A technology company holds an export licence for sensitive dual-use components. Its lead distributor is designated on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons) midway through litigation. Counsel sends a retainer invoice. The compliance team freezes. Can legal fees be paid to defend a designated party? The answer differs depending on whether the applicable restriction flows from OFAC's economic sanctions or from BIS controls under the EAR (the Export Administration Regulations administered by the Bureau of Industry and Security) – and the gap between the two regimes is wider than most businesses expect.
As of May 2026, legal-fees licences under OFAC and the parallel authorisation questions that arise under the EAR operate through distinct legal bases, different procedural routes, and divergent scope tests. OFAC provides several standing general licences permitting payments of legal fees to represent designated persons, subject to monetary and reporting conditions set regime by regime. BIS addresses access to counsel through different mechanisms, including the Denied Persons List and end-user controls, without an equivalent fee-capped general-licence architecture. The practical result: a cross-border business paying legal fees in a matter touching both regimes faces two separate authorisation questions, each with its own risk.
This analysis sets out how each regime treats legal-fees licences, where the procedural and substantive tests diverge, what risk flags practitioners see in practice, and when a business should involve specialised counsel before it pays an invoice.
What is a legal-fees licence and why does it matter?
A legal-fees licence is an authorisation – either a general licence (a standing authorisation permitting a defined category of transactions without a separate application) or a specific licence (a case-by-case authorisation for an otherwise prohibited transaction) – that permits counsel to receive payment for representing a sanctioned or restricted person. Without such an authorisation, a payment of fees to a law firm by or on behalf of a designated party can itself constitute a prohibited transaction, exposing the firm and its clients to civil and criminal liability.
The underlying policy rationale is access to justice. Designated persons retain the right to legal representation. But the mechanism for protecting that right varies sharply by regime. OFAC has built a structured general-licence architecture – regime-specific but broadly consistent in form. BIS has no direct analogue. That divergence is the source of most of the errors we see in practice.
Why does this matter for a cross-border business? Because many matters that engage an OFAC designation also involve goods, technology, or software controlled under the EAR. Counsel advising on export-control violations, classification disputes, or Entity List appeals may find that the same payment of legal fees triggers questions under two authorities simultaneously. The authorisation analysis must cover both.
How OFAC's legal-fees general licences work
OFAC's general licences for legal fees are programme-specific: each sanctions programme publishes its own version of the authorisation, with its own fee cap, reporting threshold, and procedural condition. The architecture is consistent in form but not in detail. Practitioners must read the applicable programme's general licence, not a generic version.
The standard structure across most OFAC programmes permits US persons – and in some programmes any person within US jurisdiction – to receive a defined maximum in legal fees and litigation costs from a blocked person or on their behalf, per year or per matter depending on the programme. Where fees will exceed the applicable cap, a specific licence application to OFAC is required before the excess is billed or collected.
Several elements cause firms to fall short of the general-licence conditions.
- The fee cap is per programme, per period. It does not aggregate across multiple engagements with the same client. A firm advising on both a designation challenge and a parallel commercial dispute against the same client must count fees across both matters.
- The reporting requirement is often overlooked. Many OFAC programme general licences require counsel to report to OFAC when legal fees and costs reach a defined threshold – separate from and in addition to the cap itself. Missing the reporting obligation is a standalone violation.
- The general licence typically authorises receipt of fees from blocked funds only through a blocked account – not from an unblocked third-party payor without additional authorisation. The source of funds matters, not merely the identity of the client.
- Certain programme-level restrictions exclude representation in connection with specific activities. Counsel should confirm that the scope of the representation falls within the general licence before accepting payment.
In our experience, firms most often encounter difficulty at the third point: a family member or affiliated company offers to pay on the designated client's behalf, and counsel assumes the general licence covers that arrangement without checking the source-of-funds condition.
The position above covers the standard case. Your facts – the programme, the fee structure, the payor, and the scope of the representation – change the analysis.
For an assessment of your exposure under the applicable OFAC programme, contact Calder & Vance at info@caldervance.com.
How BIS and the EAR handle legal representation – and why there is no direct equivalent
BIS does not administer a legal-fees general-licence architecture equivalent to OFAC's. The EAR restricts exports, re-exports, and transfers of items on the Commerce Control List (CCL); it also restricts transactions with parties on restricted lists, including the Entity List and the Denied Persons List (DPL). But the mechanism for preserving access to counsel is structurally different.
