. AR 000001. The funds

were routed through Citibank, N.A., in the United Kingdom, which blocked the transfer in

accordance with E.O. 13405. AR 000001-2. On May 30, 2012, Plaintiff submitted a three-page

online application seeking a license from OFAC to unblock the funds. AR 000001-4. The

application included additional space at the end, where applicants could provide a “detailed

explanation of the transaction, including the purpose of the payment.” AR 000001-4. In that

space, Plaintiff stated that the purpose of the wire transfer was to pay the deposit for

“participation in auctions to purchase petroleum products from Belarusian oil refiners” in

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accordance with their deposit agreement with UEB. AR 000002. Plaintiff attached a copy of the

deposit agreement to its application. AR 000002, 000005-15.

OFAC denied Plaintiff’s application by letter dated October 12, 2012. AR 000017-18.

The denial stated that U.S. financial institutions were required to block “all wire transfers in

which a sanctions target has an interest,” and an “interest in property sufficient to require

blocking may be an interest of any nature whatsoever, direct or indirect.” AR 000017. The

denial explained that the blocked funds transfer in question involved an “interest of a sanctions

target described in the Executive Order 13405,” specifically UEB, and that it was “OFAC’s

policy to license the release of blocked property only in limited circumstances, most of which do

not involve commercial activity.” AR 000017-18. OFAC determined “upon review” that “the

blocked funds transfer did not fall within those limited circumstances.” AR 000017-18. OFAC’s

letter also noted that OFAC does not recognize attempts to extinguish an interest of a sanctions

target in a transfer once that transfer has been blocked. AR 000017-18.

On March 1, 2013, Plaintiff, through counsel, requested reconsideration of OFAC’s

denial of its May 30, 2012 unblocking request. AR 000019-23. Plaintiff’s request for

reconsideration stated that at the time it initiated the funds transfer, Plaintiff did not know that

UEB was a U.S. sanctions target, and that since the denial of Plaintiff’s original request, Plaintiff

had cancelled its contract with UEB and that UEB’s interest in the funds had “been

extinguished.” AR 000019-23. Plaintiff indicated that it would never again transact with UEB,

and that continued blocking of the funds would not further U.S. foreign policy goals. AR

000019-23. Plaintiff included supporting documentation that included a notice of unilateral

termination issued by UEB and a declaration signed by Plaintiff’s managing officer. AR 000019-

21, AR 000039-41.

5

OFAC denied Plaintiff’s request for reconsideration by letter dated September 6, 2013.

AR 000084. OFAC’s denial of Plaintiff’s reconsideration request stated that OFAC licensed the

release of blocked funds “only under limited and compelling circumstances consistent with the

national security and foreign policy interests of the United States.” AR 000084. In its letter,

OFAC stated that it had reviewed the information submitted by Plaintiff, and that OFAC had

again determined that licensing the release of the blocked funds would be inconsistent with

OFAC policy. AR 000084.

Plaintiff filed the instant action on May 30, 2014, alleging that OFAC’s decisions violated

Section 706(2) of the Administrative Procedure Act (“APA”). On September 24, 2014,

Defendants filed their motion for summary judgment.

II. LEGAL STANDARD

Under Rule 56(a) of the Federal Rules of Civil Procedure, “[t]he court shall grant

summary judgment if the movant shows that there is no genuine dispute as to any material fact

and the movant is entitled to judgment as a matter of law.” However, “when a party seeks

review of agency action under the APA [before a district court], the district judge sits as an

appellate tribunal. The ‘entire case’ on review is a question of law.” Am. Bioscience, Inc. v.

Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001). Accordingly, “the standard set forth in Rule

56[ ] does not apply because of the limited role of a court in reviewing the administrative

record. . . . Summary judgment is [ ] the mechanism for deciding whether as a matter of law the

agency action is supported by the administrative record and is otherwise consistent with the APA

standard of review.” Southeast Conference v. Vilsack, 684 F.Supp.2d 135, 142 (D.D.C.2010).

