‘Ownership and operation are distinct,’ says DC court, upholding Deripaska sanctions

In a case which will be read carefully by others considering similar suits, Oleg Deripaska, the Russian oligarch and founder of Rusal, sanctioned in 2018 by the US government, has lost his appeal in which he challenged those sanctions.

In its judgment, the US District Court for the District of Columbia explained that while Deripaska had not challenged the executive orders (‘E.O.’) under the authority of which the sanctions were placed on him, none of the three arguments he made had merit.

The court said his first argument was that ‘the sanctions exceed OFAC’s statutory authority because, he says, they respond not to the threat Russia poses to Ukraine but to a generalized “undeclared national emergency” concerning Russia’s “worldwide malign activities.”’

But it said, ‘Deripaska’s only support for that contention is OFAC’s April 6, 2018, press release announcing sanctions against him and numerous other actors. He reads that press release to imply that an undeclared emergency concerning perceived Russian malign activities broader than the Ukraine crisis “may have motivated the agency to undertake the action.”… Nothing about the press release displaces the usual rule that “a court may not reject an agency’s stated reasons for acting simply because the agency might also have had other unstated reasons” or motivations, including those stated only after the agency’s decision [and] the press release appropriately reflects how the executive orders apply to Deripaska by summarizing the extensive justifications OFAC gave in its evidentiary memoranda.’

His second argument, it said, was that ‘OFAC acted arbitrarily and capriciously by sanctioning him under E.O. 13661. He contends in particular that OFAC lacked authority to sanction him for conduct that predated the E.O.’s effective date.’

But, it said, ‘We need not consider questions of the retroactive reach of the IEEPA and the E.O., because the evidence of Deripaska’s post-order conduct suffices to support the sanctions. OFAC cites substantial evidence that Deripaska acted on behalf of Russian officials after the President issued E.O., (noting that, in the years following the President’s E.O., Deripaska laundered money on behalf of President Putin).’

The third argument, it said, was that OFAC ‘acted arbitrarily and capriciously by sanctioning him but not his energy companies under E.O. 13662.’

The court explained: ‘Specifically, Deripaska claims that OFAC chose to lift sanctions from two major Russian energy companies – En+ and EuroSibEnergo – on the basis that Deripaska no longer “own[ed]” them, even as it maintains that Deripaska continues to “operate” in Russia’s energy sector. Seeing a contradiction, Deripaska argues he cannot be operating in the energy sector both because he no longer owns those energy companies, retaining only non-controlling stakes, and because the companies are themselves no longer subject to OFAC sanctions…But the district court correctly held that “[o]wnership and operation are two distinct concepts, with the latter conveying a far broader scope of conduct.”’

The full judgment is at: https://www.cadc.uscourts.gov/internet/judgments.nsf/C2B2FFF8D0E2D21985258814004F12B9/$file/21-5157-1940976.pdf