A person appearing on the DPL is prohibited from participating in transactions subject to the EAR. A US person – including a US law firm – cannot provide services that constitute a "transaction" subject to the EAR to a denied person without authorisation. Legal advice on an export-control matter is a service. Whether that service constitutes a "transaction" subject to EAR restrictions, and thus whether it requires a licence, depends on the nature of the advice and the items or technology involved.
BIS does issue specific authorisations – and the denied-person framework contains a pathway for counsel to seek a waiver to represent a client on the DPL. But the waiver process is distinct from OFAC's general-licence system. It is not a standing authorisation; it requires a specific application to BIS for each engagement; and the criteria BIS applies are not published in the same structured way as OFAC's general-licence conditions.
What this means in practice: a law firm that has confirmed it holds OFAC general-licence authorisation to represent a designated client may still need a separate BIS waiver if the client also appears on the DPL and the legal matter involves EAR-controlled items or technology. The two authorisations do not cross-cover each other. We regularly advise firms that discover this gap after they have already billed fees – at which point the retrospective position is more difficult to manage.
There is a further distinction on extraterritorial reach. OFAC's general licences in many programmes extend to persons subject to US jurisdiction – which can include non-US counsel in certain circumstances. BIS restrictions on denied persons extend wherever the EAR applies, which includes re-exports and transfers of US-origin items anywhere in the world. A non-US firm advising on an EAR compliance matter involving DPL-listed parties may be caught by BIS restrictions even without a direct US nexus, depending on the item and the transaction structure.
Where do the regimes diverge on legal-fees licences?
The divergence between OFAC and BIS on legal-fees licences is most pronounced across four dimensions: the availability of standing authorisation, the scope of the fee cap, the reporting obligation, and the extraterritorial reach of restrictions on representation.
Standing authorisation. OFAC provides programme-specific general licences as a matter of regulatory architecture. BIS does not. For OFAC-designated parties, counsel starts with a presumption of authorisation (subject to cap and reporting conditions). For DPL-listed parties, counsel starts with no standing authorisation and must seek one before the engagement begins.
Fee caps and reporting. OFAC general licences set specific monetary thresholds and require reporting when fees approach or reach those thresholds. BIS waivers do not follow the same cap-and-report structure. The absence of a cap in the BIS context does not mean the engagement is unrestricted; it means the authorisation conditions are set individually for each waiver, making comparative planning harder.
Scope of the authorised representation. OFAC general licences typically authorise representation across the full scope of legal proceedings involving the designated person, with programme-specific carve-outs. BIS waivers are scoped to the specific matter and items described in the application. A change in the scope of the representation – for example, adding an export-control appeal to an ongoing OFAC delisting matter – may require a new or amended BIS authorisation even if the OFAC general licence continues to cover the broader matter.
Extraterritorial reach. Under the EAR, restrictions on transactions with denied persons follow the item – meaning a non-US law firm advising on a matter involving US-origin technology controlled under the EAR may face BIS restrictions regardless of where the firm is incorporated. OFAC's jurisdictional reach in the general-licence context is typically framed around "US persons" or persons "subject to US jurisdiction," which is broader than it sounds but remains anchored to a US nexus in a way that the EAR's item-based extraterritoriality is not.
These four dimensions mean that a compliance officer who resolves the OFAC authorisation question has not resolved the BIS question, and vice versa. The regimes must be analysed in parallel, not sequentially.
Risk flags that practitioners see in cross-border matters
In a recent matter, a financial-services group retained counsel to advise on a designation challenge involving a subsidiary. The engagement letter was structured on the basis that OFAC's general licence authorised all related legal fees. Midway through the matter, it emerged that the subsidiary held technology subject to EAR controls and that the designated parent appeared on both the SDN List and the Entity List. A separate BIS authorisation was required for the portion of the engagement addressing the EAR compliance review. The firm had been billing without it. We were instructed to scope the apparent violation, advise on voluntary self-disclosure (a proactive report of a potential violation to the relevant regulator, which can be a mitigating factor in penalty assessment), and restructure the engagement going forward.
That pattern – OFAC general licence obtained, BIS authorisation missed – is the most common risk flag we see. But there are others.
- Third-party payors. When a non-designated family member, business associate, or affiliated entity pays legal fees on behalf of a designated client, the general-licence analysis must address both the source of funds and the identity of the payor. Payment from an entity that is itself blocked or that sources funds from blocked accounts may not be authorised by the general licence even if the client is covered.