The APA “sets forth the full extent of judicial authority to review executive agency

action for procedural correctness.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513

6

(2009). It requires courts to “hold unlawful and set aside agency action, findings, and

conclusions” that are “(A) arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law;” “(C) in excess of statutory jurisdiction, authority, or limitations, or short

of statutory right”; or “(F) unwarranted by the facts to the extent that the facts are subject to trial

de novo by the reviewing court.” 5 U.S.C. § 706(2). The arbitrary and capricious standard “is a

‘narrow’ standard of review as courts defer to the agency’s expertise.” Ctr. for Food Safety v.

Salazar, 898 F.Supp.2d 130, 138 (D.D.C. 2012) (quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc.

v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). An agency is required to “examine

the relevant data and articulate a satisfactory explanation for its action including a rational

connection between the facts found and the choice made.” Motor Vehicle Mfrs. Ass'n, 463 U.S.

at 43 (internal quotation omitted). The reviewing court “is not to substitute its judgment for that

of the agency.” Id. Nevertheless, a decision that is not fully explained may be upheld “if the

agency's path may reasonably be discerned.” Bowman Transp., Inc. v. Arkansas–Best Freight

Sys., Inc., 419 U.S. 281, 286 (1974).

A review of a decision made by OFAC is “extremely deferential” because OFAC

operates “in an area 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 Em.

Coalition to Defend Educ. Travel v. United States Dep't of Treasury, 498 F.Supp.2d 150, 166

n.10 (D.D.C.2007) (“[T]he regulations at issue here are entitled to an even greater measure of

deference [than Chevron deference] because they relate to the exercise of the Executive's

authority in the realm of foreign affairs.”).

7

III. DISCUSSION

Defendants move for summary judgment pursuant to Rule 56, arguing that OFAC’s

decisions were in accordance with all applicable provisions of the APA. Plaintiff opposes

Defendant’s Motion, arguing that OFAC’s denial of Plaintiff’s application was (1) “arbitrary and

capricious” under Section 706(2)(A); (2) made in “excess of statutory authority” under Section

706(2)(C); and (3) “unwarranted by the facts to the extent they are subject to trial de novo” under

Section 706(2)(F).

A. Statutory Framework

Under the IEEPA, the President may “block . . . 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.” 50 U.S.C. 1702(a)(1)(B)

(emphasis added). The sweeping language of Section 1702 “imposes no limit on the scope of

interest” blockable under the IEEPA. Holy Land, 333 F.3d at 162. Pursuant to explicit

authorization from Congress, 50 U.S.C. § 1704, OFAC has promulgated regulations, including

the Belarus regulations, which consistently cast an equally broad net as to the types of interests

blockable under the IEEPA. The Belarus regulations define “property” and “property interest” to

include, inter alia, “any other property, real, personal, or mixed, tangible or intangible, or interest

or interests therein, present, future, or contingent.” 31 C.F.R. § 548.308. OFAC has further

defined “interest” when used with respect to property to mean “an interest of any nature

whatsoever, direct or indirect.” 31 C.F.R. § 548.305 (emphasis added). Likewise, the Belarus

regulations define “transfer” broadly:

The term transfer means any actual or purported act or transaction, . . . whether or

not done or performed within the United States, the purpose, intent, or effect of

which is to . . . release, convey, transfer, or alter, directly or indirectly, any right,

remedy, power, privilege, or interest with respect to any property. Without

8

limitation on the foregoing, it shall include the making, execution, or delivery of

any assignment, power, conveyance, . . . agreement, contract, or [or] sale . . . .

31 C.F.R. § 548.309. These same or similar definitions are used throughout OFAC’s

regulations,4 and have been repeatedly upheld by reviewing courts. See, e.g., Holy Land, 333

F.3d at 162. OFAC, according to the D.C. Circuit, may “choose and apply its own definition of

property interests, subject to deferential judicial review.” Consarc Corp. v. Iraqi Ministry, 27

F.3d 695, 701 (D.C. Cir. 1994) (“Consarc I”). Therefore, Courts must give effect to OFAC’s

definition of property interest unless that definition “contradict(s) express statutory language or

prove(s) unreasonable.” Id.

