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OKKO Business PE v. Lew

United States District Court, D. Columbia

September 28, 2015

OKKO Business PE, Plaintiff,
v.
JACOB J. LEW et al., Defendants

Page 18

          For OKKO BUSINESS PE, Plaintiff: Erich C. Ferrari, FERRARI LEGAL, PC, Washington, DC.

         For JACOB J. LEW, in his official capacity as Secretary of the Department of the Treasury, ADAM J. SZUBIN, in his official capacity as Director of the Office of Foreign Assets Control, OFFICE OF FOREIGN ASSETS CONTROL, Defendants: Lynn Yuhee Lee, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division-Federal Programs Branch, Washington, DC.

Page 19

         MEMORANDUM OPINION

         COLLEEN KOLLAR-KOTELLY, United States District Judge.

         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

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legal authorities, and the record as a whole, the Court GRANTS Defendants' Motion for Summary Judgment. The Court 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, 357 U.S.App.D.C. 35 (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 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

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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]

         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.

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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 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.

         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. ...


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