Grist for the litigation mill in U.S. economic sanctions programs

Marcuss, Stanley J

I. INTRODUCTION

Economic sanctions have played a role in U.S. foreign policy throughout the nation's history. Even before the Declaration of Independence, American colonists repeatedly used economic sanctions to challenge British authority by boycotting English goods.1 The U.S. Congress also used economic sanctions as a tool of foreign policy in the years leading up to the War of 1812, imposing foreign trade embargoes in 1807 and again in 1811. 2 During the Civil War, economic sanctions in the form of a blockade of the Confederate States provided the resource-rich North with a significant strategic advantage.3

The statutory basis for U.S. economic sanctions in the twentieth century dates back to the enactment of the Trading with the Enemy Act (TWEA)4 in 1917, six months after the United States entered World War I. As originally enacted, the TWEA gave the President broad powers in times of war to regulate or prohibit transactions involving property in which a foreign country or national thereof had any interest.5 The TWEA was subsequently amended in 1933 to give the President authority to exercise his TWEA powers in response to peacetime national emergencies.6 Under the TWEA, the United States imposed sanctions against Germany during the First World War;7 Japan prior to the U.S. entry into the Second World War;8 China following the Communist takeover at the end of World War II; North Korea after the invasion of South Korea; Cuba after Fidel Castro's rise to power in 1963; North Vietnam following attacks on South Vietnam in 1964; and South Vietnam and Cambodia after the fall of Saigon in 1975. 9

In addition to the TWEA, the United States has also imposed sanctions pursuant to the foreign policy export control authority contained in the Export Administration Act.10 First enacted in 1949 as the Export Control Act,11 the Export Administration Act provides a mechanism for regulating exports of goods and technology to the Soviet bloc in order to protect U.S. national security interests.12 While the Export Administration Act and its implementing regulations expired on August 20,1994, the U.S. Department of Commerce currently administers similar regulations pursuant to the International Emergency Economic Powers Act (IEEPA).13

Congress enacted the IEEPA in 1977 in order to change the statutory basis for the imposition of economic sanctions in times of peace and to restrict the use of the TWEA to times of war.l4 The IEEPA authorizes the President to impose sanctions "to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat."15 Pursuant to the IEEPA, the United States has imposed sanctions against Angola, Burma, Egypt, Haiti, Iran, Iraq, Kuwait, Libya, Nicaragua, Panama, Zimbabwe (Rhodesia), South Africa, Yugoslavia and, most recently, Burma (Myanmar) and Sudan.l6 It has also imposed sanctions against individuals and organizations that have engaged in, or are suspected of being engaged in, narcotics trafficking or international terrorist activities.17

While the Executive Branch imposes most economic sanctions pursuant to broad grants of authority like the IEEPA, Congress occasionally mandates the imposition of sanctions by statutes aimed at specified situations. One example is the Helms-Burton Act,ls which authorizes suits for damages against those who traffic in property confiscated by the Cuban government.19 It also authorizes the President to exclude such persons from entering the United States.20 Another example is the Iran and Libya Sanctions Act of 1996,21 which requires the President to impose sanctions against those that invest more than certain statutory amounts in the Iranian or Libyan petroleum sectors.22 U.S. economic sanctions are complex and take a variety of forms.

Some prohibit dealings of virtually any kind with the target country.23 Such sanctions typically extend, albeit in varying degrees, to entities organized under the laws of the target country and to its individual citizens or residents. They may even extend to entities outside the target country that are owned or controlled by entities or nationals of the target country.24

Some sanctions programs freeze any property of the sanctioned country that is in the United States or in the possession or control of U.S. persons.25 So-called "freeze orders" of this kind may extend to property of private entities organized under the laws of the target country, as well as property of citizens or residents of the target country.26 ,

Some sanctions programs expressly apply their prohibitions to foreign subsidiaries of U.S. companies and to U.S. citizens residing or working abroad; others are more limited in their extraterritorial reach.27 In addition, some sanctions programs prohibit U.S. parent companies and U.S. nationals from approving or facilitating foreign subsidiary transactions with the sanctioned country even if the transaction is permissible for the foreign subsidiary.2 U.S. nationals working for foreign companies are also prohibited under most sanctions programs from being involved in foreign company transactions with the sanctioned country even though the transaction is permissible for the foreign company.29 All sanctions programs prohibit transactions that are for the purpose or have the effect of evading or avoiding any of their prohibitions.30

It is far from surprising that U.S. economic sanctions have generated a significant degree of litigation over the years. Executive orders and regulations implementing such sanctions are often sweeping in scope and involve difficult issues of interpretation. Moreover, identical concepts are often expressed slightly differently from one program to another, raising issues of whether such differences should be given legal significance.31

Some litigation has involved challenges to the constitutionality of specified sanctions on First Amendment freedom of speech or freedom of association grounds.32 Other constitutional challenges have raised Fifth Amendment taking, equal protection or other due process claims.33 Some have challenged the President's delegation of authority to the Treasury Department's Office of Foreign Assets Control (OFAC) to issue economic sanctions regulations as being beyond the authority granted by Congress.34 Recently, a federal district court upheld a challenge to OFAC's broad interpretation of its prohibition on actions alleged to constitute evasion or avoidance.35

These and other significant issues lurk in many of the civil enforcement actions that OFAC has brought over the years. They seldom are fully litigated, however, because the nature of civil enforcement under OFAC's procedures places a substantial premium on settlement rather than litigation.

Under IEEPA-based sanctions programs, for example, OFAC's director proposes a penalty if he believes a violation has occurred.36 If the accused refuses to pay, the matter is referred to the Justice Department for appropriate action to recover the penalty in a civil suit in federal district court.37 These procedures provide no opportunity prior to a judicial enforcement proceeding to ventilate issues of interpretation in the less threatening environment of an administrative agency hearing before an administrative law judge.

Moreover, even though OFAC is required under TWEA-based sanctions programs to bring civil enforcement actions before an administrative law judge,38 these judges as a rule tend to defer to agencies' interpretations of their own regulations. Consequently, challenges to OFAC regulatory interpretations in administrative agency hearings are likely to have little chance of success. The only recourse, therefore, is to the courts.

The purpose of this article is to explore how courts have dealt with the more significant economic sanctions issues and to identify other significant economic sanctions issues that the courts may face in the future. What permeates the case law is a palpable judicial tendency to defer to the executive branch because of the foreign policy considerations inherent in economic sanctions programs. The result is a notable reluctance to define regulatory terms and concepts and a willingness on the part of the courts to indulge interpretations that the executive branch advances as necessary to achieve a given regulatory scheme's overall policy objectives.

There are, nonetheless, notable exceptions. In 1995, in Looper v. Morgan,39 the district court refused to convict a lawyer for allegedly violating the Libyan Sanctions Regulations,40 because of what the Court characterized as a "Kafkaesque" OFAC interpretation of a regulatory prohibition on evasion or avoidance.41 While Looper stands as a somewhat lonely sentinel in a sea of judicial deference, its beacon may attract others in the years to come as economic sanctions programs grow in frequency and complexity and the executive wrestles with the difficult challenge of tailoring sanctions programs to particularized circumstances while using terms and concepts of general applicability. Increasingly, the issue will be whether the understandable desire of the executive branch to apply economic sanctions directives in an idiosyncratically to meet foreign policy imperatives must yield to the imperatives of legal consistency and precision.

