From Denial to Federal Court: The Legal Path

When the Office of Foreign Assets Control (OFAC) denies a petition for removal from the SDN List, the denial is often issued with minimal explanation. For the designated party, this can feel like a final verdict. It is not. An OFAC delisting denial is an administrative decision, and like most administrative decisions, it is subject to review in federal court.

The U.S. District Court for the District of Columbia (D.D.C.) is the primary forum for challenges to OFAC designations and denial decisions. Filing suit is not a last resort reserved for exceptional circumstances; it is a recognized legal tool that designated parties are increasingly using to put real pressure on the agency’s administrative process.

The APA as the Primary Legal Vehicle

The Administrative Procedure Act (APA) is the central statute governing judicial review of OFAC decisions. Under the APA, a court may set aside agency action that is: (1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (2) contrary to constitutional right; (3) in excess of statutory authority; or (4) taken without observance of required procedure (5 U.S.C. § 706).

In cases challenging an OFAC denial decision, the most commonly invoked ground is the first – the arbitrary and capricious standard. This is not a low bar in the colloquial sense, but it is a workable one. Courts have applied it to invalidate agency decisions where the reasoning was inadequate, the factual record was ignored, or changed circumstances were not considered.

The Arbitrary and Capricious Standard: What Courts Actually Examine

Under the arbitrary and capricious standard, the court asks whether the agency examined the relevant factors and articulated a rational connection between the facts it found and the decision it made. The court does not re-weigh the evidence or substitute its judgment for OFAC’s. What it does is check whether the agency’s reasoning holds together.

In the context of an OFAC delisting denial, this means the court will look at the administrative record (the documents OFAC had before it when it made its decision) and assess whether the denial was adequately explained in light of the evidence presented. If the petitioner submitted substantial new evidence showing changed circumstances and OFAC’s denial does not engage with that evidence, the court may find the denial arbitrary.

This is why the quality of the underlying delisting petition matters so much. The administrative record is fixed before litigation begins. Arguments and evidence not placed before OFAC during the administrative process generally cannot be introduced in court. A strong petition is not just an attempt to persuade the agency; it is also the foundation for any future judicial challenge.

The Limits of Judicial Review

Understanding what courts will not do is as important as understanding what they will. Courts do not conduct a full evidentiary hearing, call witnesses, or independently evaluate classified intelligence that may underlie the designation. In matters touching on national security and foreign policy, courts have historically extended significant deference to executive branch agencies.

This deference means that the standard for overturning an OFAC decision is genuinely demanding. A petitioner who simply disagrees with the agency’s factual assessment will not prevail. But a petitioner who can demonstrate that the agency failed to engage with material evidence, relied on stale factual findings, or failed to consider a relevant factor has a cognizable claim, and recent case law shows that such claims can succeed.

How Recent Precedents Have Shifted the Landscape

The Supreme Court’s 2024 decision in Corner Post, Inc. v. Board of Governors significantly expanded the window for challenging federal agency decisions. The Court held that the six-year statute of limitations under 28 U.S.C. § 2401(a) begins to run when a particular plaintiff is first injured by the agency action, not when the action was taken. For parties challenging an OFAC delisting denial, this means the limitations period need not be tied exclusively to the original designation and may instead be calculated from the date OFAC denies the delisting petition.

At the district court level, the D.D.C. cases of Zadornov and Buriko – both resolved through delisting in 2025 and 2026, respectively, after suit was filed – demonstrated that litigation creates meaningful pressure on OFAC’s administrative process. A denial of removal from the SDN List is no longer the end of the road for those who are prepared to pursue their rights systematically and with competent counsel.

Arguments That Work in Court

The most effective arguments in this type of OFAC litigation tend to cluster around four theories:

First, changed circumstances. If material facts have changed since the original designation (ownership changes, severed ties with the individuals or entities that formed the basis for the designation, dissolution of relevant structures), and OFAC’s denial does not account for these changes, the denial may be vulnerable to challenge as arbitrary.

Second, inadequate explanation. A denial that is conclusory or that fails to engage with the substantive arguments advanced in the petition provides a weaker basis for deference and a stronger basis for challenge.

Third, procedural error. Violations of OFAC’s own regulations or established procedures in handling the petition can support a claim under the APA’s procedural prong, though procedural defects alone rarely suffice without substantive grounds.

Fourth, unreasonable delay. Where OFAC has failed to act on a petition within a reasonable time, the APA provides a distinct cause of action under 5 U.S.C. § 706(1) to compel agency action. This avenue is particularly relevant where the administrative process has stalled.

The Role of Counsel in Challenging an OFAC Delisting Denial

Challenging an OFAC delisting denial requires counsel who can work simultaneously in two registers: the administrative and the judicial. The strategy must be designed so that every submission in the administrative process strengthens the position for litigation, and every litigation argument builds on what was properly preserved in the record.

This integration is not an abstract ideal; it is a practical necessity. Because the administrative record is the evidentiary universe for APA review, counsel must ensure that the record contains everything the court will need to evaluate the agency’s reasoning. That means the delisting petition must be drafted with litigation in mind from the outset.

Fesenko, P.C. Law Offices represents clients at both the administrative delisting stage and in federal court. The firm’s attorneys are admitted to practice before the U.S. District Court for the District of Columbia. If you have received an OFAC delisting denial and are considering your legal options, contact us for a preliminary assessment of your case.