- Programme selection errors. Counsel occasionally identifies the wrong OFAC programme as the applicable one – for example, treating a client designated under one thematic programme as falling under a different programme with a higher fee cap. The analysis must begin with the correct programme designation.
- Reporting deadline failures. Many OFAC general licences require reporting within a defined window after fees reach the applicable threshold. Missing that window is a violation independent of whether the underlying representation was authorised.
- Entity List versus Denied Persons List confusion. A party on the Entity List faces BIS licensing requirements for the export of controlled items; a party on the DPL faces a broader prohibition on participation in EAR transactions. The legal-representation implications differ. Counsel should confirm which list applies before assuming the authorisation posture.
- Non-US counsel assuming no EAR exposure. As noted above, the EAR can reach non-US persons in non-US jurisdictions when the matter involves US-origin items or technology. Non-US law firms instructed on EAR matters involving restricted parties should confirm their exposure before assuming they fall outside BIS restrictions.
Which regime is stricter on legal-fees licences?
Neither regime is categorically stricter; they are structurally different, and that difference produces different risk profiles depending on the facts of the engagement.
For a US law firm representing an OFAC-designated client in proceedings that do not involve EAR-controlled items, OFAC's general-licence architecture provides a relatively accessible standing authorisation. The cap and reporting conditions impose administrative discipline, but the threshold for authorised representation is not high. Where fees will exceed the cap, a specific licence application is the route – and OFAC processes specific licence applications on a reasonably consistent timeline, though the process can extend across a significant number of business days depending on programme and complexity.
For a firm – US or non-US – advising on a matter that involves EAR-controlled items and a DPL-listed party, BIS presents a stricter posture. There is no standing authorisation. The waiver process requires a specific application before the engagement begins. BIS does not publish standard timelines for waiver decisions in the way that the EAR licensing timeline guidance is framed. In our practice, matters that require a BIS waiver before counsel can begin billing create a meaningful delay at the outset of the engagement that the OFAC general-licence system does not produce.
Where a matter engages both OFAC designations and BIS restrictions, the combined authorisation burden is additive, not averaged. Both agencies must be satisfied. The stricter of the two conditions governs each relevant element of the engagement. That is the cross-border reality that compliance teams and counsel alike underestimate.
If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. To discuss a licence application or a specific authorisation question, write to info@caldervance.com.
Procedural route: general licence versus specific licence under OFAC
Where the applicable OFAC programme general licence covers the representation and the fees remain within the cap, no application to OFAC is required. Counsel must confirm that the general-licence conditions are met – programme, scope, source of funds, and reporting – before the first invoice is issued. That confirmation should be documented in writing at the outset of the engagement.
Where fees will or may exceed the cap, a specific licence application is the required route. The specific licence process under OFAC involves submitting a complete application that sets out the nature of the representation, the identity of the designated client, the anticipated fees, and the legal basis for the authorisation requested. OFAC may request additional information or impose conditions on any licence it issues. The timeline for a specific licence decision varies by programme and by the volume of applications OFAC is processing at the time.
Key procedural steps for the specific-licence route:
- Confirm the applicable programme and the programme-specific general-licence cap.
- Estimate total fees and confirm whether a specific licence is required before billing begins.
- Prepare the application: identity of the designated party, nature of the representation, fee estimate, source of funds, and legal basis.
- Submit to OFAC and preserve a complete record of the submission and any OFAC correspondence.
- Do not collect fees in excess of the general-licence cap until the specific licence is received and its conditions reviewed.
- Comply with any conditions OFAC attaches to the specific licence, including additional reporting obligations.
- Maintain records for the period required by the applicable programme – typically a significant number of years from the date of the transaction.
The BIS waiver process follows a different procedural track. The application is addressed to BIS and must identify the denied party, the scope of the legal representation, and the items or technology involved in the underlying matter. Because no general-licence equivalent exists, the waiver must be in hand before fees are billed. A compliance function that approves an engagement with a DPL-listed party before the waiver is issued has created an exposure that a subsequent waiver may not fully cure retroactively.
When to involve counsel on legal-fees licence questions
The threshold question – whether a legal-fees authorisation is required at all – is often more complex than it appears. Involving specialised sanctions and export-control counsel at the point when a new engagement involves a potentially designated or restricted client is the surest way to prevent the billing errors described above.