II. COURT CASES

Over the past forty years, the courts have addressed various aspects of OFAC's economic sanctions programs. They have ruled on questions of statutory and regulatory interpretation; the scope of congressionally delegated powers; the impact of sanctions regulations on First Amendment freedom of speech guarantees, Fifth Amendment taking, equal protection and other due process issues; the deference to be given the executive branch on matters of foreign policy; and such recurring issues as the nature of the interests affected by a given sanctions prohibition and the meaning of ubiquitous prohibitions on evasion or avoidance. Many cases have involved the Cuban Assets Control Regulations,42 although courts have also issued important rulings under sanctions programs relating to China, North and South Vietnam, Zimbabwe (Rhodesia), Iran, Iraq, Nicaragua, Libya and Yugoslavia.43

A. Fifth Amendment Taking

A recurring issue is whether prohibitions under various sanctions programs constitute a taking of property without due process in violation of the Fifth Amendment. Despite the widely varying contexts in which this issue has arisen, the courts have reached substantively similar conclusions-albeit for different reasons.

In Sardino v. Federal Reserve Bank of New York,44 for example, a Cuban national residing in Cuba unsuccessfully sought to compel the Federal Reserve Bank of New York to authorize the transfer to him of some $7,000 that was on deposit in his savings account in a New York bank. The money represented the proceeds of a life insurance policy on his son, who had died in New York.

In upholding the Bank's refusal under the Cuban Assets Control Regulations to issue a license to transfer the funds, Judge Friendly concluded that, while the plaintiff was entitled to the protections of the Fifth Amendment despite his status as a non-resident alien, the deprivation of property that the Regulations effected was not without due process because of the Supreme Court's approval in Silesian-American Corp. v. Clark45 of the seizure of assets during times of war as a means of preventing property from being used to assist an enemy. According to Judge Friendly, "Hard currency is a weapon in the struggle between the free and communist worlds; it would be a strange reading of the Constitution to regard it as demanding depletion of dollar resources for the benefit of a government seeking to create a base for activities inimical to our national welfare."46

Citing precedent dating back to the pre-World War II Litvinov Assignment whereby the Soviet Union transferred assets of Russian corprations to the United States to reimburse American citizens whose property had been seized during the Russian revolution,Judge Friendly also concluded that freezing the assets of Cuban nationals was justified as a means of immobilizing those assets until the United States could determine whether they were needed to compensate the United States or its citizens for damage caused by the Cuban government.47

In Tran Qui Than v. Regan,48 the Ninth Circuit advanced a different rationale for dismissing a Fifth Amendment taking claim. There, the plaintiff, a citizen of Vietnam but a U.S. resident alien, sought payment from the U.S. Army under certain contracts the Army had entered into with Vietnamese contractors before the fall of Saigon. The Army's payment obligations under those contracts had been assigned to a Vietnamese bank of which the plaintiff was a shareholder. In order to gain access to the bank's funds, the bank's shareholders attempted to dissolve the bank and transfer its assets to themselves after the communist takeover.

The Army did not dispute the plaintiff's contract claim but contended that payment was prohibited under the Foreign Assets Control Regulations49 unless the Secretary of the Treasury issued a license to authorize the payment. The Secretary refused to do so, however, on the ground that the payments were property in which the Vietnamese bank had an interest at the time the relevant blocking order had been issued, because either the bank had not been effectively dissolved or the purported transfer of its assets to its shareholders had been ineffective. The plaintiff thereupon claimed that the Secretary's refusal effected a taking of property in violation of the Fifth Amendment.

In dismissing that contention, the court expressly recognized that "blocking involves a deprivation of the enjoyment of a property interest" but concluded that such action "does not constitute a constitutionally cognizable taking without just compensation" because the "deprivation is temporary . . . and is not equivalent to vesting."50 "Vesting," the court observed, "occurs when title to assets is transferred to the government; blocking does not transfer title but rather prohibits temporarily, transactions involving those assets."51

In Chang v. United States,52 the Court of Claims was presented with the issue of whether a prohibition under the Libyan Sanctions Regulations53 on the continued performance of an employment contract constituted an improper taking under the Fifth Amendment. Citing Supreme Court precedent in other contexts, the Court concluded that the answer turned on an "'ad hoc' analysis of such factors as the character of the Government's action, the economic impact of the regulation on the property owner, and the extent of interference with reasonable, investment-backed expectations."54 In ultimately concluding that the Libyan Sanctions' prohibition did not effect an unconstitutional taking, the court observed that "a public program adjusting the benefits and burdens of international commerce . . . . `does not constitute a taking requiring Government compensation.' "55 Furthermore, the court held that because the plaintiffs' inability to perform their employment contracts did not deprive them of the ability to work elsewhere, they were not permanently deprived of a substantial economic interest and, as a consequence, had not suffered "that degree of governmental intrusion upon private property interests for which fairness would demand the payment of just compensation."56 Finally, the court concluded that the plaintiffs had no reasonable expectation that the government would never interfere with the performance of their contracts because "[t]he possibility of Executive intrusion upon foreign commerce is `part and parcel of the understanding businessmen share about the realities of the marketplace.' "57

The courts have, thus, consistently found challenges to OFAC enforcement of economic sanctions programs based on Fifth Amendment taking claims to be without merit. The rationale varies but is essentially grounded in the notion that, because prohibitions on the exercise of property rights pursuant to sanctions programs promulgated under the TWEA or the IEEPA do not amount to permanent deprivations of such rights, they do not implicate the Fifth Amendment.

In at least one case under the IEEPA, however, a court has expressed considerable doubt as to whether that rationale is valid under circumstances where the "limitation on use of the frozen property is `extensive in impact, and indefinite in duration.'"58 If the deprivation were to continue indefinitely, according to the Court of Claims in E-Systems, "it may be equivalent to a taking."59

Because the Foreign Assets Control Regulations have been in effect for almost half a century and the Cuban Assets Control Regulations have been in effect for more than a third of a century, one might fairly ask what it would take for the freeze orders thereunder to be regarded as "indefinite in duration."

B. Unlawful Delegation of Authority

Another recurring issue is whether Congress or the President has improperly delegated authority to OFAC to structure economic sanctions programs. Here, too, the courts have generally been untroubled by the latitude granted to OFAC.

The general attitude of the courts on this issue is exemplified by the summary manner in which Judge Friendly dealt with the delegation issue in Sardino.60 According to Judge Friendly:

The claim that the Constitution is violated by the President's delegation of his power to issue regulations [under the TWEA] to the Secretary of the Treasury and the latter's delegation of administration of the regulations to the Office of Foreign Assets Control, is . . . insubstantial. The founders could not have meant to impose upon the President burdens that would make it humanly impossible to conduct his office as the nation grew .... Congress can validly authorize the President to depute a portion of his duties in the field of foreign affairs, as it can do with other high officers .... The safeguard remains, as stated in the 1816 report of the Senate Committee on Foreign Relations, that for all that is done, whether by him or in his name, the President is "responsible to the Constitution.61

Sardino involved the Cuban Assets Control Regulations. Thirty years later, in Teague, a case involving the Foreign Assets Control Regulations, the Second Circuit gave equally summary treatment to contentions that Congress had improperly delegated powers to the President by way of the TWEA and that such powers had improperly been delegated to OFAC.62 The Court summarized the issues and its conclusion as follows:

Plaintiffs challenge the constitutionality of the Trading with the Enemy Act, contending that the Congress has delegated legislative power to the President without fixing standards. And they assert that the powers delegated to the President (if constitutionally delegated to him) are personal to his office and may not constitutionally be delegated to the Secretary of the Treasury or the Director of Foreign Assets Control. These precise contentions were raised and dismissed in Sardino.... Far from overruling Sardino, as plaintiffs urge us to do, we reaffirm it as a sound and well-reasoned decision.63

Justice Rehnquist provided a more thoughtful analysis of the delegation issue in his opinion in Dames & Moore v Regan.64 While Dames fF Moore did not involve an improper delegation claim per se, it did present the question of whether the President had exceeded his powers under the IEEPA or the Constitution in suspending claims against Iran in order to carry out the terms of an executive agreement designed to settle claims between the United States and Iran.