Under its sanctions programs, OFAC may, by request, issue a “specific license” to

authorize an otherwise prohibited transaction or service. See 31 C.F.R. § 501.801. OFAC has

interpreted its blocking authority under the IEEPA and implementing executive orders as

granting it discretionary authority to issue or withhold such licenses based on national security

and foreign policy considerations, and OFAC regulations generally do not compel the issuance of

a specific license once certain criteria are met. See Zarmach, 750 F. Supp. 2d at 153; see also

Smith Decl. ¶ 14. A beneficiary’s interest in blocked property is extinguished once the property

has been transferred pursuant to an OFAC-licensed transfer, or the national emergency

underpinning the blocking is terminated. See 31 C.F.R. § 548.403; Smith Decl. ¶ 16.

4 See, e.g., 31 C.F.R. §§ 537.315, 537.309, 537.317 (Burmese Sanctions Regulations); 31 C.F.R.

§§ 538.310, 538.307, 538.313 (Sudanese Sanctions Regulations); 31 C.F.R. §§ 542.315, 542.308,

542.317 (Syrian Sanctions Regulations); 31 C.F.R §§ 544.308, 544.305, 544.309 (Weapons of

Mass Destruction Proliferators Sanctions Regulations); 31 C.F.R. §§ 560.325, 560.323, 560.326

(Iranian Transactions and Sanctions Regulations); 31 C.F.R. §§ 594.309, 594.306, 594.312

(Global Terrorism Sanctions Regulations).

9

B. OFAC’s Denial of Plaintiff’s Application Was Not Arbitrary and Capricious

The APA requires courts to “hold unlawful and set aside agency action, findings, and

conclusions” that are “arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law.” 5 U.S.C. § 706(2)(A). Under this standard, a court must uphold an

agency decision that is supported by a rational basis. See Holy Land, 333 F.3d at 162.

a. OFAC’s Conclusion that UEB had an “Interest” in the Blocked Property Is

Supported by a Rational Basis

Plaintiff argues that OFAC’s denial of Plaintiff’s license application was arbitrary and

capricious because UEB never acquired an interest in the deposit because under the deposit

agreement, the funds would revert back to the Plaintiff after the conclusion of the auction. Pl.’s

Opp’n at 10, 14. Plaintiff’s argument, however, is in opposition to the plain language of the

IEEPA and the case law that have addressed the interpretation of the term, “interest,” within the

context of sanctions regulations administered by OFAC under the IEEPA.

The D.C. Circuit has repeatedly held that the sweeping language of the IEEPA “imposes

no limit on the scope of interest” blockable under the IEEPA, and that an “interest when used

with respect to property means “an interest of any nature whatsoever, direct or indirect.” Holy

Land, 333 F.3d at 162; see also 50 U.S.C. § 1702(a), 31 C.F.R. § 548.30. A sanctions target need

not have a “legally enforceable ownership interest” to justify a blocking under U.S. regulations.

Holy Land, 333 F.3d at 162-63. In Holy Land, the D.C. Circuit affirmed the lower court’s

decision upholding an agency action taken by OFAC to block the assets of a domestic charity

organization that OFAC determined to be controlled by Hamas. See Holy Land, 219 F. Supp. 2d

57, 68 (D.D.C. 2002) aff'd, 333 F.3d 156 (D.C. Cir. 2003). The lower court, citing the plain text

of the IEEPA and affording deference to OFAC’s interpretation of its own regulations, upheld the

blocking of the charity’s funds, even though Hamas had no “legally enforceable ownership

10

interest” in the funds. Id. In its affirmance, the D.C. Circuit reasoned that the IEEPA “is

designed to give the President means to control assets that could be used by enemy aliens,” and

therefore the IEEPA covers interests “not defined in traditional common law terms.” Holy Land,

333 F.3d at 163 (citing Global Relief Foundation, Inc. v. O'Neill, 315 F.3d 748 (7th Cir. 2002)). 5

Moreover, because OFAC is interpreting the term, “interest,” as defined in its own regulations,

OFAC’s construction merits “an even greater degree of deference than the Chevron standard, and

must prevail unless plainly inconsistent with the regulation.” Consarc Corp. v. U.S. Treasury

Dep't, Office of Foreign Assets Control, 71 F.3d 909, 915 (D.C. Cir. 1995) (citation and internal

punctuation omitted) (“Consarc II”). Therefore, the appropriate inquiry is whether OFAC’s

construction has departed so far from common usage as to be “plainly wrong.” Consarc I, 27

F.3d at 702.