Specific triggers that warrant immediate advice:
- A new client or counterparty appears on any OFAC list, the Entity List, the DPL, or any equivalent restricted-party list of another jurisdiction.
- An existing client receives a new or amended designation midway through a matter.
- A third party offers to pay fees on behalf of a designated client.
- The scope of a matter changes to include EAR-controlled items or technology after an engagement has already begun under OFAC general-licence authorisation.
- A non-US law firm is instructed on a matter involving US-origin items and a restricted party.
- Fees have been collected and a potential general-licence cap exceedance is discovered.
Have you confirmed both the OFAC and BIS authorisation positions before your next invoice goes out? In cross-border matters, the two questions cannot be resolved by the same answer.
We have acted for both counsel firms and their corporate clients in resolving apparent billing violations, structuring prospective authorisation, and managing the voluntary self-disclosure process where fees were collected outside the applicable conditions. Early involvement typically reduces both the remediation cost and the regulatory exposure.
Cross-border divergence: how the EU and UK positions compare
The OFAC versus BIS divergence does not exist in isolation. A business with European operations or counsel with EU or UK connections may face a third layer of authorisation questions under the EU Council regulations or under the UK financial-sanctions regime administered by OFSI (the Office of Financial Sanctions Implementation).
The EU regime addresses legal fees through a licensing mechanism that operates at the member-state level. Individual member states issue licences permitting the payment of legal fees to or for the benefit of designated persons. The substantive criteria and procedural timelines vary by member state, though the underlying legal basis is the applicable Council regulation. A representation before the EU General Court in an annulment action – one of the routes available to challenge an EU designation – may require a member-state licence for fees, a separate question from whether OFAC or BIS authorisations are in place.
OFSI in the United Kingdom administers a specific-licence system for legal fees. There is no UK general-licence equivalent to the standing OFAC authorisations in most programmes. Every payment of legal fees to or for the benefit of a UK-designated person requires a specific OFSI licence unless the fee relates to basic legal advice and falls within a limited exception. The OFSI licensing process has its own procedural requirements, timelines, and conditions. It is not compatible with the OFAC process, and a firm that has OFAC authorisation cannot rely on it to cover OFSI requirements.
For a cross-border matter – for example, counsel advising a designated client on simultaneous OFAC, OFSI, and EU listing challenges while also managing export-licence obligations under the EAR – the authorisation matrix can involve four separate processes: an OFAC general or specific licence, a BIS waiver (if EAR items are involved), an OFSI specific licence, and a member-state legal-fees licence in the relevant EU jurisdiction. Each has its own conditions, timelines, and reporting obligations. The rule across all regimes is that the stricter prohibition governs where they conflict; where they do not conflict but each imposes independent conditions, all conditions must be satisfied simultaneously.
For a detailed comparison of OFAC and EU legal-fees licence treatment, see our OFAC vs EU: legal-fees licences analysis. For the OFSI and Australia comparison, see our OFSI vs Australia: legal-fees licences analysis.
Common misconception: one authorisation covers all regimes
The most persistent myth in this area is that securing OFAC authorisation for legal fees resolves the authorisation question across all applicable regimes. It does not.
OFAC licences – whether general or specific – authorise transactions that would otherwise be prohibited under US economic sanctions administered by OFAC. They do not authorise transactions that are prohibited under the EAR, under OFSI, under the EU Council regulations, or under any other autonomous sanctions programme. Each regime's authorisation requirement is independently assessed and independently satisfied. An OFAC licence does not substitute for a BIS waiver, an OFSI licence, or an EU member-state licence.
The same logic applies in the opposite direction. A BIS waiver permitting representation of a denied person does not authorise the receipt of fees that would otherwise be blocked under OFAC. The two authorisations address different legal prohibitions administered by different agencies under different statutory authority.
We regularly advise compliance teams that have constructed a careful OFAC authorisation position only to discover that parallel BIS, OFSI, or EU conditions have not been addressed. The discovery typically comes either at the point of an audit or at the point where fees have already been collected and a reporting obligation has been missed. Early parallel analysis is materially cheaper than retrospective remediation.
Related practices
- Frozen account management under BIS and the EAR – managing blocked accounts and authorisation for controlled transactions under BIS and EAR controls.
- OFAC vs EU: legal-fees licences analysis – a detailed comparison of OFAC and EU Council regulation legal-fees licence treatment and procedural routes.