Justice Rehnquist began the analysis by noting archly that "[t]he questions presented by this case touch fundamentally upon the manner in which our Republic is to be governed."65 He went on to observe that the "decisions of the Court in this area [the exercise of executive power] have been rare, episodic, and afford little precedential value for subsequent cases."66 The Court found that the IEEPA did not authorize the suspension of claims against Iran because they were not transactions involving Iranian property or the exercise of any rights with respect to such property. However, Rehnquist concluded that the President was, nevertheless, authorized to suspend claims against Iran because of long-standing congressional "acquiescence" in executive branch settlement agreements and "inferences to be drawn from the character of the legislation Congress has enacted in the area, such as the IEEPA and the Hostage Act."67 Quoting from Justice Frankfurter's concurring opinion in Youngstown Sheet & Tube Co. V. Sawyer,68 Rehnquist went on to say, "a systematic, unbroken, executive practice, long pursued to the knowledge of the Congress and never before questioned . . . may be treated as a gloss on `Executive Power' vested in the President by 11 of Art. II [of the Constitution] .,69

The lesson of Dames & Moore may thus be that, via the express provisions of either the IEEPA or the TWEA or long-standing congressional acquiescence in the sweeping economic sanctions programs promulgated by the executive branch because the turn of the century, Congress has delegated virtually limitless powers to the President in this field. As the Fourth Circuit stated in United States v Arch Trading Co.,70 "So long as Congress `lays down by legislative act an intelligible principle to which the person or body authorized to [act] is directed to conform, such legislative action is not a forbidden delegation of legislative power.''71

C. Property in Which the Sanctioned Country Has an Interest

Among the more difficult interpretation issues in this area is the meaning of the term "interest" as used in relation to property. This is a central issue under both the Cuban Assets and Foreign Assets Control Regulations, because the core prohibitions under both sets of regulations are prohibitions on engaging in transactions that "involve" property in which the sanctioned country or its nationals have or have had "any interest of any nature whatsoever, direct or indirect."72 It is also a central issue under other sanctions programs that attempt to freeze the assets of the sanctioned country or its nationals by way of regulations that prohibit dealings in property in which the sanctioned country has an interest, or dealings in property or interests in property of the sanctioned country.73

OFAC regulations typically define the term "interest" as meaning "an interest of any nature whatsoever, direct or indirect."74 This not very illuminating definition leaves open the question of whether an interest must be a property interest or whether some lesser interest will suffice. OFAC appears to take the latter view.75

Surprisingly, the meaning of the term "interest" has been the subject of little analysis in the courts. In concluding, for example, in Dames & Moore v. Regan, that the President lacked authority under the IEEPA to suspend claims against Iran, the Supreme Court merely said:

The claims of American citizens against Iran are not in themselves transactions involving Iranian property or efforts to exercise any rights with respect to such property. An in personam lawsuit, although it might eventually be reduced to judgment and that judgment might be executed upon, is an effort to establish liability and fix damages and does not focus on any particular property within the jurisdiction.76

It is impossible to tell whether the Court was aware of the possible significance of its reference to "Iranian property" in this passage. By referring to "transactions involving Iranian property," the court implied that Iran must have a property interest in the property involved in a given transaction before the transactions' prohibition is implicated; otherwise the property would not be "Iranian property." That may very well be an appropriate conclusion, but it is not self-evident.77

The relevant prohibition in Dames & Moore was on dealing in or transactions involving property in which Iran had any interest.78 As a matter of construction, such property could belong to someone else but, nonetheless, be property in which Iran had an interest amounting to less than a property interest. The result in Dames &Moore would have been the same whether the Court had concluded that a claim was not a dealing in property, that a claim was not a transaction, or that a claim did not involve or constitute "property." Accordingly, its ambiguous statement that claims against Iran are not "transactions involving Iranian property or efforts to exercise any rights with respect to such property" leaves this important issue unsettled.

A greater appreciation for the subtlety of this issue is suggested by the subsequent Supreme Court decision in Regan v. Wald,79 involving travel to Cuba. There, one of the issues was whether the TWEA authorized the President to regulate travel-related transactions. The Court, in an opinion delivered by Justice Rehnquist, described as bordering on the "frivolous" the plaintiffs contention that the TWEA did not convey such power to the President. After stating that the President is authorized by the TWEA to regulate any transaction "involving" property in which a foreign country or any national thereof has any interest, the Court went on to say that " [p] ayments for meals, lodging, and transportation in Cuba are all transactions with respect to property in which Cuba or Cubans have an interest."80

Rehnquist's statement leaves unclear whether the Court regarded the payments for meals, transportation or lodging in Cuba as the property in which Cuba or Cuban nationals had an interest or whether the meals, transportation and lodging themselves consisted of or involved property in which Cuba or Cuban nationals had an interest. Whether intentional or not, however, the Court's description of the law in Regan v. Wald was more accurate than its description of the law in Dames & Moore. The lack of clarity in the rationale for its conclusion, alas, reflects the lack of clarity that is inherent in the TWEA's implementing regulations.

The Court of Appeals for the D.C. Circuit dealt with this issue from a different perspective when it held in American Airways Charters, Inc. v. Regan8l that OFAC could not prohibit an attorney from representing a designated national of Cuba in its dealings with OFAC without first securing an OFAC license. Interestingly, OFAC contended that a contract for legal services with a designated national of Cuba would constitute a transfer of the client's property even if the attorney received no payment for his services.82 OFAC did not, apparently, make the broader contention that entering into a contract to provide services to a designated Cuban national was a transaction "involving" property in which the Cuban national had an interest. The property in such circumstances could either be the services themselves, the right to payment for such services that the contract would create or the property interests that the Cuban national sought to advance or protect by having an attorney represent it in its dealings with OFAC Instead of pursuing a textual analysis, the court concluded that it was "doubtful" that any of the TWEA's economic purposes would be served by upholding OFAC's position, because, according to the court, retention of counsel would provide no economic benefit to Cuba, produce no flow of currency to Cuba or give Cuba any outlet for its goods in the United States. Whatever the validity of those conclusions, they beg the fundamental question, because the prohibition on transactions involving property in which Cuba or Cuban nationals have an interest does not by its terms turn on whether the transaction conveys economic benefits to Cuba or its nationals. Perhaps the best that can be said for the Court's analysis is that it represents a purposebased effort to establish limits on a term that OFAC's regulations fail to circumscribe.

Judge Sporkin took this purpose-based analysis down a different path when he attempted to apply notions of equity in Consarc Corp. v. Iraqi Ministry of Industry and Minerals,84 to determine whether a U.S. company, Consarc, could have access to funds held by a New York bank for payment pursuant to a letter of credit opened by the central bank of Iraq. Consarc had been under contract to supply certain furnaces to Iraq. The U.S. government stopped shipment of the furnaces out of the United States, however, on the ground that Iraq had misrepresented their intended use in certificates filed for purposes of securing the necessary export licenses. Because of the misrepresentation, Consarc sought and obtained a judgment against Iraq for the amount of the contract. In the interim, however, the President issued an order freezing all property in the United States in which Iraq had an interest.