Here, the basis in the administrative record for OFAC's conclusion that UEB had an

“interest” in the blocked property is clear. Both Plaintiff’s original application and Plaintiff’s

request for reconsideration of OFAC's initial denial stated that the blocked funds were to be

deposited directly into a bank account owned and operated by UEB, as part of a commercial

transaction to which UEB was a party. AR 000002, AR 000021. Plaintiff argues that UEB had

no “interest” in the funds because under the deposit agreement, the funds would revert back to

the Plaintiff after the conclusion of the auction. Pl.’s Opp’n at 14. The administrative record,

however, makes clear that bidders were not entitled to dispose of the funds while the funds were

in UEB’s account, and there is nothing in the record to suggest that UEB would have lacked

5 Plaintiff misconstrues the holding in Holy Land and argues that “interest” under the IEEPA

means at least a “beneficial interest,” see Pl.’s Opp’n at 13. The D.C. Circuit’s opinion,

however, clearly states that “interest” under the IEEPA “need not be a legally protected one,” and

encompasses “any interest,” including a “beneficial interest” or “an interest not defined in

traditional common law terms.” 333 F.3d at 163.

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access to this account or control over the money in it. AR 000010. Moreover, the deposit

agreement required UEB to return the funds five days after a “written demand” from the bidder.

AR 000010-11. Until the bidder issued such a demand—an event that appeared likely, but not

certain, under the administrative record—the funds would have remained in UEB’s bank account

under UEB’s control. Id. Under these facts, OFAC concluded that UEB’s “interest” in the

blocked funds constituted “an interest of any nature whatsoever, direct or indirect.” AR 000017.

In light of the plain text of the IEEPA and OFAC’s regulations broadly defining the term

“interest,” the deference that must be afforded to OFAC’s interpretation of its own regulations,

and the controlling case law, the Court cannot conclude that OFAC’s decision lacked a rational

basis. See Holy Land, 333 F.3d at 163; see also 50 U.S.C. § 1702(a), 31 C.F.R. § 548.30.

b. The Facts Relied Upon by OFAC Are Rationally Connected to the Continued

Blocking of the Funds in Question

Plaintiff argues that OFAC failed to provide a satisfactory explanation for its action,

including a “rational connection between the facts found and the choice made.” Pl.’s Opp’n at

15. Plaintiff argues that OFAC “failed to review the deposit agreement” and “automatically

affirmed the block based upon the fact that UEB is a designated party.” Id. at 15-16. Plaintiff

contends that the record is “devoid of any deliberative agency process regarding Plaintiff’s

requests for unblocking.” Id. at 17. Plaintiff’s arguments are without merit.

OFAC’s decision letters attest, and the administrative record confirms, that OFAC

reviewed both Plaintiff’s initial application and its request for reconsideration, but ultimately

decided that unblocking the funds would be contrary to the policy objectives of the Belarus

sanctions program. In its letter denying Plaintiff’s initial application, OFAC stated that based on

information “reflected by [Plaintiff’s] application,” the blocked funds in question involved a

UEB property interest. AR 000017. OFAC’s letter also explained that after reviewing the

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application, OFAC determined that granting a license would be inconsistent with OFAC policy

because the interest involved commercial activity. AR 000017-18. OFAC’s denial of Plaintiff’s

request for reconsideration contained similar language. AR 000084. Moreover, the

administrative record contains internal emails clearly indicating that OFAC considered the fact

that under the deposit agreement, Plaintiff was “making a deposit to participate in an auction

organization by UEB, the terms of which required the applicant to send the money to UEB’s

account.” AR 000048. The record further indicates that OFAC considered all of Plaintiff’s key

arguments made in its reconsideration request. See AR 000048. Specifically, OFAC considered

