What Is Unblocking Assets Through Litigation, and When Does It Apply

Unblocking assets through litigation means using a federal court proceeding as the instrument that prompts the Office of Foreign Assets Control of the U.S. Department of the Treasury (OFAC) to either issue a specific license or reconsider a prior denial. The court itself does not issue licenses and does not directly unfreeze accounts: it evaluates OFAC’s action or inaction against the applicable legal standard and, where grounds exist, orders the agency to render a decision or to reconsider the one already made.

An important point: an OFAC specific license application and any subsequent suit is a tool for parties who are not themselves on the Specially Designated Nationals (SDN) List. If the asset owner is on the SDN List, OFAC will not issue a license; in that situation, a different legal path applies, namely SDN List removal followed by release of the owner’s assets. That strategy is addressed in two separate sections of this site: “OFAC SDN List Removal” and “SDN List Removal Through Litigation“.

Court action through the OFAC specific license mechanism becomes relevant, for example, in the following situations:

• A foreign depository, Euroclear or Clearstream, has blocked the securities of Russian investors after the inclusion of their broker, SPB Exchange or Moscow Exchange, on the SDN List. The investors themselves are not on the SDN List. Each of them files an OFAC specific license application. Where there is prolonged inaction or denial, and the frozen assets are significant, the litigation path opens.
• A correspondent bank has blocked a transfer because a sanctioned person sat in the payment chain or because of other risk factors. Neither sender nor recipient may know what those “risk factors” actually are, since the blocking decision is made on the basis of the bank’s internal compliance procedures. Neither party is on the SDN List, but the funds cannot be returned without an OFAC specific license. If the review of the application drags on or the application is denied, and the amount of the transfer is significant, recourse to federal court is possible.
• A U.S. or foreign bank has blocked a company’s account or transfer under the 50 percent rule, treating a sanctioned person as directly or indirectly owning 50 percent or more of the company’s capital. Where the actual ownership structure does not support that, and OFAC denies the specific license application or fails to respond for an extended period, that can be challenged in court.

In all such situations, the court is not a forum of first instance, but a subsequent stage of review. It is the position actively developed during the administrative process that forms the foundation for any ensuing litigation.

If your OFAC specific license application has been denied or has remained pending without response for an extended period, contact us to discuss whether pursuing judicial review is advisable.

Step One: The OFAC Specific License as a Pre-Litigation Stage

As a general rule, courts require a prior application to OFAC before an asset-unblocking suit will be entertained; without it, the claim may be dismissed on grounds of the ripeness doctrine and the requirement of exhaustion of administrative remedies. The first step in the overwhelming majority of cases is therefore a properly prepared OFAC specific license application.

An OFAC specific license is an individual authorization issued by OFAC for a particular transaction that would otherwise be prohibited. OFAC reviews applications on a case-by-case basis. The typical review period is roughly one year; in complex matters, it can be longer. A high-quality application, supported by documentary evidence, an analysis of the U.S. sanctions framework (statutes, executive orders, and OFAC practice), and, most importantly, a qualified legal argument as to why OFAC should issue the license in this particular case, frequently resolves the matter without recourse to court.

It is by the result of this first stage that one can tell whether a court is needed at all. If OFAC issues the license, the matter is resolved administratively. If OFAC remains silent or denies the application, grounds for suit emerge.

We prepare OFAC specific license applications with an eye not only to approval but also to a possible litigation stage. Contact us for an initial consultation.

Step Two: Compelling OFAC to Act

If OFAC has had an application under review for a year or more without a meaningful response, and the blocked sum is significant, the client may file a suit to compel agency action. This is a separate procedure and should not be confused with challenging a denial: here, the court evaluates not the lawfulness of a decision but the very fact that no decision has been made.

The legal basis is the Administrative Procedure Act (APA), specifically 5 U.S.C. § 706(1), which directs a court to “compel agency action unlawfully withheld or unreasonably delayed.” A supplementary basis in exceptional cases is 28 U.S.C. § 1361, under which a court may issue a writ of mandamus compelling an officer or agency to act.

The governing standard was articulated by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) in Telecommunications Research and Action Center v. FCC (D.C. Cir. 1984) and is known as the TRAC factors. It comprises six factors: (1) whether the time taken to act is reasonable in light of the agency’s mission, (2) whether Congress has provided a statutory timetable, (3) the effect of the delay on human health and welfare, (4) the agency’s competing priorities, (5) the nature and extent of the interests prejudiced by delay; taking into account that (6) the court need not find any impropriety or bad faith to conclude that agency action has been unreasonably delayed.

