A manufacturing group with operations in North America receives a designation notice. Its US subsidiaries are now listed on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons). Its Canadian parent faces parallel action under the applicable Canadian sanctions regime. Two sets of lawyers, two different procedural maps, two different standards of review. Which route offers the stronger prospect of relief? And what does each path demand in terms of evidence, timing, and legal theory?
The judicial review of a designation under OFAC proceeds through the US federal court system under the Administrative Procedure Act, where courts have historically applied a highly deferential standard to executive branch national-security determinations. Canada's process operates through the Federal Court under the applicable statutory framework, where the reviewing court applies a standard of reasonableness and examines the evidentiary record more directly. The procedural gap between the two is significant, and the strategic choice of which challenge to lead – or whether to run both in parallel – can define the outcome.
This analysis sets out the governing authority in each regime, maps the divergences in procedure and standard of review, identifies the risk flags that practitioners regularly encounter, and explains when to involve specialist cross-border counsel.
What governs judicial review of a designation in the United States?
Judicial review of an OFAC designation proceeds primarily under the Administrative Procedure Act, with the designation itself grounded in IEEPA or, for older programmes, the Trading with the Enemy Act. The reviewing court – typically a federal district court in Washington, D.C. – assesses whether the agency's decision was arbitrary, capricious, an abuse of discretion, or contrary to law. Due process claims under the Fifth Amendment provide a parallel constitutional channel, particularly where the designated person argues that the process provided was constitutionally insufficient.
In practice, the deference courts have extended to executive national-security determinations creates a high bar. OFAC is not required to disclose classified information supporting a designation. The agency's evidentiary standard for listing is a reasonable basis to believe that the grounds for designation are satisfied – a deliberately low administrative threshold. The gap between that administrative threshold and the constitutional minimum of notice and opportunity to respond has been the primary litigation battleground in this jurisdiction for well over a decade.
Practitioners working on OFAC delisting matters must also account for the internal administrative track. Before a federal court challenge becomes viable, most practitioners exhaust – or at least engage – OFAC's own administrative reconsideration process. That process is entirely within OFAC's discretion. There is no statutory deadline by which OFAC must respond to a reconsideration petition. In our experience, the interplay between the administrative reconsideration track and federal court proceedings is one of the most consequential strategic decisions in any OFAC delisting matter.
The position above covers the standard procedural map. Your facts – the designation authority, the evidentiary basis OFAC relied upon, the client's US nexus, and the constitutional claims available – will alter the analysis materially.
For an assessment of your exposure and your available challenge routes, contact Calder & Vance at info@caldervance.com.
How does Canada's review process differ in structure and standard?
Under the applicable Canadian statutory framework, a designated person may apply to the Federal Court for judicial review. The Canadian Federal Court applies a reasonableness standard, examining whether the decision falls within a range of acceptable and defensible outcomes on the facts and the law. That is materially different from the APA's arbitrary-and-capricious formulation as applied in practice, because a Canadian court will engage more directly with the reasoning disclosed in the record.
Canada's process imposes specific statutory timelines that do not exist in the US administrative track. A designated person must bring a review application within a defined statutory window – verify the current period before relying on it, because legislative amendments have modified these timeframes. Procedural default on timing has ended challenges before they were substantively assessed. This underscores a discipline that cross-border counsel must apply from the first day: calendar the applicable deadlines across all jurisdictions simultaneously, not sequentially.
A second structural divergence is the availability of the record. Canadian courts in judicial review proceedings require the government to produce the administrative record, subject to applicable public-interest immunity claims. The degree to which national-security information can be withheld and the mechanism for its handling in court differ from the US approach. In the Canadian context, a designated party has, in certain circumstances, more traction in testing the factual basis for a designation – though the standard of deference applied to national-security decisions remains elevated.
There is also a declaratory relief option in Canada that sits alongside direct review of the designation itself. A party may challenge the constitutional validity of the designation authority or the procedural adequacy of the regime. These constitutional angles have been more actively litigated in Canada in recent years than in comparable US proceedings, where Fifth Amendment due process claims have had mixed results.
Where do the OFAC and Canadian processes converge – and where do they decisively diverge?
Both regimes share the fundamental difficulty facing any designated person: the government holds the information that justified the listing, and the legal standard for maintaining the listing is lower than most people expect. That asymmetry defines the challenge in both jurisdictions.