After reviewing the facts,Judge Sporkin directed OFAC to release its freeze on the funds held by the New York bank to satisfy the letter of credit on the ground that the funds had passed to Consarc when Consarc attempted to make delivery of the furnaces to Iraq despite the fact that delivery was never completed and the documents required under the letter of credit were never presented. Because Consarc had "fulfilled its end of the bargain," Sporkin reasoned, the central bank of Iraq "had no right to, nor interest in, those funds" on the date the President issued his freeze order.85

Had Judge Sporkin stopped there, his ruling might have stood for the proposition that the account party under a letter of credit has no interest in funds set aside to satisfy its obligations under a letter of credit if the account party takes actions that frustrate the beneficiary's ability to perform under the credit. Judge Sporkin went on to say, however, that, " [s]ince the President's authority under the IEEPA does not extend to assets which are not owned by Iraq," the money in the New York bank should never have been subject to the President's freeze order.86 Thus, without explanation, Judge Sporkin equated ownership with interest in, defining the limits of the President's power under the IEEPA to prohibit dealings in property or property interests of Iraq.

Sporkin was clearly influenced by his view that it would be inequitable for Consarc to be deprived of payment when it had "fulfilled its end of the bargain," as evidenced by his response to OFAC's contention that the furnaces that Consarc had manufactured but was unable to deliver were subject to the President's freeze order as well. Said Sporkin, the "OFAC's argument clearly would work a 'taking' of Consarc's property, as Consarc would be left with neither the furnaces nor the money Consarc was to receive in payment for them."87

Not surprisingly, Judge Sporkin was reversed by the Court of Appeals on the ground that the account party under a letter of credit retains an interest in funds on deposit to satisfy the credit until the terms of the credit have been complied with or the letter of credit expires.88 On remand to the District Court, Judge Sporkin, still troubled by the equities of the situation, rejected OFAC's contention that the furnaces, too, were blocked property and held that Consarc was entitled to retain possession of the furnaces as well as the proceeds from any sale thereof.89 His rationale was as follows:

Equity and fairness demand that Consarc not be left emptyhanded by the U.S. government which initially approved the contract Consarc entered into with Iraq. U.S. corporations must have at least some certainty when they enter into complex international transactions, particularly when they do so with the specific blessing of the U.S. government. They clearly cannot be deprived of both the proceeds of sale as well as the goods sold but not delivered because of the intercession of the government. OFAC's own regulations underscore the need for fairness.90

As a disquisition on the harshness of freeze orders that catch the hapless in midstream, Judge Sporkin's opinion has much appeal. As a guide to the meaning of the term "interest" under the TWEA and the IEEPA, it leaves the waters as muddied as they have always been.

D. Evasion

One of the more interesting judicial decisions under the IEEPA in recent years is that of the U.S. District Court for the Southern District of Texas in Looper v. Morgan.91 Looper involved the prohibition against evasion or avoidance under the Libyan Sanctions Regulations.92 That prohibition provides that "any transaction for the purpose of, or which has the effect of, evading or avoiding any of the prohibitions set forth in this subpart [the Libyan Sanctions Regulations] is . . . prohibited."93

Interestingly, OFAC prohibitions on evasion or avoidance in some of its other regulations are worded somewhat differently. An example is the evasion or avoidance prohibition in the Iranian Transactions Regulations.94 There, the prohibition provides that "any transaction by any United States person or within the United States that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions contained in this part [the Iranian Transactions Regulations] is . . . prohibited."95

In Looper, the Court was confronted with the question of whether the attorney-client privilege applied to certain documents that the Customs Service attempted to review when an attorney, Donald Looper, arrived at the Houston Intercontinental Airport from a trip abroad.96 The documents, which were in Looper's briefcase, pertained to legal work he was doing for a foreign corporation involving one or more transactions relating to Libya.97 OFAC claimed, among other things, that the crime-fraud exception applied to any attorney-client privilege that might attach to the documents in Looper's possession, because either Looper's client had violated the Libyan Sanctions' prohibition on evasion or avoidance or Looper had committed a crime by render ing services that directly or indirectly benefited a Libyan entity.98

In a blistering attack on what it called this "curious directive,"99 the court held that the prohibition on evasion or avoidance violated "either of two fundamental constitutional principles: (1) that retroactive lawmaking must be avoided when criminal punishment is at stake, and (2) that rules which impose criminal punishment must provide fair advance notice of the conduct prohibited."100 Because the evasion or avoidance prohibition provides no standards for determining what is or is not permissible, said the court, "[t]he only apparent means for private enterprises to avoid prosecution for `sanction [sic] evasion' is to apply for an OFAC license."lol OFAC is thereby "free," observed the court, "to declare retroactively which transactions and activities constitute `sanctions evasion,' and which do not [and thus] the regulations do not provide fair advance notice of the range of prohibited activities and transactions."102 The consequence, the court held, is that "[a]ny [OFAC license] applicants who err on the side of caution voluntarily confer jurisdiction and authority upon OFAC that exceeds the Congressional and Executive delegations which form the sole legitimate basis for OFAC's regulatory power."103

In response to OFAC's contention that it had the power to prohibit any activities that might directly or indirectly benefit a Libyan national, the court observed that " [collectively, OFAC's proffered constructions render virtually impossible any effort to structure transactions in a manner that satisfies the sanctions regulations without submitting to OFAC's supervision as though it had regulatory authority."104 As the court saw it, anyone

attempting to structure a transaction that might indirectly benefit a Libyan designated national must elect between placing the fate of the transaction in OFAC's hands, and conferring power upon OFAC that OFAC would not otherwise possess, or shooting blind (i.e., without legal assistance) at a moving target (because OFAC can declare transactions 'evasive' after the fact), and suffering the consequences if a shot happens to miss.105 Such a "Hobson's choice," the court held "does not satisfy the basic requirements of due process."106

Indeed, said the court, "[t]he Constitution ... cannot abide the Kafkaesque interpretation that OFAC proposes-that the Libyan sanctions regulations prohibit, at the whim of OFAC regulators, any effort to structure transactions with the purpose of complying with the remainder of the Libyan sanctions regulations, including any attempt to hire an attorney for guidance."107 As a consequence, "[t]he only possibly constitutional interpretation of the `evading or avoiding' prohibition," according to the court, "is to limit its scope to a prohibition of those transactions that would clearly violate another, sufficiently specific, regulation or provision of the [relevant] executive orders."108 While the regulatory provision in Looper was the Libyan Sanctions Regulations' prohibition on evasion or avoidance, its reasoning is equally applicable to the prohibitions on evasion or avoidance under each of OFAC's other economic sanctions regimes. Looper has a potentially broader significance as well because a concern over vagueness in regulations can result in the imposition of criminal penalties pervades the court's analysis. As the court noted, Looper was faced with the Hobson's choice of submitting himself to OFAC's licensing process because of the uncertainty of OFAC's regulations, thus conferring a power on OFAC that it would not otherwise have, or proceeding at his peril without the benefit of clear regulatory guidance or OFAC's specific approval. Such Hobson's choices abound in many of OFAC's economic sanctions regulatory prohibitions.

III. POTENTIAL LITIGATION ISSUES

The array of potential issues for resolution by the courts under OFAC's economic sanctions regulations is virtually limitless. A number of issues, however, present particularly tempting candidates.

A. The Term "Interest"

Despite Dames & Moore, Regan v. Wald, American Airways Charters and Consarc, the last word has not been said on the meaning of the term "interest." American Airways and Consarc reflect judicial struggles to put some limits on the term.l09 The cases decided to date are ultimately unsatisfactory because in none of them have the courts directly tackled the issue of whether the term "interest" should be limited to property interests or whether a lesser interest will suffice.

A significant part of the problem is attributable to the failure to use the term selectively to distinguish between proscriptions intended to implement an assets freeze and those intended to prohibit specified kinds of transactions. The term "interest" is made to carry too heavy a burden under the Foreign Assets and Cuban Assets Control Regulations, for example, because it must do double duty under a prohibition that is intended to effect a freeze on the assets of the target country as well as a prohibition on any dealings with that country.