The practical effect of an APA suit often extends well beyond its formal goal. Formally, the court orders OFAC to issue a decision. In practice, the very fact of filing frequently triggers negotiations and accelerates issuance of the OFAC specific license even before judgment. Once a suit is filed, the case is handled by attorneys at the U.S. Department of Justice (DOJ) representing OFAC, who are required by law to respond within established deadlines to the court. The OFAC review process, therefore, ceases to be open-ended and inevitably moves toward resolution.

If your OFAC specific license application has been pending for more than a year without a clear outcome, contact us. We will analyze the prospects of a suit to compel agency action.

Step Three: Judicial Review of an OFAC License Denial

If OFAC issues an adverse decision on a license application, the next stage is judicial review. The governing framework is 5 U.S.C. § 706(2) of the APA, which empowers the court to hold unlawful and set aside agency action found to be defective on any of the following grounds:

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(B) contrary to constitutional right, power, privilege, or immunity;

(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;

(D) without observance of procedure required by law;

(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute;

(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.

Not all subparagraphs are equally relevant to OFAC licensing challenges. Subparagraph (E) applies only to formal on-the-record adjudications conducted under APA §§ 556–557. Subparagraph (F) (de novo review of facts) is equally unavailable in this context. The operative grounds are (A), (B), (C), and (D), which map onto the following practical theories of challenge.

Grounds for Challenge

1. Arbitrary and capricious decision-making; § 706(2)(A). This is the primary and most frequently invoked ground. OFAC must articulate a rational explanation for each decision and demonstrate a clear connection between its conclusions and the materials in the administrative record. A decision that lacks a reasoned explanation, contains internal contradictions, or reaches conclusions the evidence does not support is vulnerable under this standard. A recognized variant is inconsistency with the agency’s own prior practice: where OFAC has issued specific licenses on materially similar facts and denies the present application without explanation, that position is challengeable as unjustified.

2. In excess of statutory authority: § 706(2)(C). The International Emergency Economic Powers Act (IEEPA), together with the applicable Presidential Executive Orders, sets the outer limits of what OFAC may do. An action that falls outside those limits may be vacated under this ground. This includes: blocking property that is not “subject to the jurisdiction of the United States” within the meaning of 50 U.S.C. § 1702; blocking transactions between two non-U.S. persons with no genuine U.S. nexus; stretching the statutory definitions of “property” or “interest” beyond what the statute authorizes; or formalizing a decision effectively made by another agency without independent OFAC assessment.

3. Without observance of procedure required by law: § 706(2)(D). OFAC is required to follow its own procedural regulations and any applicable statutory procedures. Failure to do so, such as failing to provide a statement of reasons sufficient to enable a meaningful response, relying on evidence not disclosed in the administrative record, or bypassing required internal review steps, renders the decision unlawful on this ground.

4. Lack of support in the administrative record: § 706(2)(A). Judicial review proceeds on the basis of the administrative record, which OFAC must lodge with the court. Gaps, internal contradictions, or evident factual errors in that record are reviewable under the arbitrary and capricious standard. A record that cannot sustain OFAC’s stated rationale will not survive review, and it is not uncommon for the record itself, once produced in litigation, to reveal deficiencies that OFAC could not have anticipated the court would scrutinize.

5. Contrary to constitutional right: § 706(2)(B). The APA expressly authorizes courts to set aside agency action contrary to a constitutional right, power, privilege, or immunity. In the OFAC context, the constitutional theory that has produced the most traction is the procedural due process component of the Fifth Amendment, requiring notice of the grounds for the decision, access to at least the unclassified basis of the administrative record, and a meaningful opportunity to respond.

Each of these grounds may apply in practice, and they are not mutually exclusive. The specific situations in which each is invoked, and with what result, are illustrated by the precedents below.

Precedents Underlying Unblocking Assets Through Litigation

Litigation against OFAC over the past fifteen years has produced a stable body of decisions setting the standards for judicial review of agency action. Most published cases concern challenges to inclusion on the SDN List; the standards developed in those cases, however, apply equally to disputes over the issuance of an OFAC specific license and to the practice of court-driven asset recovery.

