ExxonMobil to Challenge Retroactive Changes to Guidance on Russian Sanctions
July 20 2017 - 2:53PM
Business Wire
ExxonMobil said today it has launched a legal challenge to a
finding by the Treasury Department’s Office of Foreign Assets
Control (OFAC) that it violated U.S. sanctions against Russia in
2014 when the company followed authoritative and specific guidance
from the Obama administration that OFAC retroactively changed a
year later.
“OFAC seeks to retroactively enforce a new interpretation of an
executive order that is inconsistent with the explicit and
unambiguous guidance from the White House and Treasury issued
before the relevant conduct and still publicly available today,”
said ExxonMobil’s filing in the U.S. District Court.
OFAC’s action is fundamentally unfair and constitutes a denial
of due process under the Constitution and violates the
Administrative Procedure Act because market participants, including
ExxonMobil, did not have notice of the interpretation OFAC now
seeks to retroactively enforce, the filing said.
At the center of the dispute are interactions ExxonMobil had
with the Russian oil company, Rosneft and with Igor Sechin in his
capacity as CEO of Rosneft.
OFAC alleges that ExxonMobil violated sanctions when it signed
certain documents in May 2014 that were countersigned on behalf of
Rosneft by Sechin acting in his official capacity as a Rosneft
executive. OFAC has acknowledged that White House and Treasury
Department officials repeatedly said sanctions involving Sechin
applied only to his personal affairs and not to companies that he
managed or represented.
A March 17, 2014, White House Fact Sheet said: “Our current
focus is to identify these … individuals and target their personal
assets, but not companies that they may manage on behalf of the
Russian state.”
The position was confirmed on May 16, 2014 by a Treasury
Department spokesperson, who said by way of example that BP’s
American CEO was permitted to participate in Rosneft board meetings
with Sechin so long as the activity related to Rosneft’s business
and not Sechin’s personal business.
However, two months later, in July 2014, despite the White House
and Treasury guidance that had already been given, OFAC contacted
ExxonMobil to say it was still formulating its own policy. Nearly a
year later, in June 2015, OFAC notified ExxonMobil through a
pre-penalty notice that it had violated guidance that had not been
developed when the alleged offences took place. The penalty notice
was issued on July 20.
When Sechin was added to the sanctions list in April 2014, the
White House and Treasury Department in numerous briefings and media
reports specifically stated the sanctions applied to him in his
individual capacity and with respect to his personal assets, and
not the business he manages.
ExxonMobil followed the clear guidance from the White House and
Treasury Department when its representatives signed documents
involving ongoing oil and gas activities in Russia with Rosneft – a
non-blocked entity -- that were countersigned on behalf of Rosneft
by Sechin in his official capacity. At the time of the signing,
those activities themselves were not under any direct sanction by
the U.S. government.
ExxonMobil said a 2012 Supreme Court ruling involving drug
company SmithKline Beecham is relevant to this matter.
In the case, the court said the following: “It is one thing to
expect regulated parties to conform their conduct to an agency’s
interpretations once the agency announces them; it is quite another
to require regulated parties to divine the agency’s interpretations
in advance or else be held liable when the agency announces its
interpretations for the first time in an enforcement proceeding and
demands deference.”
Chronology of Events Leading to Allegations of Sanction
Violations
- March 16, 2014. President Obama issues
Executive Order 13661 Blocking Property of Additional Persons
Contributing to the Situation in Ukraine.
- March 17, 2014. White House Fact Sheet:
“Our current focus is to identify … individuals and target their
personal assets, but not companies that they may manage on behalf
of the Russian state.”
- March 17, 2014. White House Briefing:
“[O]ur current focus is to identify these cronies of the Russian
government and target their personal assets and wealth, rather than
the business entities and industries that they may manage or
oversee.”
- April 28, 2014. Treasury Department
Briefing: Sanctions were applicable to Igor Sechin
“individually.”
- April 28, 2014. Tony Blinken, White
House Deputy National Security Adviser, said on PBS NewsHour that
Sechin was sanctioned in his “individual capacity” and that Rosneft
was not designated, “minimizing any impact or consequences on
American companies.”
- April 28, 2014. New York Times: “U.S.
persons are not prohibited from dealing with Rosneft, including
participating in meetings of the company board on which Mr. Sechin
sits,” a Treasury Department official said.
- April 28, 2014. Foreign Policy
magazine: “Sechin’s personal assets will be frozen, but Treasury
officials said the designation wouldn’t impact U.S. companies’
ability to do business with Rosneft because Sechin does not control
the firm.”
- May 14, 2014. The president of
ExxonMobil Development Company signs a document relating to a
potential liquefied natural gas (“LNG”) plant in Far East
Russia.
- May 15, 2014. ExxonMobil-Rosneft High
Arctic Completion Deeds signed by president of ExxonMobil
Exploration Company and Sechin, in his official capacity as
president of Rosneft.
- May 16, 2014. Wall Street Journal: BP’s
CEO, an American, “may participate in board meetings with Mr.
Sechin as long as they are conducting Rosneft's, and not Mr.
Sechin's, personal business, the Treasury Department said.”
- May 23, 2014. Sechin, acting in his
official capacity as Rosneft’s president, countersigns the document
relating to a potential LNG plant in Far East Russia.
- July 22, 2014. OFAC issues an
administrative subpoena to ExxonMobil Development Company.
- July 30, 2014. OFAC acknowledges it has
not yet come to a legal conclusion on whether Sechin’s signature
violated sanctions.
- June 29, 2015. OFAC issues pre-penalty
notice to ExxonMobil.
- Sept. 26, 2016. OFAC dismisses the
importance of the White House guidance at a meeting with
ExxonMobil.
- July 20, 2017. OFAC issues penalty
notice to ExxonMobil.
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