Under OFAC's other economic sanctions programs, by contrast, there are particularized prohibitions on exports, imports, investments and other forms of specifically identified economic activity. No attempt is made to prohibit such transactions by way of a generalized prohibition on transactions involving property in which the target country has an interest. The failure of the Foreign Assets and the Cuban Assets Control Regulations to be similarly particularized in their approach is the source of much potential overbreadth under those bodies of law.

By the same token, the inclusion of prohibitions in other OFAC sanctions regulations on transactions involving interests in property of the target country creates confusion as to whether the term "interest" should be interpreted under those regulations in the same way that it is interpreted under the Foreign Assets and Cuban Assets Control Regulations. An express prohibition on exports to or imports from a target country, for example, is unnecessary when the relevant regulations contain a prohibition on dealing in property in which the target country has "any interest" if the term "interest" is construed as including the goods to be exported or imported. If the sanctioned country has an "interest of any nature whatsoever, direct or indirect," in such goods, a prohibition on exports or imports is superfluous. If it does not have an interest in such goods, how can a prohibition on dealing in property in which the target country has an interest extend to import and export transactions as the Foreign Assets and Cuban Assets Control Regulations are interpreted as doing?

The problem arises fundamentally from the failure of OFAC's economic sanctions regulations to delineate in a more precise way their attempts to impose asset freezes. The resulting overbreadth can create considerable confusion and produce seemingly unfair consequences. American Charters, Cernuda and Judge Sporkin's decision in the first Consarc case reflect heroic but unsatisfactory efforts to avoid such consequences. Future litigation in this area is not difficult to imagine.

B. Applying Prohibitions to U.S. Citizens Employed by Foreign Entities

Many of OFAC's economic sanctions regulations permit foreign subsidiaries of U.S. companies to engage in transactions with a sanctioned country that are impermissible for their U.S. parent. None of these regulations, however, generally exempts from such prohibitions individual U.S. citizens who are employed by U.S. foreign subsidiaries. U.S. citizens, as well as U.S. residents, are lumped together with U.S. entities under the term "U.S. person" and thereby made subject to identical prohibitions. The consequence is that U.S. citizens employed by U.S. foreign subsidiaries may be prohibited from participating in perfectly permissible foreign subsidiary transactions solely because of their status as U.S. citizens. Indeed, U.S. citizens employed by foreign entities having no corporate connection to a U.S. entity may similarly be prohibited from engaging in transactions that are permissible for the entity by which they are employed because such individuals are "U.S. persons" regardless of their employer.

Furthermore, a foreign entity that permits employees who are U.S. citizens to become involved in a transaction with a sanctioned country may find itself subject to freeze orders with respect to property that such employees handle. This is a consequence of prohibitions on dealing in property or property interests of the sanctioned country if such property comes into the possession or control of U.S. persons.ll Thus, for example, a foreign subsidiary that has a U.S. citizen as its treasurer may find that funds it receives from a sanctioned country in payment for a sale of goods that is permissible under the relevant regulations must be frozen because they have come into the possession or control of its treasurer.

It is difficult to see that any legitimate policy purpose is served by such anomalous consequences. Indeed, the regulatory provisions that produce such consequences have essentially haphazard extraterritorial consequences, because their applicability to foreign entities is a function of whether and in what capacity a foreign entity employs U.S. citizens. OFAC could, of course, rectify the problem by exempting U.S. citizens from prohibitions that are inapplicable to their employers.ll Absent such action, it seems only a matter of time before the issue is before the courts.

C. "Approval" or "Facilitation"

Executive Order No. 13,059112 with respect to Iran prohibits any "approval" or "facilitation" by a U.S. person, "wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by this order if performed by a United States person .... "113 This is an expansion of a prohibition in the Iranian Transactions Regulations on a U.S. person's approval or facilitation of the entry into or performance by "an entity owned or controlled by a United States person" of certain contracts or transactions that are prohibited as to U.S. persons.114 Neither the Executive Order nor the Iranian Transactions Regulations, however, provide any guidance as to the meaning of the terms "approval" or "facilitation." The only available guidance is contained in the Sudanese Sanctions Regulations,115 which prohibit the facilitation, but, interestingly, not the approval, of exports to or from Sudan.118 According to the Sudanese Sanctions Regulations, that prohibition "bars any unlicensed action by a U.S. person that assists or supports trading activity with Sudan," not including "[a]ctivity of a purely clerical or reporting nature that does not further trade or financial transactions with Sudan or the Government of Sudan."117 Whether this guidance would have any applicability to the Iranian Transactions Regulations is questionable because OFAC takes the position that each set of regulations is drafted in the context of a specific sanctions program and that, therefore, the definitions and interpretations used in one program are irrelevant to terms used in other programs.

Regardless of how they are interpreted, prohibitions on approval or facilitation are troublesome for U.S. citizens employed by foreign entities and U.S. parents of foreign subsidiaries. For U.S. citizens employed by foreign entities, for example, virtually any activity relating to a transaction involving Iran could be said to constitute approval or facilitation thereof. As a result, such individuals are subject to prosecution for their involvement in transactions that are completely permissible for their employers.

For U.S. parent companies, too, virtually any activity relating to a foreign subsidiary's dealings with Iran could be regarded as approval or facilitation thereof Indeed, in a fundamental sense, a U.S. parent company can be regarded as approving any transaction or activity in which its wholly-owned or controlled foreign subsidiary engages simply by virtue of such ownership or control. Consequently, U.S. parent companies are vulnerable under the Iranian Transactions Regulations to prosecution for violating prohibitions on facilitation or approval whenever their foreign subsidiaries engage in transactions relating to Iran even though such transactions are themselves perfectly lawful for the subsidiary. U.S. parent companies are also likewise vulnerable to prosecution for violating the prohibition on facilitation under the Sudanese Sanctions Regulations whenever their foreign subsidiaries engage in trade transactions with Sudan even though such transactions themselves are perfectly lawful for the subsidiary.

The attempt under the Sudanese Sanctions Regulations to illustrate the reach of the facilitation prohibition makes it clear how difficult it would be for a U.S. parent company to know when it might be regarded as unlawfully facilitating a foreign subsidiary transaction. By way of a warning salvo, for example, the Sudanese Regulations state that

[t]o avoid potential liability for U.S. persons . . ., a U.S. parent corporation must ensure that its foreign subsidiaries act independently of any U.S. person with respect to all transactions and activities relating to the exportation or re-exportation of goods, technology, or services between Sudan and any other location, including, but not limited to, business and legal planning, decision making, designing, ordering or transporting goods, and financial, insurance, and other risks.118

The Regulations, however, go on to provide that "[n]o U.S. person may change its policies or operating procedures, or those of a foreign affiliate or subsidiary, in order to enable a foreign entity owned or controlled by U.S. persons to enter into a transaction that could not be entered into directly by a U.S. person ... pursuant to [the Regulations]."119 Navigating between the mandate of foreign subsidiary independence and the prohibition on changing policies and procedures where change is necessary to ensure such independence will call for Odysseian skills that those not blessed with Homeric talents may find difficult to muster.

Prohibitions on approval and facilitation may reflect an attempt on OFAC's part to close what it sees as potential loopholes in regulatory regimes that do not reach foreign subsidiaries of U.S. companies or U.S. citizens employed by foreign entities. They may also reflect an attempt to extend the extraterritorial reach of U.S. law to foreign entities by indirection in order to avoid having to do so expressly. Whatever the motivation, it is difficult to imagine undefined or contradictory prohibitions on approval or facilitation as passing due process muster under a Looper court analysis. (It is also not difficult to imagine that widespread prosecution of these cases will force the courts to address these definitional issues).

D. Parsing Complex Prohibitions

Many of OFAC's economic sanctions prohibitions are worded in ways that make them difficult to parse. The resulting difficulties of interpretation and application inevitably create opportunities for disputes.