A significant recent development is the Supreme Court’s 2024 decision in

Loper Bright Enterprises v. Raimondo (2024), which overruled the Chevron doctrine and eliminated judicial deference to agency interpretations of ambiguous statutes. For OFAC litigation, this means that courts will now independently interpret IEEPA and the applicable executive orders rather than defer to OFAC’s reading – a development that substantially strengthens § 706(2)(C) challenges to designations and license denials that rest on expansive statutory interpretations. Below are the key precedents on which contemporary practice in this area rests.

Zevallos v. Obama, 793 F.3d 106 (D.C. Cir. 2015)

This is the case of Peruvian businessman Fernando Zevallos, designated by OFAC under the Foreign Narcotics Kingpin Designation Act (Kingpin Act). The specific outcome of the dispute went to OFAC, but it is this precedent that fixed the methodology of judicial review of OFAC’s decisions under § 706(2)(A): the court must make sure that OFAC’s conclusion rests on substantial evidence in the administrative record, not on assumptions. Plaintiffs in any case against OFAC, including disputes over license denials, rely on this standard. Zevallos is significant for clearly delineating what OFAC is not free to do at its discretion, and for confirming that gaps in the administrative record are a reviewable defect.

Fares v. Smith, 901 F.3d 315 (D.C. Cir. 2018)

A Lebanese plaintiff challenged inclusion on the Narcotics Kingpin Designations list. The D.C. Circuit confirmed that OFAC is required to give the applicant access to the unclassified portion of the administrative record and a meaningful opportunity to rebut it. This obligation arises both as a constitutional matter, for persons with the requisite U.S. nexus to invoke Fifth Amendment due process, and as a statutory procedural requirement under § 706(2)(D), which applies regardless of the claimant’s citizenship or domicile. For foreign clients, the decision is most directly useful on the latter ground: an OFAC decision that denies access to the unclassified record or forecloses a meaningful response violates the procedural requirements of law independently of any constitutional claim.

Al Haramain Islamic Foundation v. U.S. Department of the Treasury, 686 F.3d 965 (9th Cir. 2012)

The Ninth Circuit reviewed the case of a U.S.-based non-profit foundation whose assets had been blocked by OFAC. The court held that the agency had violated the organization’s procedural rights by failing to provide adequate notice and a meaningful opportunity to respond. Because the plaintiff was a domestic U.S. entity, the court analyzed the violation through the constitutional lens of the Fifth Amendment’s Due Process Clause.

For foreign clients the same procedural defect (denial of notice and opportunity to respond) is independently actionable under § 706(2)(D) as a failure to observe procedure required by law. The case remains the leading precedent on the procedural obligations that attach to any OFAC blocking action.

OKKO Business PE v. Lew, 133 F. Supp. 3d 17 (D.D.C. 2015)

A Ukrainian company challenged inclusion on the SDN List under the Ukraine/Russia-related sanctions program. The case is instructive for clients affected by Russia-related sanctions on several fronts at once: it illustrates the mechanics of the 50 percent rule, the standards for proving actual control, and the limits of the requirement that OFAC’s conclusions be supported by the administrative record. The decision is actively cited today by Russian and other plaintiffs building legal positions in asset disputes. It also illustrates the high deference courts afford OFAC under § 706(2)(A), making the quality of the administrative record, and the precision of the challenge to it, the decisive variable.

Russian Practice of Judicial Pressure on OFAC

The cases of Golikova and Titova, of Buriko , and of Zadornov, board and supervisory board members of Otkritie FC Bank, the former CFO of Sberbank, and a former Russian Finance Minister, are formally cases about removal from the SDN List rather than asset releases. They are nonetheless central to the practice of asset litigation: in each instance, suit in the U.S. District Court for the District of Columbia became the instrument that converted a multi-year administrative process into real negotiations with OFAC and ultimately resulted, among other things, in the unblocking of plaintiffs’ assets.

Conclusion: the precedents confirm that, with a properly built legal position and proper grounding in the administrative record, the federal court is willing to intervene, and OFAC is willing to settle even before a ruling.

If you wish to assess whether these prcedents apply to your case, contact us for a consultation.

The Stages of Asset Unblocking Litigation

In practice, the process unfolds as follows:

1. Situation analysis and strategy selection. At this stage, counsel reviews the case file, determines what is to be challenged (OFAC inaction or denial of a license), and formulates the legal grounds. The entire architecture of the proceeding follows from this.

