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Lack of Transparency Plagues Government Sanctions Decisions, Lawyers Say

Petitioning to be delisted from a sanctions regime has become increasingly difficult and often lacks transparency, both in the U.S. and Canada, trade lawyers from both countries said this week. Several lawyers, including a former high-ranking senior U.S. sanctions official, said designated people often aren’t given an adequate explanation for why they were sanctioned and therefore aren’t able to fairly challenge the basis for their designation.

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Richard Newcomb, a DLA Piper lawyer and former director of the Office of Foreign Assets Control, bemoaned what he said has become the increasing “politicization” of U.S. sanctions decisions. OFAC often relies on government intelligence to add someone to its Specially Designated Nationals List even though that sensitive information can’t be used as evidence in a sanctions case, Newcomb said during a sanctions enforcement and compliance conference hosted by the Wilson Center. “Yet it is increasingly used as the basis for blacklisting of non-U.S. persons.”

He also said there’s typically “no discovery” process in delisting battles because a sanctions designation isn’t a criminal charge, and sensitive intelligence information can’t be publicly released. “Thus, there's little if any opportunity to effectively challenge without commonly understood notions of due process,” Newcomb said.

That same “lack of transparency” plagues the Canadian delisting process, said Jessica Horwitz, a Toronto-based trade lawyer with Bennett Jones. She said her firm has been approached by people and entities designated under Canada’s sanctions against Russia that say they have no ties to Russian President Vladimir Putin, have no involvement in Russia’s war in Ukraine and haven’t engaged in human rights abuses but don’t know how to challenge their designation.

“How do they prove their lack of involvement” to Canada “in a way that's going to encourage a delisting decision? How do you prove a negative?” Horwitz said. That process becomes “even more difficult” when designated people aren’t allowed to view the evidence underlying the designation, she said, because that evidence is protected by Canadian disclosure laws.

Canada currently has a “number of cases” before its federal court that are challenging sanctions designations, Horwitz said, but none have resulted in public decisions yet.

“There's a lack of transparency available to the person that has been targeted by the listing measure as to the grounds for listing and the evidence that underpins the listing,” she said. “How do you ensure that due process and procedural fairness is followed?”

Other lawyers have made similar arguments, particularly as the U.S. has seen an influx of delisting requests spurred by the rapid pace of sanctions against Russia over the last two years (see 2305010023).

Stephen Burridge, director of sanctions policy at Global Affairs Canada, said the government is “reflecting really carefully on what kind of information we're able to make public on listings.” But he also noted that the government can’t rely solely on sensitive intelligence to sanction someone.

“It's not that the process is hidden or relying on intelligence. All the listings are based on open-source material. They have to be,” he said. “We cannot use intel to list.”

U.S. officials during the conference said the Biden administration has recently made strides in its delisting efforts. Michael Cass-Antony, a senior advisor for sanctions policy and implementation at the State Department, said the administration has shown “a willingness to roll back certain measures.” He pointed to the results of a Treasury-led sanctions review released by the agency last year, which outlined U.S. plans to more carefully consider the impacts of designations, coordinate better with allies and more (see 2110190044).

“You don't hear about the smaller examples of the delistings that happen on a very routine basis, that primarily OFAC engages in with the guidance of the State Department, and those are happening quite frequently, honestly,” Cass-Antony said.

Rachel Fredman Lyngaas, Treasury’s chief sanctions economist, made similar points, saying the Biden administration has made a “concerted focus” on reviewing past designations.

“OFAC does engage quite a bit with private industry and partners on those cases,” she said.

She added that this process differs for broader sectoral sanctions, such as restrictions on an entire industry of a country’s economy. Decisions on lifting those sanctions are “very much case specific” and are often only made after diplomacy with the target country, she said, pointing to the U.S.’s suspension of certain sanctions on Venezuela in October after the country's government and opposition formally agreed to work together on conditions for the next presidential election (see 2310180070).

“In terms of dealing with actors where we're still seeking behavior change, or we're still seeking free and fair elections in some of these countries,” she said, “there has to be conversation and diplomacy surrounding any kind of efforts for sanctions relief.”