DC Court Says OFAC Didn't Illegally Predetermine Iranian Company's Sanctions Listing
The U.S. District Court for the District of Columbia on Sept. 29 upheld the Office of Foreign Assets Control's addition of Iranian company Bahman Group to the Specially Designated Nationals and Blocked Persons (SDN) list. Judge Randolph Moss held that OFAC's denial of Bahman's delisting petition wasn't impermissibly predetermined, finding that even if OFAC's decision could be set aside under the Administrative Procedure Act for being pre-decided, "the record offers no basis for concluding that OFAC’s decision-making in this case was pretextual or irredeemably biased under any standard" (Bahman Group v. Lisa Palluconi, D.D.C. # 22-3826).
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In addition, Moss rejected Bahman's claim that it wasn't provided adequate explanation of its redesignation on the SDN list. The judge held that a letter from OFAC explaining it was designating Bahman "for owning or controlling, directly or indirectly" three subsidiaries that had been "concurrently designated" for assisting the Iranian government and military, coupled with a redacted administrative record, "readily" cleared the APA's "low bar of conveying" why the agency acted the way it did.
Bahman initially was added to the SDN list in 2018. After the company challenged the listing in court, OFAC rescinded the listing, though it "simultaneously redesignated Bahman Group on different grounds." Bahman again petitioned OFAC for delisting, which the agency denied in 2022, prompting the present lawsuit. OFAC then asked for a voluntary remand to reconsider the company's listing, which the court granted over Bahman's objection.
On remand, OFAC again rescinded and redesignated Bahman on the basis of a new rationale: that the company owned or controlled three sanctioned subsidiaries that supported the Iran Revolutionary Guard Corps, the Iranian Ministry of Defense and Armed Forces Logistics and Mobarakeh Steel Company. The agency explained that one of the subsidiaries, Bahman Diesel Co., had made vehicles for the IRGC; that another of the subsidiaries, Iran Docharkh Co., sold motorcycles to an entity controlled by the Iranian defense ministry; and that the last subsidiary, Iran Chassis Manufacturing, had bought "millions of dollars’ worth of goods from the Mobarakeh Steel Company."
Bahman acknowledges it controls the three subsidiaries, but it challenged its designation on the grounds that OFAC's denial of its delisting petition was predetermined due to "the agency’s inherent, deep-set bias in favor of maintaining Bahman Group’s designation." Moss first acknowledged Supreme Court precedent establishing that the APA has no general "open-mindedness" requirement beyond the statute's specific "objective criteria." It's "fanciful to expect agencies to approach each decision as if it were being made on a blank slate," the judge said.
However, Moss said, he would assume it's possible an agency "might be so committed to reaching a particular outcome that it was unable fairly to assess a petition submitted by a party opposed to that outcome and that, as a result," the agency violated the APA's "reasoned decision-making" requirement.
Looking to the record and Bahman's claims, the court said the company failed to support its claim that the denial of the petition was pretextual. While Bahman said it was "pointless" for OFAC to separately sanction the three subsidiaries, since "their property was already blocked" given that they are subsidiaries of a listed entity, the judge said this case doesn't involve a challenge to the listings of the subsidiaries. He said there's "nothing inherently improper, let alone irrational to the level of suggesting bad faith," in the decision to designate the subsidiaries for their own actions.
Bahman also took umbrage at OFAC's continued delisting of the company in the past, arguing this repeated action "shows that OFAC abused its discretion" when it redesignated Bahman in the instant case. Moss rejected this notion, finding that the agency never admitted it erred in its past decisions and no court ever found that the agency erred. Even if the agency did err, it's "black-letter law that an agency that takes superseding action on remand is entitled to reexamine the problem, recast its rationale and reach the same result," the court said.
The company additionally suggested a "pretextual motivation can be inferred" from OFAC's decision to focus on Bahman's control of its subsidiaries rather than the company's own support for the Iranian military, arguing that the agency's inquiry should have been limited to Bahman itself. Moss first said OFAC didn't err in using information regarding the subsidiaries it obtained from its consideration of Bahman's prior delisting petition and that was received from the company itself.
The judge added that given that OFAC denied Bahman's prior delisting petition due to a belief that the subsidiaries were assisting the IRGC, "it can hardly have been surprising that Bahman Group would face questions about its relationships with its subsidiaries and those subsidiaries’ ties to the IRGC and other listed Iranian entities." And while a page on OFAC's website suggested the agency will request more information only if required "to evaluate the delisting petition," the record shows "OFAC (quite reasonably) treated the question of Bahman Group’s controlled subsidiaries’ support for the IRGC as highly relevant to that delisting request," the judge said.
In fact, Moss held that, if anything, OFAC's questionnaire about Bahman's subsidiaries suggests not that the agency failed to engage in reasoned decision-making, but that "OFAC took efforts to gather the relevant facts and to make a reasoned decision based on those facts."