Among the worst offenders in this regard is the "including" clause that is frequently used as part of a comprehensive prohibition. An example appears in the prohibition in Executive Order 13,059, pertaining to Iran, against

any transaction or dealing by a United States person, wherever located, including purchasing, selling, transporting, swapping, brokering, approving, financing, facilitating, or guaranteeing, in or related to:

(i) goods or services of Iranian origin or owned or controlled by the Government of Iran; or (ii) goods, technology, or services for exportation, reexportation, sale, or supply, directly or indirectly, to Iran or the Government of Iran.120

What activities can a prohibition on "approving. . . in or related to . . . goods of Iranian origin" cover? What activities can a prohibition on "facilitating . . . in or related to . . . technology .. . for supply . . . to Iran" cover? Can "approving" or "facilitating" reasonably be said to be a "transaction" or "dealing?" It seems inevitable that a court at some point will be called upon to decide.

E. Use of Different Wording to Describe Similar Prohibitions or Concepts

A number of OFAC's sanctions programs use slightly different wording to describe prohibitions that appear intended to address the same activity. An issue naturally arises as to the significance to be accorded such differences.

Prohibitions on evasion or avoidance under OFAC's economic sanctions regulations provide an example. Under the Foreign Assets Control and the Cuban Assets Control Regulations, the prohibition on evasion or avoidance prohibits "[a]ny transaction for the purpose or which has the effect of evading or avoiding any of the prohibitions" of the regulations.121 Under the Iraqi Sanctions Regulations, the prohibition on evasion or avoidance prohibits "[a]ny transaction for the purpose of, or which has the effect of, evading or avoiding, or which facilitates the evasion or avoidance of any of the prohibitions" of the Regulations.122 Under Executive Order 13,059 pertaining to Iran, the prohibition on evasion or avoidance prohibits "any transaction by a United States person or within the United States that evades or avoids, or has the purpose of evading or avoiding. . . any of the prohibitions" under the Executive Order.123 Thus, in these four sets of economic sanctions regulations, there are three different formulations of the prohibition on evasion or avoidance.124

Another example is the prohibition on transactions involving property in which the sanctioned country has an interest. As noted, under the Cuban Assets Control Regulations, the prohibition is on "transactions [that] involve property in which [Cuba] or any national thereof, has . . . any interest of any nature whatsoever, direct or indirect."125 Under the Libyan and Iraqi Sanctions Regulations, by contrast, the prohibition is on dealing in "property or interests in property of' the governments of Libya and Iraq, respectively, that are in the United States or within the possession or control of U.S. persons. Meanwhile, the heading for each of these prohibitions is entitled, in part, "Prohibited transactions involving property in which the Government of Libya [Iraq] has an interest."126 Is property in which a person "has any interest" different from "property or interests in property of" that person? Is a transaction "involving" property in which a person has an interest different from a dealing in property or interests in property of that person?

Yet a third example is contained in the prohibitions in the Iran Executive Order and the Iranian Transactions Regulations pertaining to the facilitation of foreign transactions with Iran and the export of services from the United States to Iran. Under Executive Order 13,059, U.S. persons, "wherever located," are prohibited from exporting services to Iran or facilitating any transaction with Iran by a foreign person if the transaction is one that is impermissible for U.S. persons.l27 The Iranian Transactions Regulations also provide, however, that "[s]ervices provided in a third country by a United States person ordinarily resident outside the United States are not considered to be exported from the United States."128 The question then naturally arises as to whether a U.S. person ordinarily resident outside the United States who "facilitates" a foreign person's transaction with Iran by providing "services" in connection therewith in a third country is engaging in a prohibited facilitation of that transaction or a permissible export of services to the foreign person.

These and many other issues under OFAC's economic sanctions regulations are the product of unexplained differences in wording and inherently overlapping concepts. They provide hearty grist for the litigation mill.

IV. CONCLUSION

OFAC economic sanctions programs are complex. They are complex not only because the situations they attempt to address are complex but also because they attempt to deal in a broad-brush way with an immensely complicated array of possible financial and commercial transactions. Their complexity often drives affected persons to seek ad hoc guidance from OFAC because they are unable to find clear guidance in the relevant regulations or executive orders. The need to seek guidance from OFAC, however, creates due process concerns of the kind the court addressed in Looper. Regulatory complexity and lack of clarity also create consequences of a kind the courts have sought to avoid by rulings like those on display in Consarc. As the use of economic sanctions continues to grow, it seems inevitable that the need for judicial intervention will grow as well, as there appears to be no other vehicle for resolving an expanding list of unanswered questions.

1. See GARY C. HUFBAUER ET AL., ECONOMIC SANCTIONS RF.CONSIDEREP: HISTORY AND CURRENT Pol.IcY 28 (2d ed. 1990).

2. See id. at 29; see also BARRY E. CARTER, INTERNATIONAL ECONOMIC SANCTIONS 8 (1988). For discussion of one of the firstjudicial challenges to the Executive Branch's exercise of statutorilygranted powers to enforce an embargo, see Gilchrist v Collector of Charleston, 10 F Cas. 355 (C.C.D. Sc 1808) (NO. 5,420) (as described in JEAN E. SMITH, JOHN 8MlTEl,JoHN SfARSHI: DEFINER OF A NATION 3H82 (1996)). This case involved an order by President Jefferson pursuant to the Embargo Act of April 25, 1808, 17 Annals of Congress 2870-74 (1808), barring a ship believed to be destined for England from leaving the port in Charleston, South Carolina. For a description of the adverse impact on New England of the Embargo Act of 1807, 17 Annals of Congress 2815 (1807), see ROBERT V. REMINI, DANIEL WEBSTER: THE MAN AND HIS TiME 93-95 (1997) . For James Madison's role in the Embargo Act of 1807, see JOSEPH J. ELLIS, AMERICAN SPIINX: THE CHARA(TER OF TE1OMXS JEFFERSON 280-84 (1998).

3. See HUFBAUER, supra note 1, at 30.

4. Trading with the Enemy Act, Pub. L. No. 65-91, chi. 106, 40 Stat. 411 (1917) (codifid as mended at 50 U.S.C. app. Sec 1-44 (1994 & Supp. III 1998)).

5. See id. 5.

6. See Trading with the Enemy Act, Pub. L. No. 73-1, 2, 48 Stat. 1 (1933) (codified as amended at 50 U.S.C. app. 1-44 ( 1994 & Supp. III 1998) ). 7. See Trading with the Enemy Act, supra note 4.

8. For a good general discussion of U.S. economic sanctions against Japan prior to World War II, See JAMES CHACE, ACHESON: THE SECRETARY OF STATE WHO CREATED THE AMERICAN WORLD 83-87 (1998).

9. See HuF:BAtTER, suPra note 1, at 16-27. 10. 50 U.S.C. app. 2401-20 ( 1994 & Supp. III 1998). 11. Pub. L. No. 81-11, 63 Stat. 7 (1949). 12. See CARTER, supra note 2, at 65.

13. 50 U.S.C. 1701-06 (1994 & Supp. III 1998). The fact that the Export Administration Regulations, 15 C.ER. . 730-74 (1998), are being administered and enforced pursuant to the IEEPA rather than the Export Administration Act, the statute expressly authorizing their promulgation, exposes them to possible challenge as lacking proper statutory authority. Expiration of the Export Administration Act also exposes to challenge use of the civil and criminal sanctions prescribed by that statute for violations of the Export Administration Regulations.

14. See'rading with the Enemy Act, Pub. L. No. 95-223, 101,91 Stat. 1625 (1I77) (codified as amended at 50 tJ.S.('. app. , 5(b) (1) (1994)).

