A trading company's assets are blocked under the Export Administration Regulations (EAR – the US Commerce Department's export-control and sanctions rules administered by the Bureau of Industry and Security, or BIS). The company needs legal representation. Its lawyers need to be paid. But the funds sit in blocked accounts. Can any of those funds reach counsel?
Yes – but only through a specific authorisation process. Under the EAR and the broader US sanctions architecture, payments of legal fees from blocked or restricted assets require a specific licence (a case-by-case authorisation granted by BIS or the relevant licensing authority permitting an otherwise prohibited transaction). No general standing permission covers this automatically. The analysis turns on which instrument imposed the restriction, which authority administers it, and whether the assets in question fall within the scope of the applicable licensing provision.
This guide walks through each stage of the process: identifying the correct regime and authority, assessing eligibility, preparing and submitting the application, managing the regulator's questions, and addressing the cross-regime complications that arise when other jurisdictions' rules also bite on the same assets.
Step 1: Identify which authority administers the restriction
Before any licence application is drafted, you must confirm precisely which legal instrument imposed the restriction on the assets – because BIS and OFAC administer overlapping but legally distinct regimes, and confusing them is the most consequential early mistake.
BIS administers the EAR under the authority of the Export Control Reform Act. Its enforcement arm, the Office of Export Enforcement, handles violations. BIS restricts exports, re-exports, and transfers of items subject to the EAR. Where an entity appears on the Entity List (a BIS-administered list of parties to which exports require a licence) or the Denied Persons List (a list of individuals and entities barred from participating in US exports), BIS is the relevant authority for any authorisation.
OFAC, by contrast, administers the economic-sanctions programmes under IEEPA and related statutes. OFAC blocks property, not just export privileges. If the restriction on the assets arises from an OFAC designation – an SDN List (OFAC's list of Specially Designated Nationals and blocked persons) entry – then OFAC, not BIS, holds the licensing authority for payments from those blocked funds.
In our cross-border practice, we regularly see matters where both regimes apply simultaneously: a party is on the Entity List for export-control reasons and also the subject of OFAC blocking. In that situation, legal-fees authorisation requires separate engagement with both authorities. Proceeding on a BIS authorisation alone does not cure an OFAC restriction, and vice versa.
The first document any counsel should prepare is a jurisdiction map: which instrument, which authority, which assets, and which transactions are caught. Without this map, the application goes to the wrong desk.
Step 2: Assess eligibility – who may apply and for what?
Eligibility for a legal-fees licence turns on two questions: is the applicant a person authorised to submit the request, and do the proposed payments fall within the scope of what the applicable regime permits to be licensed?
Under the EAR's licensing scheme, applications are typically filed by the exporter, the re-exporter, or another party in interest. For a legal-fees licence, the "party in interest" is usually the law firm or the blocked party itself, depending on the structure of the application and which authority is administering the process. Where OFAC is the administering authority – as it often is for the financial-blocking component – OFAC's regulations contemplate that either the blocked party or its counsel may apply for specific authorisation to receive legal fees from blocked funds.
What may be licensed? The applicable regimes permit authorisations for reasonable and bona fide legal fees and costs incurred in connection with a civil, criminal, or administrative proceeding, or in connection with advice on sanctions compliance itself. The word "reasonable" is doing real work here: regulators scrutinise fee levels. Applications that bundle unusually large retainers, success fees, or consultancy components alongside core legal fees attract additional questions. We regularly advise clients to present fee requests in itemised form, separating genuine legal services from any other disbursement.
One eligibility question that frequently surprises clients: the licence covers the transfer of funds to counsel, not the broader conduct of the legal matter. The authorisation does not permit the blocked party to take actions that would otherwise violate the applicable restrictions; it permits only the specified payment to the specified recipient for the specified purpose.
Step 3: Prepare the application – what the submission must contain
A well-prepared legal-fees licence application is a structured evidentiary package, not a form-filling exercise. The licensing authority uses the submission to verify eligibility, assess the fee level, identify the assets to be drawn upon, and confirm that the payment route will not itself breach the applicable rules.
The core components of a strong submission include the following.
- A precise identification of the applicant and the blocked party. Full legal names, addresses, identification numbers, and the relationship between the applicant and the party whose assets are to be used. Where the applicant is law firm counsel, the engagement letter and a description of the scope of representation are attached.
- The legal basis for the restriction. Which list, which instrument, which programme. This is stated generically by reference to the applicable instrument – not by section number, but by the programme name and administering authority.
- A description of the assets. Where they are held, in what form, the approximate value, and the identity of the custodian (typically the financial institution holding the blocked account). The custodian will receive a copy of any licence granted and must be notified of the application in advance of submission.
- A fee budget. An itemised estimate of the legal fees and costs expected over a defined period – typically six months to one year. Applications seeking an open-ended or indefinite authorisation are unlikely to succeed. The budget is the anchor for the regulator's assessment of reasonableness.
- A payment-route description. How the funds will move from the blocked account to the law firm's trust account. The route must not pass through a third party that is itself subject to restrictions.
