ExxonMobil Asks Court to Set Aside $2 Million Penalty for Sanctions Violations

ExxonMobil is requesting that a court vacate a $2 million penalty imposed by the Office of Foreign Assets Control for doing business with Rosneft, a Russian oil company, according to a brief filed Aug. 26 with the U.S. District Court for the Northern District of Texas.

OFAC imposed the penalty in 2017 after saying ExxonMobil violated the Ukraine-Related Sanctions Violations by doing business with Igor Sechin, Rosneft’s sanctioned CEO. OFAC said ExxonMobil violated U.S. sanctions by signing “eight legal documents related to oil and gas projects” with Sechin.

In its lawsuit, ExxonMobil argues that it did not deal with Sechin -- only his company. It also said the 2014 executive order that imposed the Ukraine-related sanctions did not include Rosneft and only blocked transactions with Sechin’s “personal” assets and property. The sanctions did not target companies Sechin manages, ExxonMobil said.

“In imposing penalties on ExxonMobil, OFAC relied on a flawed premise: that ExxonMobil executed these documents, and thereby entered into prohibited transactions, with Sechin, who was the subject of sanctions,” the motion said. “But Rosneft, not Sechin, was the party to each of those documents, and Rosneft was indisputably not subject to sanctions at that time."

ExxonMobil also said that OFAC’s penalty contradicted statements and positions held by the administration and the Treasury Department. Treasury had specifically said that business deals with Rosneft were allowed and that U.S. businesses “could interact with Sechin in his capacity as a Rosneft board member” as long as discussions did not involve Sechin’s “personal” business.

“The Treasury Department has expressly endorsed the very principle OFAC rejects here: that business dealings with Sechin in connection with Rosneft are permissible,” ExxonMobil said.

The motion said that OFAC has “crafted its alternative interpretation” of U.S. sanctions to say that “the involvement of a specially designated national, regardless of who owned the property at issue, is restricted -- out of whole cloth without any basis in the text of the regulations.” ExxonMobil argued that Sechin “was acting exclusively in a representative capacity on behalf of a non-blocked entity.”

The oil company also said the penalty should be vacated on the basis that OFAC violated the Fifth Amendment's due process clause by failing to provide “fair notice of the regulatory requirement that ExxonMobil allegedly violated.” ExxonMobil said OFAC did not provide “‘ascertainable certainty’ of the agency’s interpretation,” because reviewing OFAC regulations and public statements “would not have enabled the public to ‘identify ... the standards with which [OFAC] expects parties to conform.’”

ExxonMobil requested that the court set aside the penalty and declare OFAC’s penalty notice “unlawful.” Along with OFAC, ExxonMobil also named Treasury Secretary Steven Mnuchin and OFAC Director Andrea Gacki as defendants.