15. 50 U.S.C. 1701 (a).

16. See HUFBAUER, supra note 1, at 16-27; see also Exec. Order No.13,047, 62 Fed. Reg. 28,301 (1997) (prohibiting new investment in Burma); Exec. Order No. 13,067, 62 Fed. Reg. 59,989 (1997) (imposing sanctions against Sudan).

17. See Exec. Order No. 12,978, 31 C.ER. 536.802 (1998); Antiterrorism and Effective Death Penalty Act of 1996, Pub. L. No. 104-132, 321, 110 Stat. 1254 (1996). All economic sanctions regulations administered by OFAC can be found in 31 C.F.R ch. V (1998). 18. Cuban Liberty and Democratic Solidarity (LIBERTAD) Act, 22 U.S.C. 6021-91 (Supp. III 1998).

19. See id. 6082, 6091. 20. See id . 6082, 6091. 21. 50 U.S.C. 1701 (Supp. III 1998). 22. See id. . 5(a), 5(b) (2).

23. See, e.g., Foreign Assets Control Regulations, 31 C.ER. 500.201 (1998); Cuban Assets Control Regulations, 31 C.F.R 515.201 (1998).

24. See, e.g., Foreign Assets Control Regulations, 31 C.ER. 500.302(a)(2) (1998); Cuban Assets Control Regulations, 31 C.ER. . 515.302(a) (2) (1998).

25. See, e.g., Iranian Assets Control Regulations, 31 C.F.R. 535.201 (1998), Iraqi Sanctions Regulations 5 575.201 (1999), Federal Republic of Yugoslavia and Bosnian-Serb Controlled Areas of the Republic of Bosnia and Herzegovina Sanctions Regulations [hereinafter Yugoslavian Sanctions Regulations], 31 C.F.R. 585.201(1998). 26. See, eg., Yugoslavian Sanctions Regulations, 31 C.F.R. 585.201 (b), (c). 27. Compare Foreign Assets Control Regulations, 31 C.ER. 500.330 (1998) and Cuban Assets Control Regulations 31 C.ER. 515.334 (1998) with Libyan Sanctions Regulations, 31 C.ER. 5550.308 (1998).

28. See, e.g., Iranian Transactions Regulations, 31 C.ER. 560.208 (1998) (prohibiting "approval or facilitation"); Sudanese Sanctions Regulations, 31 C.FR. 538.206 (1998) (prohibiting "facilitation").

29. See, e.g., Iranian Transactions Regulations 31 C.ER. 560.314 (1998) (defining "United States person" to include "any United States citizen").

30. See, e.g., Cuban Assets Control Regulations, 31 C.F.R * 515.201(c) (1998); Libyan Sanctions Regulations, 31 C.ER. 5550.208 (1998); Iranian Transactions Regulations, 31 C.ER. 560.203 (1998).

31. Compare Foreign Assets Control Regulations, 31 C.ER. 500.201 (a) (1998) and Cuban

Assets Control Regulations 31 C.ER. * 515.201(a) (1998) (prohibiting transactions "involving" property in which North Korea or Cuba or any national thereof has any interest) with Iranian Assets Control Regulations, 31 C.ER. . 535.201 (1998) (prohibiting "dealing" in property in which Iran has any interest) and Iraqi Sanctions Regulations, 31 C.ER. 575.201(a) (1998) (prohibiting dealing in property or interests in property "of" the government of Iraq) and Yugoslavian Sanctions Regulations, 31 C.ER. * 585.201 (a) (1998) (prohibiting dealing in property or interests in property "of" the government of Yugoslavia (Serbia and Montenegro) ). 32. See, e.g., American Documentary Films, Inc. v. Secretary of Treasury, 344 F. Supp. 703 (S.D.N.Y. 1972).

33. See Sardino v. Federal Reserve Bank of New York, 361 F.2d 106 (2d Cir. 1966); Teague v. Regional Comm'r of Customs, 404 F.2d 441 (2d Cir. 1968); United States v. Fernandez-Pertierra, 523 E Supp. 1135 (S.D. Fla. 1981). 34. See Teague, 404 E2d 441.

35. Looper v. Morgan, No. H-92-0294, 1995 U.S. Dist. LEXIS 10241 (S.D. Tex. June 30, 1995).

36. See, e.g., Libyan Sanctions Regulations, 31 C.ER. 550.706 (1998); Iranian Transactions Regulations, 31 C.ER. 560.706 (1998); Iraqi Sanctions Regulations, 31 C.F.R. . 575.705 (1998).

37. See, e.g., Libyan Sanctions Regulations, 31 C.ER. . 550.706 (1998); Iranian Transactions Regulations, 31 C.ER. 560.706 (1998); Iraqi Sanctions Regulations, 31 C.F.R. 575.705 (1998).

38. See Trading with the Enemy Act, 50 U.S.C. app. 1 16(b)(3) (Supp. III 1998). 39. No. H-92-0294, 1995 U.S. Dist. LEXIS 10241 (S.D. Tex. June 30, 1995). 40. 31 C.ER. pt. 550 (1998).

41. No. H-92-0294,1995 U.S. Dist. LEXIS 10241 (S.D. Tex.June 30, 1995) at *49.

42. 31 C.ER R 515.200 et seq. (1998). 43. See HUFAUER, supra note 1 at 16-27, 44. 361 F.2d 106 (2d Cir. 1966). 45. 332 U.S. 469 (1947).

46. Sardino, 361 F.2d at 112 (footnotes omitted).

47. See id.

48. 658 F.2d 1296 (9th Cir. 1981).

49. 31 C.F.R. Sec 500.200 et seq. (1998).

50. 658 F.2d at 1304.

51. Id.

52. 13 Cl. Ct. 555 (Cl. Ct. 1987), afd, 859 F.2d 893 (Fed. Cir. 1988). 53. 31 C.ER. 550.200 et seq. (1998). 54. Id. at 559.

55. 13 Cl. Ct. at 559 )quoting Connollly v. Pension Benefit Guar. Corp., 475 U.S. 211. 225 (1985)).

56. Id.

57. Id. at 560 (quoting Shanghai Power Co. v. United States, 4 Cl Ct. 237, 247 (Cl. Ct. 1983), aff'd. 765 F.2d 159 (Fed. Cir. 1985)).

58. E-Systems, Inc. v. United States, 2 Cl. Ct. 271, 276 (C1. Ct 1983) (quoting Nielsen v. Secretary of Treasury, 424 F.2d 833, 843-44 (D.C. Cir. 1970) ). 59. Id. at 276.

60. Sardino v. Federal Reserve Bank of New York, 361 E2d 106 (2d Cir.1966). 61. Id. at 110 (citations omitted) (quoting United States v. Curtiss-Wright Export Corp., 299 U.S. 304, 319 (1936)).

62. Teague v. Regional Comm'r of Customs, 404 F.2d 441 (2d Cir. 1968).

63. Id.

64. 453 U.S. 654 (1981).

65. Id. at 659.

66. Id. at 661.

67. Id. at 686.

68. 343 U.S. 579 (1952).

69. 453 U.S. at 686 (quoting Youngstown Sheet & Tube Col, 343 U.S. at 610-11).

70. 987 F.2d 1087 (4th Cir. 1993).

71. Id. at 1093 (quoting Touby v. United States, 500 U.S. 160, 165 (1991)).

72. Foreign Assets Control Regulations, 31 C.ER. . 500.201(a)-(b) (1998); Cuban Assets Control Regulations, 31 C.ER. 515.201 (a)-(b) (1998).

