OFAC Sued Over Constitutionality of 50 Percent Rule on Ownership

A group of U.S. venture capital funds is suing the Treasury Department’s Office of Foreign Assets Control, alleging that OFAC’s 50 percent rule is unconstitutional, court records show. The lawsuit says the rule -- which bans companies and people from dealing with entities owned 50 percent or more by a sanctioned party -- unlawfully prevented the plaintiffs from accessing their money, property and investments, violating unreasonable seizure and due process laws under the Fourth and Fifth amendments to the Constitution, respectively.

Along with OFAC, the lawsuit, filed July 1 with the U.S. District Court for the Southern District of New York, names Treasury Secretary Steven Mnuchin and OFAC Director Andrea Gacki as defendants.

The plaintiffs -- composed of nine entities and one person -- are asking the court to: declare the 50 percent rule unconstitutional, force OFAC to unblock their assets, order OFAC to allow the companies to negotiate with the blocked parties to collect outstanding funds and “grant any other relief the court deems appropriate,” records show.

The lawsuit lists several broad issues with OFAC’s 50 percent rule, including the fact that OFAC has not issued detailed rules for how U.S. companies collect property that becomes indirectly sanctioned through the 50 percent rule. OFAC’s “sole administrative remedy” is for companies to apply for specific licenses that would allow them to retrieve blocked funds, the lawsuit says. The plaintiffs applied for licenses in April 2018, the lawsuit says, but have not gotten an answer despite follow-ups. “Plaintiffs remain in complete limbo,” the lawsuit says, “unable to control, manage, use, or dispose of their property.”

The lawsuit also says OFAC’s regulations don’t provide limits “on the time within which OFAC must act on a license application” to unblock seized property and don’t “set forth any legal standards that the agency must follow” when considering the applications. The lawsuit stems from sanctions OFAC placed on Russian oligarch Viktor Vekselberg and Renova Group. The plaintiffs own investment funds that are also indirectly owned by Vekselberg and Renova, the lawsuit says. The Treasury Department did not respond to a request for comment.

Email ITTNews@warren-news.com for a copy of the complaint.