The convergences end there. Consider four decisive divergences.
Standard of review. In the US, the combined effect of the APA's arbitrary-and-capricious standard and the judiciary's deference to executive national-security classifications has produced a body of case law in which courts rarely substitute their assessment for OFAC's. In Canada, the reasonableness standard, as developed in domestic administrative law, requires the decision-maker to have justified the outcome in light of the law and the facts. A Canadian court that finds the reasoning internally incoherent can set aside the designation. That is a more direct judicial engagement with the merits.
Access to evidence. OFAC decisions can rest on classified information that is never disclosed to the designated party. US courts have developed mechanisms for handling classified records in camera, but the practical effect is that a designated person may never see the core evidence against them. Canada has comparable national-security privilege mechanisms, but the procedural architecture for challenging privilege claims and for the court's in camera review of withheld material has, in practice, yielded more engagement with the evidentiary basis in individual cases.
Timing and exhaustion. The US does not require formal exhaustion of OFAC's administrative reconsideration process before a federal court action, but the tactical calculus almost always favours running the administrative track first. Canada imposes a statutory limitation period from the date of designation. Missing that window is fatal. In our cross-border practice, the most common procedural mistake in multi-regime designation challenges is allowing a Canadian limitation period to expire while waiting for a US administrative response.
Scope of relief. A successful US federal court challenge typically results in a remand to OFAC for further consideration. The court rarely orders immediate delisting. A successful Canadian judicial review can result in the designation being quashed – a direct legal consequence that US courts have been more reluctant to impose. That difference in available relief shapes the entire litigation strategy.
What are the cross-border risk flags practitioners identify most often?
A designation in one regime frequently triggers – or accelerates – action in a second. This is not coincidence. OFAC, GAC (Global Affairs Canada), OFSI in the United Kingdom, and the EU Council share intelligence and coordinate listings, particularly in thematic programmes aligned with UN Security Council resolutions. A US listing may arrive with a Canadian listing a matter of days later, or simultaneously. Cross-border counsel must therefore treat each jurisdiction's procedural clock as running from the moment the first designation anywhere is published.
The risk of parallel proceedings without coordinated strategy is significant. Arguments made in a Canadian judicial review become part of a public record. Positions disclosed in that proceeding can be used – by the government or by counterparties in commercial disputes – to inform proceedings elsewhere. A filing that advances a strong factual narrative in Canada may inadvertently constrain the evidence strategy in the US administrative reconsideration, or vice versa.
A second risk flag is the corporate-structure problem. Where a designation targets the ultimate beneficial owner of a corporate group, subsidiaries may become caught under the ownership test applicable in each regime. In the US, the 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked) operates automatically. In Canada, the applicable ownership and control test similarly extends the reach of a designation to entities the listed person owns or controls. The judicial review of the parent-level designation therefore has immediate downstream consequences for every controlled entity. Counsel handling the challenge must map those consequences from day one.
Third: the interaction with criminal exposure. In both jurisdictions, knowingly dealing in the assets of a designated person can attract criminal sanction. A judicial review petition does not suspend the operative prohibitions during the review period. Businesses that continue to deal with a designated counterparty on the assumption that the designation will be overturned face serious enforcement exposure. The review process and the compliance obligation run concurrently.
If a transaction has already been flagged, or a challenge needs to be filed urgently to preserve a deadline, early intervention can preserve options that narrow with time. Write to Calder & Vance at info@caldervance.com.
How does the evidentiary picture differ when building the challenge record?
The evidence package for a designation challenge is not a restatement of why the designated person is innocent. It is a structured legal argument that the government's evidence – to the extent disclosed – does not meet the applicable standard, that the procedure was deficient, or that the factual findings are internally incoherent. The construction of that argument differs between the OFAC and Canadian contexts.
In the US, the designated person's evidence package typically addresses: the factual basis asserted in OFAC's unclassified administrative record; open-source information that contradicts or contextualises OFAC's assertions; legal argument that the designation exceeds the authorising statute's scope; and, where available, due process arguments about the adequacy of notice. The package is submitted first to OFAC in reconsideration proceedings. If the matter proceeds to federal court, the court reviews the agency record as it stood at the time of the designation. This has a critical consequence: evidence that was not in the record when OFAC made its decision is generally not available to the court on review. The reconsideration stage is therefore the primary opportunity to build the evidentiary record that a court will later examine.