Plaintiff’s arguments that (1) “the US government’s foreign policy interest isn’t being helped by

the continued blocking of these funds; (2) Plaintiff didn’t know that UEB was a sanctions target;

and (3) Plaintiff had “cancelled their agreement with [UEB] based on this block.” See AR

000048. OFAC’s decision to continue blocking the funds at issue, despite Plaintiff’s arguments,

is rationally connected to OFAC’s stated policy objectives related to blocking. 6

It is not the Court’s role to undertake its own fact-finding or substitute its own judgment

for that of OFAC. See Holy Land, 333 F.3d at 162. The administrative record demonstrates that

there was a rational connection between the facts found and the choice made by OFAC. See

Motor Vehicle Mfrs. Ass'n, 463 U.S. at 43; see also Zarmach, 750 F. Supp. 2d at 158 (upholding

OFAC denials of unblocking application and reconsideration request under similar administrative

record).

6 OFAC’s stated policies include, inter alia, (1) limiting the flow of currency and other property

to or for the benefit of a sanctions target, thereby preventing use that conflicts with U.S. interests;

(2) disrupting commercial transactions with a sanctions target, thus isolating the target, raising

the costs of engaging in such transactions, and discouraging third country business with a

sanctions target; and (3) disrupting national security threats, minimizing sanctions evasions, and

increasing the Executive’s leverage when dealing with such threats. Smith Decl. ¶ 11-12.

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C. OFAC Did Not Exceed Its Statutory Authority by Continuing to Block the Funds in

Question

The APA requires courts to “hold unlawful and set aside agency action, findings, and

conclusions” that are “in excess of statutory jurisdiction, authority, or limitations, or short of

statutory right.” 5 U.S.C. § 706(2)(C).

Plaintiff argues that OFAC exceeded its authority by continuing to block the funds in

question because UEB’s interest in the blocked property was extinguished under principles of

contract law, or in the alternative, unilateral action taken by Plaintiff. See Pl.’s Opp’n at 20-22. 7

Plaintiff argues that the contract was terminated due to the failure of Plaintiff to comply with the

specific terms of the agreement, namely Plaintiff’s failure to provide the deposit. See id. at 22.

Alternatively, Plaintiff argues that UEB’s interest was terminated when Plaintiff cancelled its

agreement with UEB. See id. Plaintiff’s arguments are tenuous and inconsistent with

established sanctions law. The IEEPA and related regulations provide only one method by which

the UEB’s interest in the funds may be extinguished: a valid license from OFAC. See 31 C.F.R.

§ 548.403(a). The regulations contain “no provision by which the efforts of a sanctions target

and a company it wishes to do business with can, on their own, ‘un-block’ assets frozen by

OFAC.” Zarmach, 750 F. Supp. 2d at 157. By contrast, the regulations explicitly state that a

blocked interest may not be “transferred, paid, exported, withdrawn, or otherwise dealt in.” 31

C.F.R. § 548.201(a). Accordingly, UEB’s interest may not be extinguished by operation of the

7 Plaintiff also argues that OFAC exceeded its authority by continuing the block of funds because

UEB never held an interest in the blocked funds. See Pl.’s Opp’n at 20. As discussed earlier in

the Court’s opinion, the administrative record demonstrates that OFAC had a rational basis for

concluding that UEB held an interest in the blocked funds. See Section B, supra.

14

parties’ contract. See id. 8 Similarly, Plaintiff cannot, through unilateral actions, extinguish

UEB’s interest in the blocked funds. See Zarmach, 750 F. Supp. 2d at 157. As OFAC has

observed, allowing third parties to extinguish property interests in such ways could undermine

OFAC’s policy of discouraging “companies worldwide from doing business with the sanctions

target and places companies at risk for having their assets frozen should they inadvertently be

routed through the United States . . . .” Zarmach, 750 F. Supp. 2d at 157. Making exceptions for

third parties, such as Plaintiff, who attempt to cancel their transaction with a sanction entity

would dilute the effectiveness of the sanctions program by lowering the risks and costs of doing

business with sanctions targets. See Smith Decl. ¶ 13. Plaintiff disagrees, arguing that continued

blocking in this case not only fails to achieve OFAC’s stated policy objectives, it “actually harms

U.S. foreign policy and national security objectives by unnecessarily harming America’s

reputation overseas.” See Pl’s Opp’n at 23-25, AR 000022.

