Curtis Seeks U.S. Court Order to Direct OFAC to Make a Decision on SDN Delisting Application

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Curtis, Mallet-Prevost, Colt & Mosle LLP has filed a complaint on behalf of its client, Pola Raiz OOO before the United States District Court for the District of Columbia against OFAC, the Office of Foreign Assets Control, to seek a court order to compel OFAC to make a decision on Pola Raiz’ application to be delisted as a blocked entity.

Pola Raiz is a privately owned shipping company incorporated in the Russian Federation that maintains a fleet of shipping vessels for commercial purposes. The company was added by the Department of State to OFAC’s List of Specially Designated Nationals and Blocked Persons, the so-called SDN List, on February 24, 2023.

The SDN List is maintained by OFAC and it publicly identifies individuals, groups, and entities that the U.S. government considers to be acting contrary to the national security, foreign policy, or economic interest of the United States. Individuals and entities placed on the SDN List have no prior notice of, or right to challenge, their placement on the list prior to their designation.

Being listed as an SDN carries significant implications: assets under U.S. jurisdiction are frozen, U.S. individuals and companies are generally barred from transactions with SDNs, and violations can lead to severe penalties, including fines and imprisonment. Being listed can tarnish reputations, affect global business relationships and opportunities, and result in restricted access to international financial systems and markets.

The State Department designated Pola Raiz under Section 1(a)(i) of Executive Order (“E.O.”) 14024 for operating in the marine sector of the Russian Federation’s economy.

Pola Raiz ’s entire fleet of 21 vessels was also placed on the SDN List for being property in which Pola Raiz has an interest. The marine sector of the Russian economy was previously designated as a target of blocking sanctions by OFAC in a determination issued in March 2022. Generally, a sector determination exposes persons that operate or have operated in an identified sector to sanctions risk; however, a sector determination does not automatically impose sanctions on all persons who operate or have operated in the sector.

The U.S. government has provided little reasoning for designating Pola Raiz as an SDN. The State Department’s press release only refers to Pola Raiz ’s role in increasing Russia’s trade with Turkey and aiding shipments to Arctic construction sites as reasons for its listing, without providing further justification. Neither trading with Turkey nor facilitating Arctic shipments inherently violates U.S. sanctions, E.O. 14024, or any of its determinations.

Beginning in April 2023, Pola Raiz started to file delisting applications with the State Department and OFAC. Under U.S. law, administrative agencies are required to address matters brought before them in a timely manner. Despite that requirement, OFAC and the State Department have yet to issue a decision on Pola Raiz’s various requests for delisting.

The case number is Pola Raiz OOO v. Blinken, et al., Case No. 24-cv-323. The U.S. government must respond to the complaint by April 16, 2024.