A law firm in Frankfurt is retained by an individual whose assets have been frozen under both US and EU sanctions. Counsel is able to act – but only if the applicable regime permits fees to be paid. Under BIS and the Export Administration Regulations (EAR), the legal-fees licensing question sits in a space that surprises many practitioners. Under the EU's Council regulations, a distinct but parallel system applies. The two regimes share a common purpose yet diverge sharply in structure, procedure, and risk exposure.
As of May 2026, legal-fees licences (authorisations that permit the payment of reasonable legal fees and costs from frozen assets or on behalf of designated persons) are available under both the BIS / EAR regime and the relevant EU Council regulations – but the governing authority, the procedural route, the evidentiary threshold, and the cross-border risk picture differ materially between them. A firm advising in either jurisdiction must understand both sets of rules before it accepts funds.
This analysis compares the two regimes criterion by criterion, identifies the points of divergence most likely to trip a cross-border engagement, and sets out the risk flags that make early involvement of sanctions counsel essential.
What is the legal basis for legal-fees licences in each regime?
Under the BIS / EAR regime, the Export Administration Regulations operate under the authority of the Export Control Reform Act and, where applicable, the International Emergency Economic Powers Act (IEEPA). The EAR governs the export, re-export, and transfer of items subject to US jurisdiction – including, in certain circumstances, the provision of services. Where a party is listed on the Entity List administered by the Bureau of Industry and Security (BIS), dealings with that party require a licence or an applicable licence exception. The provision of legal services – including the receipt of legal fees – can constitute a transaction that falls within that control perimeter.
The EU legal basis is different in kind. The relevant Council regulations on restrictive measures each contain a humanitarian or carve-out provision that expressly permits the release of frozen funds for reasonable legal fees and disbursements. The text is instrument-specific: each Council regulation on a given sanctions programme states its own conditions. The competent authority for authorising the release is the national authority of the EU Member State in which the funds are held, not a single EU-level body. In our cross-border practice, this distributional feature – national competence rather than central competence – is one of the most practically significant structural differences between the two regimes.
A business or individual facing restrictions under both regimes must therefore manage two separate legal instruments, two separate procedural tracks, and, in the EU, potentially multiple national authorities if assets are held in more than one Member State.
How does the BIS / EAR licensing procedure work for legal fees?
Under the EAR, the starting point is whether the party requiring legal services is a listed person – most commonly an Entity List designee – and whether the services or associated transfers are subject to BIS jurisdiction. Where a licence is required, the application is made to BIS through its SNAP-R online system. BIS evaluates applications against the applicable review policy for the listed party, which varies by the basis and the programme under which the listing was made.
The procedural steps are broadly sequential. First, the applicant confirms that the intended transaction is not covered by an existing licence exception. Second, the applicant assembles the evidentiary package: a description of the legal matter, the scope of representation, the fee structure, and the nexus of the services to BIS-controlled items or conduct. Third, the application is submitted and BIS conducts its review. The timeline for BIS licence determinations is not guaranteed by statute and can run to several months, depending on the complexity of the matter and the basis for the underlying listing.
One feature that distinguishes the BIS / EAR route from the OFAC route is the nature of the control. BIS controls focus on items, technology, and software, and on services tied to those items. A purely domestic legal engagement with no EAR-controlled item in the background may fall outside the BIS control perimeter entirely. The analysis is therefore item- and transaction-specific before it is person-specific. Have you confirmed which export-control regime actually controls the relevant conduct – and whether BIS rather than OFAC is the right authority?
The position above covers the standard case. Your facts – the identity of the designated party, the goods or technology involved, the jurisdiction of the funds, and the regime generating the listing – change the analysis significantly. For a review of your specific BIS licensing position, contact Calder & Vance at info@caldervance.com.
How does the EU procedure compare?
The EU procedure begins with the text of the applicable Council regulation. Most EU sanctions regulations include a provision permitting national competent authorities to authorise the release of frozen funds for legal fees, subject to conditions that typically include a cap on the amount, a requirement that the funds were frozen before the application, and a notification obligation to the EU institutions where the amounts exceed a defined threshold – verify the current position before relying on any specific figure, as thresholds vary by instrument and are updated.
The application is made to the national competent authority of the Member State in which the funds are held. In practice this means a firm advising a designated individual with assets in Germany and in the Netherlands must make separate applications to two separate national authorities, each applying their own administrative process under the same Council regulation text but with their own procedural requirements, timescales, and documentary expectations. This fragmentation is a recurring operational challenge.
The EU General Court has addressed the legal-fees carve-out in annulment proceedings, confirming that access to legal representation is a fundamental right and that restrictions on the release of funds for that purpose are subject to proportionality review. In our experience before the EU General Court, the existence of that procedural protection gives counsel meaningful ground to challenge an authority's refusal to release funds – but the route requires proper preparation and early action.
A further EU-specific point is the interaction with the EU Blocking Regulation. Where a firm is also subject to US secondary-sanctions pressure, the EU Blocking Regulation may impose obligations that cut against compliance with the US position. That tension is live in legal-fees matters where both regimes are in play simultaneously. The analysis of which obligation governs – and which regime's prohibition is stricter – requires careful mapping before any funds move.
If a transaction has already been flagged, or a filing has been refused by a national competent authority, an early review can preserve options that narrow with time. Write to us at info@caldervance.com.
Where do the key structural divergences arise?
