Rare OFAC Litigation Defeat: U.S. District Court Rules in Favor of Exxon Mobil and Vacates a $2 Million OFAC Penalty

Photo : Richard Drew, AP  

In July 2017, the U.S. Department of Treasury Office of Foreign Assets Control (OFAC), which oversees U.S. sanctions programs, imposed a $2 million penalty on the oil giant Exxon Mobil Corporation (Exxon). The fine was levied for violations of Ukraine-related sanctions on Russia, which were imposed after Russia’s effective annexation of Ukraine’s Crimea region. The imposition of the penalty related to contracts between Exxon and the Russian oil company Rosneft. Rosneft was not on OFAC’s list of Specially Designated Nationals and Blocked Persons (SDN List) at the time the contracts were signed. However, Rosneft’s President was on the List, and it was he, Igor Sechin, who had signed the contracts on behalf of Rosneft.

In a rare decision, Exxon challenged OFAC’s decision in federal court in Texas. Even rarer was the court’s December 31, 2019 decision ruling in favor of Exxon’s motion for summary judgment and vacating OFAC’s $2 million penalty. The U.S. District Court for the Northern District of Texas found that the OFAC penalty violated the Due Process Clause of the Fifth Amendment, because OFAC had not given Exxon fair notice that its conduct with Rosneft would violate Ukraine-related sanctions. While OFAC had given informal guidance in the past that dealing with SDN-listed persons acting in a representative capacity like Sechin could run afoul of sanctions, this informal guidance related to a different sanctions program.

Legal observers speculate that this decision may encourage OFAC to issue informal guidance more consistently across its various sanctions programs in the future to avoid similar litigation outcomes.

By Amin Bahrami, Legal Fellow