March 29, 2022

Russian billionaire loses appeal to defeat sanctions

The United States Court of Appeals has affirmed the district court’s judgment dismissing Russian billionaire Oleg Deripaska’s challenge to his designation by the US Treasury’s Office of Foreign Assets Control in 2018. 

Deripaska was sanctioned pursuant to Executive Orders 13661 and 13662, which were issued in March 2014 in response to Russia’s invasion of the Crimea in February of that year.  In his attempt to annul the sanctions, Deripaska argued that OFAC had exceeded its authority by incorporating unstated motives broader than the Crimea invasion in its decision to impose sanctions on him.  The Court rejected this argument, saying that EO 13661 and 13662 “plainly cover the types of actions OFAC attributes to Deripaska” and furthermore, “there is no evidence that the government acted for reasons other than those it provided.”

Deripaska argued, secondly, that OFAC acted arbitrarily and capriciously by basing his designation under EO 13661 on conduct that predated the Executive Order.  The Court rejected this argument, noting that Deripaska’s post-EO conduct alone sufficed to support his designation, without considering the retroactive reach of the International Emergency Economic Powers Act (IEEPA), which formed the basis for issuing the Executive Orders.

Finally, Deripaska contended that his designation under EO 13662 was  arbitrary and capricious, since that Executive Order targets the property of “additional persons contributing to the situation in Ukraine,” including those who operate in the energy sector.  In January 2019, sanctions were lifted from two Russian energy companies previously owned by Deripaska – En+ and EuroSibEnergo – on the grounds that they were no longer “owned” by the billionaire, following Deripaska’s divestment of some of his stake in these companies.  The Court of Appeals agreed with the district court’s holding on this issue as well, explaining that “[o]wnership and operation are two distinct concepts, with the latter conveying a far broader scope of conduct,” and finding that Deripaska operates extensively in the Russian energy sector through his continued, albeit reduced, ownership and control of En+ and his representation of Russia and Russian energy companies on international councils.