In Canada, the administrative record is produced by the government as part of the judicial review process. The designated party can, subject to privilege rulings, respond to what that record actually contains – rather than to the truncated unclassified summary that may be all that is provided at the administrative stage. This structural difference gives the designated party in Canada a somewhat more direct engagement with the government's reasoning, even accounting for national-security privilege.
In both jurisdictions, the quality of the evidence package is decisive. Assembling it requires early access to the person's business and financial records, a thorough reconstruction of the factual narrative, and a clear-eyed assessment of what the government is likely to assert. We regularly advise on evidence-package construction in both systems. The methodology differs, but the discipline – factual rigour, legal precision, early timing – is the same.
For a comparison of the evidence-package requirements across multiple regimes, see our related guidance on delisting evidence packages in the Australian context, which illustrates how the evidentiary architecture of a challenge is shaped by the regime's administrative structure.
What myths do cross-border clients commonly hold about the judicial review process?
The most persistent myth is that filing for judicial review automatically pauses all the practical consequences of a designation. It does not. In both the US and Canada, the designation remains operative throughout the review proceedings. Banks close accounts. Contractual counterparties invoke force majeure. Credit facilities are withdrawn. The listed person's commercial existence does not pause pending the outcome of a court case that may take many months or years to resolve. Interim injunctive relief – if sought and granted – is the mechanism for suspending particular consequences, but it requires a separate application, it is not available as of right, and courts in national-security contexts are reluctant to grant it.
A second myth is that winning a judicial review means immediate restoration of the pre-designation status quo. In the US, a remand to OFAC for reconsideration is the most common remedy. OFAC may then re-designate on a corrected procedural basis, or it may decline to act quickly. The practical gap between a successful legal challenge and restored normal business can be considerable. In Canada, quashing the designation has more immediate legal effect, but the government retains the power to re-designate with a corrected process. Managing the period between legal success and actual operational normalisation is a practical challenge that counsel and client must plan for together.
Third: that the two regimes will reach the same substantive conclusion. They need not. A successful challenge in Canada does not bind OFAC. A failure before OFAC does not preclude a successful application to the Canadian Federal Court. The evidentiary record and the legal standards are different. Each regime's outcome is independent. This independence is at once the greatest risk and the greatest opportunity in a parallel dual-regime challenge.
When should a business or individual involve cross-border counsel?
The honest answer is: immediately upon learning that a designation is imminent or has occurred. Designation challenges are not matters where delayed instruction is recoverable. The Canadian statutory limitation period runs from the date of designation. OFAC's administrative reconsideration has no time limit, but the evidentiary record closes at the time of the original decision for federal court purposes – making the reconsideration phase the primary window for building the case. Both clocks run from the moment of listing.
Cross-border counsel should be involved before any public statement is made by or about the designated person. Statements made publicly – by the client, by a spokesperson, or by local counsel unfamiliar with the parallel-proceedings risk – can affect the record in the second jurisdiction. Coordination between the US and Canadian strategies must be established at the outset, not retrofitted after separate proceedings have already generated public filings.
There are four situations in which delay has the most damaging consequences. First, where the designated person has a corporate group with subsidiaries in multiple jurisdictions: the downstream ownership and control consequences need to be mapped immediately. Second, where there is time-sensitive commercial activity that depends on the designation being challenged: an interim relief application may be available but has its own procedural deadlines. Third, where parallel listings in the UK or EU have also occurred: those regimes have their own challenge routes and timelines running concurrently. Fourth, where there is any possibility of criminal exposure related to the events underlying the designation: the challenge strategy must account for the criminal risk from the start.
In a recent matter, a financial services group faced near-simultaneous designations in two North American jurisdictions. We assessed the procedural calendars across both regimes, coordinated the reconsideration and judicial review filings, and managed the downstream asset-freeze consequences for the group's subsidiary entities. The matter illustrated how different the legal architectures are in practice, even for designations arising from the same underlying facts.
Related practices
- Delisting evidence packages: Australian regime – structuring the evidentiary case for an Australian designation challenge
- Judicial review of a designation: OFAC vs OFSI – how the US and UK challenge routes diverge on standard of review and procedure
- OFAC vs Canada: designation challenges – further analysis – extended treatment of parallel filing strategy and evidence coordination