2. Filing suit in the U.S. District Court for the District of Columbia. This is the standard forum for suits against federal departments and agencies.

3. Defendant’s response and scheduling. OFAC, represented by the U.S. Department of Justice (DOJ) attorneys, ordinarily has 60 days to file a response. The court holds an initial scheduling conference and approves the further course of proceedings.

4. Production of the administrative record and parallel negotiations. OFAC must lodge with the court the materials on which the challenged decision rests or, in the case of an inaction suit, the current status of the application. In parallel, contacts continue with DOJ attorneys, which often lead to a settlement.

5. Cross-motions for summary judgment. APA cases rarely go through a full trial with witnesses: the parties file cross-motions for summary judgment on the basis of the administrative record. It is at this stage that the court issues its substantive evaluation of OFAC’s position.

6. Court ruling and actual release. If the court agrees with the plaintiff, it vacates OFAC’s decision and remands the matter for new consideration. The actual release of the asset follows through subsequent issuance of an OFAC specific license. Often, however, the case ends earlier: OFAC issues the license, the plaintiff withdraws the suit, and the parties close the matter by settlement.

Indicative timing: from filing to court ruling, it may take 12 to 18 months and even more in complex cases. Settlement may be reached substantially earlier where the plaintiff’s legal position is compelling and OFAC perceives procedural risk.

We accompany the proceedings at every stage, from strategy formation to actual release of funds.

Statute of Limitations: Why You Should Engage Counsel Early

The general limitations period for suits against U.S. federal agencies is set by 28 U.S.C. § 2401(a) at six years. The equally important practical question is when, exactly, that period begins to run. As applied to asset unblocking litigation, the answer differs by claim type.

When the Limitations Period Begins to Run

A suit challenging an OFAC denial of a specific license. The period runs from the date of the agency’s formal denial. This is the cleanest scenario: the date of denial is fixed in OFAC’s letter and is not in dispute.

A suit to compel an OFAC decision (unreasonable delay). The picture is different here: agency inaction is a continuing condition, and the right of action formally arises not on a single day but at the point when the delay becomes unreasonable within the meaning of the TRAC factors. There is no rigid procedural deadline as such; with that said, prolonged delay erodes both the evidentiary and the negotiation dynamics, so reliance on the absence of a formal deadline is unwise.

Why Time Works Against the Client Even Where No Deadline Has Run

Beyond the procedural deadline, there is a second, equally important, argument for early engagement. The earlier the work begins, the better preserved the evidence:

• Bank documentation of the block (SWIFT messages, internal compliance notices, correspondence with the depository) is not lost or moved into archives whose access must later be restored.
• Financial counterparties, brokers, and bank personnel are still available to provide confirmations and explanations.
• Ownership and transaction chains are reconstructed without gaps: particularly critical when contesting application of the 50 percent rule.
• Correspondence with OFAC begins at the outset and produces a favorable administrative context on which the litigation position later rests.

Engagement years later, by contrast, requires reconstructing all of this from fragments and substantially complicates work at both the administrative and the judicial stages.

Practical Conclusion

At the first signs of an asset block: a bank notice of blocking, a refusal of a transaction citing sanctions, a depository’s notice of frozen securities — consider engaging counsel without delay. An early start delivers three advantages: a buffer on the procedural deadline, preservation of the evidentiary record, and a strategic edge in dealings with OFAC. Each of those advantages increases the likelihood that asset release will come through a license, without the need for litigation.

If your assets are blocked, contact us: timely analysis of the situation substantially expands the legal options available.

Why Clients Trust Us with Unblocking Assets Through Litigation

This work requires a unified strategy that links the administrative and judicial stages into a single whole.

• We handle matters as a coordinated OFAC specific license + federal court track, not as isolated stages: the application at the first stage is built with the possible suit in mind, and the litigation position rests on materials already introduced into the administrative record.
• We work with situations in which asset release is achievable both through delisting followed by the release and through an OFAC specific license for a particular transaction.
• We negotiate directly with OFAC, with banks holding blocked assets, and with DOJ attorneys; we understand their internal procedures and know how to clear compliance barriers even after a formal favorable decision.
• We work in English and Russian and accompany the client from the first bank notice of blocking through to actual release of funds into the client’s account.

Contact us: we will conduct an initial analysis and propose a concrete plan for unblocking your assets .