On December 31, 2019, the US District Court for the Northern District of Texas threw out a $2 million fine issued in 2017 by the Treasury Department’s Office of Foreign Assets Control (OFAC) under the Ukraine-Related Sanctions Regulations (URSR), 31 C.F.R. § 589. The much-awaited opinion held that OFAC did not provide “fair notice” that the URSR prohibited dealing in contracts signed by a sanctioned individual on behalf of a non-sanctioned company, prior to the issuance of the penalty.
In reaching its decision, the Court concluded that the language of the URSR did not “’fairly address’ whether a US entity receives a service from [a Specially Designated National (SDN)] when that SDN performs a service enabling the US person to contract with a non-blocked entity.” Moreover, public statements made by relevant US government officials in 2014—some of which could be read to conflict—did not “create ascertainable certainty” of OFAC’s intention with respect to the URSR’s application. (The Court also held that contemporaneous reports by media outlets were not probative of OFAC’s regulatory intent.)