73. See, e.g., Iranian Assets Control Regulations, 31 C.ER . 535.201 (1998) (prohibiting dealing in property in which "Iran has any interest of any nature whatsoever"); Libyan Sanctions Regulations, 31 C.F.R. 550.209(a) (1998) (prohibiting dealing in any "property or interests in property of the (Government of Libya"); Iraqi Sanctions Regulations, 31 C.F.R. . 575.201(a) (1998) (prohibiting dealing in any "property or interests in property of the (Government of

Iraq"); Yugoslavian Sanctions Regulations, 31 C.ER. 585.201 (1998) (prohibition on dealing in any "property or interest [sic] in property of the Government of [Yugoslavia) .

74. See, e.g., Iranian Assets Control Regulations, 31 C.F.R. 535.312 (1998); Libyan Sanctions Regulations, 31 C.ER. 550.315 (1998); Iraqi Sanctions Regulations, 31 C.ER. 575.308 (1998); Yugoslavian Sanctions Regulations, 31 C.FR 585.303 (1998).

75. See, e.g. Consarc Corp. v. Iraqi Ministry of Indus. & Minerals, No. 90-2269, 1992 U.S. Dist. LEXIS 19727, at *3, *5 n.3 (D.D.C. Dec. 29, 1992) rev'd, 27 F.3d 695 (D.C. Cir. 1994). OFAC contended that the account party with respect to an irrevocable letter of credit maintained an "interest" in the letter of credit funds held at the confirming bank despite the fact that the Court had previously ruled that (i) the letter of credit beneficiary was "entitled" to such funds and (ii) the account party and the issuer of the letter of credit had no "right to, nor interest in, those funds." For a recent Supreme Court discussion of property interest nuances, see College Sav. Bank v. Florida Prepaid Postsecondary Educ. Expense Bd., No. 98-149,1999 U.S. I EXIS 4375, at *12-16 June 23, 1999) ("business in the sense of the activity of doing business, or the activity of making a profit is not property in the ordinary sense-and it is only that, and not any business asset. which is impinged upon by a competitor's false advertising"). See also Kaiser Aetna v. United States, 444 U.S. 164, 179-180 (1979) (describing the "right to exclude" as a fundamental element of property, citing Justice Brandeis's dissenting opinion in International News Serv. v. Associated Press, 248 U.S. 245, 250 (1918). 76. 453 U.S. at 675.

77. See infra Part III.E for discussion of the prohibition in the Libyan and Iraqi Sanctions Regulations on dealing in "property or interests in property of" the governments of Libya and Iraq, respectively

78. International Emergency Economic Powers Act, 50 U.S.C. 1702(a) (1) (B) (1994). 79. 468 U.S. 222 (1984).

80. Id. at 233 n.16 (emphasis added).

81. 746 F.2d 865 (D.C. Cir. 1984). 82. See id. at 871 83. See id. at 872.

84. No. 90-2269,1992 U.S. Dist LEXIS 19727 (D.D.C. Dec. 29, 1992), rev'd, 27 E3d 695, 702 (D.C. Cir. 1994).

85. Id. at **3-4 (emphasis added).

86. Id. at *4 (emphasis added).

87. Id. at *5.

88. See Consarc Corp., et al. v. Iraqi Ministry, et al., 27 F.3d 695, 702 (D.C. Cir. 1994).

89. See Consarc Corp. v. United States Treasury Dep't Office of Foreign Assets Control, 871 F. Supp. 1463 (D.D.C. 1994).

90. Id. at 1465.

91. No. H-92-0294, 1995 U.S. Dist. LEXIS 10241. 92. 31 C.F.R. pt. 550 (1998). 93. Id. 550.208 (emphasis added).

94. 31 C.ER pt. 560 (1998).

95. Id. 560.203; see also discussion infra Part III.E. 96. See Looper, No. H-92-0294, 1995 U.S. Dist. LEXIS 10241, at *3.

97. See id. 98. See id. 99. See id. at *36. 100. Id. at *42. 101. Id. at *43. 102. Loper-at *44.

103. Id.

104. Id. at *45.

105. Id.

106. Id.

107. Looper at *49.

108. Id.

109. See also Cernuda v. Heavy, 720 F. Supp. 1544 (S.D. Fla. 1989) (holding that Cuban-origin paintings purchased from a non-Cuban national come within the exception for "informational materials").

110. See, e.g., Libyan Sanctions Regulations, 31 C.ER. 550.209(a) (1998) ("no property or interests in property of the Government of Libya that . . . come within the possession or control of U.S. persons . . . may be. . dealt in").

111. See, e.g., Iranian Transactions Regulations, 31 C.F.R. 560.410(d) (1998) (providing an exception from the prohibition on exports from the United States for services provided in a third country by a U.S. person ordinarily resident outside the United States). 112. 62 Fed. Reg. 44,531 (1997). 113. See id.2(e).

114. Iranian Transactions Regulations, 31 C.F.R. Sec 560.208 (1998).

115. 31 C.F.R. pt. 538 (1998).

116. See id. Sec 538.206 (1998).

117. Id. Sec 538.407 (a).

118. Id. 538.407(b). 119. Id. 538.407(c).

120. Exec. Order No. 13,059 2(d), 62 Fed. Reg. 44,531 (1997) (emphasis added).

121. Foreign Assets Control Regulations, 31 C.ER. . 500.201(c) (1998); Cuban Assets Control Regulations, 31 C.ER. . 515.201 (c) (1998). 122. Iraqi Sanctions Regulations, 31 C.ER. 575.211 (1998) (emphasis added). 123. Exec. Order No. 13,059, 2 2(f), 62 Fed. Reg. 44,531 (1997) (emphasis added).

124. By casting its evasion or avoidance prohibitions in the disjunctive, OFAC fails to recognize a distinction between lawful avoidance and illegal evasion that Justice Oliver Wendell Holmes and other have long-recognized. See, e.g., Bullen v. Wisconsin, 240 U.S. 625, 630 (1916) (Holmes, J.) ("We do not speak of evasion, because, when the law draws a line, a case is on one side of it or the other, and if on the safe side is none the worse legally that a party has availed himself to the full of what the law permits.").

Secretary of State Dean Acheson recounts a particularly charming application of the distinction between evasion and avoidance in describing a rule that he and Justice Felix Frankfurter devised for ending the long conversations in which they engaged during their daily walk to work down Pennsylvania Avenue from their homes in Georgetown, with Acheson stopping off at the State Department in the Old Executive Office Building and Frankfurter continuing on to the Supreme Court. As told by Acheson, "As time went on, our inability to stop our talk at the state Department led to amused comment, which drove us to an agreement that we would stop, even in the middle of a sentence, as we passed a certain crack in the sidewalk [in front of the State Department]. But it was no use. He [Frankfurter] claimed that to stop walking, but not talking, when we came to the crack. was only proper avoidance, and no illegal evasion, of the rule." Dr.tN ACHEsoN, FRAGMENTS OF My FLEECE 221 (1971 ). 125. Cuban Assets Control Regulations, 31 C.F.R. 515.201(a)-(bj ((1998).

126. Libyan Sanctions Regulations, 31 C.ER 550.209(a) (1998); Iraqi Sanctions Regulations, 31 C.ER. 575.201 (a) (1998) (emphasis added). 127. Exec. Ord. 13,059 2(a), (e), 62 Fed. Reg. 44,531 (1997). 128. Iranian Transactions Regulations, 31 C.F.ER. 560.410(d) (1998).

STANLEY J. MARCUSS**

* This article is adapted from materials prepared by the author for a 1997 seminar sponsored by Insight Information, Inc. Permission to use such materials for other purposes was retained by the author

** Partner, Bryan Cave, LLP. The author acknowledges the research assistance of Carol E. Lockwood and the cite-checking assistance of Gayle Hubbard, both of Bryan Cave LLP, in preparing this article for publication.

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