The most consequential divergences between the BIS / EAR and EU regimes on legal-fees licences arise across four dimensions: the nature of the control trigger, the identity of the authorising body, the standard of review, and the cross-regime interaction.
On the control trigger: BIS / EAR focuses on items, technology, software, and associated services. The legal-fees question under the EAR is primarily whether the legal engagement has a BIS-controlled nexus. The EU regulations focus on the person and the funds: if the person is designated and the funds are frozen, the carve-out applies irrespective of the subject matter of the legal work. This distinction matters enormously in practice. A criminal-defence lawyer retained by an Entity List designee on a matter that has no export-control dimension at all may find the EAR analysis resolves quickly; the EU analysis runs regardless.
On the authorising body: BIS is the single US authority. In the EU, the competent national authority of each Member State in which assets are held is the decision-maker. Multi-jurisdiction EU engagements require multiple applications. There is no EU-wide single-window route for legal-fees authorisations.
On the standard of review: BIS applies its case-by-case review policy, informed by the policy applicable to the listed party. The EU national authorities apply the conditions in the Council regulation plus, increasingly, guidance from the competent body of the relevant Member State. The EU General Court is available as an appellate route where an annulment action is appropriate; BIS determinations are subject to administrative review under US law. The timelines and procedural rights differ significantly between the two systems.
On cross-regime interaction: where a designated party has assets or connections in both the US and EU, a legal-fees licence secured from BIS does not automatically resolve the EU position, and vice versa. Each regime must be addressed independently. Where the two regimes impose conflicting obligations – most commonly where the US position on secondary sanctions or the EU Blocking Regulation creates a collision – the stricter prohibition governs for compliance purposes in the relevant jurisdiction, but that determination itself requires legal advice. A business treating a BIS licence as sufficient when EU funds are in play is taking a material risk.
What are the practical risk flags for cross-border counsel?
The most common risk flags we see in legal-fees matters that cross the BIS / EAR and EU boundary are the following.
- Mis-identification of the controlling regime. Counsel assumes OFAC rather than BIS controls the US side of the engagement, or treats the EU as a single authority. Both errors lead to the wrong application being made – or no application being made at all.
- Incomplete ownership analysis. The 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked) has EU and UK analogues in the ownership and control test. Where the individual seeking legal representation controls an entity through which fees might flow, that structure must be analysed before funds move. The entity may itself be caught.
- Delay in identifying the frozen-asset position. A national competent authority may refuse a legal-fees application on the ground that the funds were not frozen at the time of application, or that the application was made after services were already rendered. Timing matters and is regime-specific.
- Secondary-sanctions exposure for the law firm. A law firm accepting fees from or on behalf of a designated party without the required BIS licence or EU national authorisation may face its own enforcement risk. In our experience, firms frequently underestimate this exposure, particularly where the designated party is a non-US person and the firm is outside the United States.
- Failure to notify. Several EU Council regulations impose a notification requirement to the relevant EU institutions where the amount released for legal fees exceeds a defined threshold. Failure to notify is a separate breach from the act of release. Verify the current notification position for the applicable instrument before relying on any generalisation here.
- Conflating the BIS Entity List with the OFAC SDN List. The SDN List (OFAC's list of Specially Designated Nationals and blocked persons) and the BIS Entity List are separate instruments administered by different authorities. A party on one may not be on the other. The legal-fees licensing analysis under each is wholly distinct, and the competent authority is different.
In a recent matter, a professional-services firm was retained by an individual with connections to a group subject to both BIS and EU restrictions. The firm had correctly identified an EU national authorisation route but had not assessed the BIS position. We were instructed to scope the BIS exposure, identify whether a licence was required, and prepare the cross-regime mapping before the retainer was formalised. The matter resolved within the scope of the applicable authorisations. The firm preserved its compliance position and was able to act.
A common misconception: is legal representation always permitted under a carve-out?
A widely held assumption is that access to legal representation is always guaranteed under a sanctions carve-out, and that the legal-fees licence is therefore a formality. It is not. The carve-out provisions in both the BIS / EAR system and the EU Council regulations are subject to conditions, and those conditions can be substantial.
Under the EU regulations, the carve-out is not self-executing. It requires an application to the national competent authority and a determination that the conditions of the instrument are met. A refusal – even where access to justice considerations are engaged – has occurred in practice, and is subject to challenge before the EU General Court only if the legal basis and procedure for a challenge are in place. A designated party cannot simply assume that the carve-out will be granted as a matter of course.
Under the BIS / EAR regime, the position is more nuanced still. The EAR does not contain a general legal-fees carve-out of the kind found in OFAC's general licences. The licensing requirement arises from the specific nature of the transaction and its connection to BIS-controlled items or conduct. Where that nexus is absent, the BIS question may not arise at all. Where it does arise, the application must be assessed on its individual merits, and the outcome is not pre-determined by any standing authorisation.
We regularly advise law firms and individuals who have proceeded on the assumption that the carve-out is automatic, only to discover that the applicable regime required a prior authorisation that was not obtained. The remediation path is more difficult than the application path. Early analysis is the lower-cost option by a significant margin.
Related practices
- Frozen account management under BIS / EAR – managing frozen-asset positions and release applications under US export-control rules
- Legal-fees licences: OFAC vs BIS / EAR analysis – comparing the OFAC and BIS licensing routes for legal-fees authorisations
- Legal-fees licences: OFAC vs EU analysis – how the OFAC and EU positions on legal-fees carve-outs compare in cross-border matters