Whether continued blocking is an effective strategy at fulfilling OFAC’s foreign policy

objectives, however, is not a question for this court. See Zarmach, 750 F. Supp. 2d at 157-58.

Matters of strategy and tactics relating to the conduct of foreign policy “are so exclusively

entrusted to the political branches of government as to be largely immune from judicial inquiry

or interference.” Regan v. Wild, 468 U.S. 222, 242 (1984). Accordingly, the Court cannot

conclude that OFAC exceeded its statutory authority by continuing to block the funds in

question. See Zarmach, 750 F. Supp. 2d at 155-57.

8Plaintiffcites no authority to support its argument that an interest under the IEEPA may be

extinguished by operation of contract law, in violation of OFAC regulations. See Pl.’s Opp’n at

22-23.

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D. OFAC’s Decisions Were Not Unwarranted by the Facts to the Extent that the Facts are

Subject to Trial De Novo

The APA requires courts to “hold unlawful and set aside agency action, findings, and

conclusions” that are “unwarranted by the facts to the extent that the facts are subject to trial de

novo by the reviewing court.” 5 U.S.C. § 706(2)(F). De novo review is appropriate under

Section 706(2)(F) of the APA “when the action is adjudicatory in nature and the agency

factfinding procedures are inadequate.” Citizens to Preserve Overton Park v. Volpe, 401 U.S.

402, 415 (1971); see also Camp v. Pitts, 411 U.S. 138, 141-42 (1973) (same, citing Overton

Park). De novo review is appropriate only where the underlying procedures are inadequate to

the extent that they are deemed “severely defective.” Nat'l Org. for Women v. Soc. Sec. Admin.,

736 F.2d 727, 745 (D.C. Cir. 1984).

Plaintiff argues that “OFAC failed to fully evaluate the underlying factual circumstances

giving rise to the blocking of funds.” Pl.’s Opp’n at 26. Plaintiff alleges that OFAC “did not

review the terms of the deposit agreement, did not acknowledge Plaintiff’s lack of intent to

transact with a blocked party, nor fully addressed the policy arguments proffered by Plaintiff.”

Id. The Court finds Plaintiff’s arguments lacking in merit. OFAC’s decision letters attest that

OFAC reviewed both Plaintiff’s initial application and its request for reconsideration, but

ultimately decided that unblocking the funds would be contrary to the policy objectives of the

Belarus sanctions program. In its letter denying Plaintiff’s initial application, OFAC stated that

based on information “reflected by [Plaintiff’s] application,” the blocked funds in question

involved a UEB property interest. AR 000017. OFAC’s letter also explained that after

reviewing the application, OFAC determined that granting a license would be inconsistent with

OFAC policy because the interest involved commercial activity. AR 000017-18. OFAC’s denial

of Plaintiff’s request for reconsideration contained similar language. AR 000084. At most,

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Plaintiff raises a question as to whether OFAC adequately explained its decision, but such an

inadequacy would not constitute “a deficiency in fact-finding procedures such as to warrant the

de novo [review of OFAC’s fact finding procedures].” See Pitts, 411 U.S. at 142.

Accordingly, the Court concludes that OFAC’s decisions to continue blocking the funds

in question were permissible under the APA. See 5 U.S.C. § 706(2).

IV. CONCLUSION

For the foregoing reasons, the Court GRANTS Defendants’ [11] Motion for Summary

Judgment. The Court enters judgment for Defendant. Accordingly, this action is DISMISSED in

its entirety.

An appropriate Order accompanies this Memorandum Opinion.

Dated: September 28, 2015

/s/

COLLEEN KOLLAR-KOTELLY

United States District Judge

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