- A statement of purpose. A concise description of the legal matter for which representation is sought and why that matter requires the specific fees requested.
In our practice, we treat the fee budget as the most-contested element. Regulators ask for supporting detail: hourly rates, timekeeper composition, estimated hours by task, and anticipated disbursements. Submitting a single aggregated number invites a request for supplemental information – adding weeks to the process. Start itemised.
Step 4: Submit, manage regulator queries, and track timelines
Submission routes differ by authority. BIS applications are submitted through the Simplified Network Application Process Redesign (SNAP-R) system for export licences, or through direct written application to the Office of Export Enforcement where the request relates to enforcement-adjacent authorisations. OFAC applications are submitted through its online licensing portal or, for complex or urgent matters, by written correspondence.
Processing timelines are not fixed by statute and vary materially with workload, application quality, and the sensitivity of the programme. In our experience, straightforward applications to OFAC for legal-fees authorisation in less-sensitive programmes resolve within a few months. Applications involving heavily-scrutinised regimes, incomplete submissions, or novel legal questions take considerably longer. BIS processing timelines for export-licence applications have a statutory target, but that target does not apply in the same way to enforcement-adjacent authorisation requests.
After submission, the most productive thing an applicant can do is maintain direct, prompt communication with the case officer. Requests for additional information (RFIs) must be answered completely and within the timeframe specified, or the application may be closed without action. We have seen applications lapse because an RFI response was partial – the case officer had one outstanding question, received an answer to a different question, and closed the file.
Where urgency is genuine – an imminent hearing, a statutory deadline, or a situation where the blocked party will lose representation without an expedited decision – the application should explicitly request expedited treatment and explain the basis. Regulators do grant expedited review; but the request must be substantiated, not merely asserted.
Step 5: Manage cross-border complications
For many clients, the BIS / EAR application is only one part of a multi-regime problem. A blocked party with assets in multiple jurisdictions faces parallel processes that do not automatically align.
In the United Kingdom, OFSI (the Office of Financial Sanctions Implementation) administers financial-sanctions licensing under SAMLA and the relevant thematic regulations. OFSI has its own specific-licence process for legal fees. The test, the documentation requirements, and the processing approach differ from OFAC's. OFSI places particular emphasis on the proportionality of the fee request and on the connection between the legal matter and the sanctioned party's legitimate interests.
Under EU Council regulations, designated parties may also seek authorisation to release funds for legal representation. The competent authority varies by member state; the substantive test is set at EU level but procedural requirements differ nationally. An applicant navigating EU, UK, and US restrictions simultaneously is dealing with three separate licensing queues, three sets of document requirements, and three sets of case officers – none of whom are obliged to coordinate with the others.
The practical implication: a licence granted by OFAC does not authorise a UK bank to release funds. An OFSI licence does not cure a BIS restriction. Each jurisdiction requires its own authorisation. The sequencing of applications matters: in our practice, we advise submitting in the jurisdiction where the custodian bank is located first, since that licence determines whether funds can physically move. Where the custodian is a US-nexus institution, the OFAC authorisation is typically the gate.
There is a further cross-border risk that is frequently overlooked. The act of applying for a licence – describing the assets, identifying the custodian, explaining the nature of the legal matter – creates a paper trail. If the applicant or the blocked party has exposure in additional jurisdictions whose authorities share information, the application itself can surface the existence of assets or relationships that the party had not previously disclosed to those other jurisdictions. This is not a reason to avoid applying; it is a reason to plan the disclosure sequence carefully and to understand the information-sharing arrangements between the relevant authorities before submitting.
Step 6: Common risk flags and when to involve counsel early
Several risk patterns recur in legal-fees licence matters. Identifying them early changes the outcome.
The custodian moves faster than the licence. A financial institution, on discovering that it holds a blocked account, may freeze the account and report the situation before the blocked party has time to engage counsel. Once the account is fully frozen, the window for voluntary, coordinated disclosure narrows. Involving sanctions counsel at the earliest indication of a potential blocking – before the bank acts – is consistently the most effective approach.
A second pattern: the fee request is not clearly bounded. Applications that request "all legal fees as they arise, without limit" are rejected or returned for resubmission. Regulators require a defined period and a defined maximum. Open-ended requests signal to the case officer that the applicant has not thought carefully about scope. That perception slows processing.
A third risk: the payment route passes through an intermediary that is itself a restricted party. This error is more common than it sounds. A law firm's bank may have correspondent-banking relationships with restricted entities. The custodian bank may be unwilling to process the transfer without its own legal review. We regularly advise on payment-route analysis before submission – mapping the proposed route and identifying any link that could create a secondary violation.
A fourth risk specific to the cross-border dimension: assuming that a licence granted in one jurisdiction extends to assets held in another. It does not. Each asset pool, in each jurisdiction, requires its own authorisation from the competent authority in that jurisdiction.
Is there a myth worth addressing directly? Yes. We encounter a persistent belief that a legal-fees licence application, once granted, permits any payment to counsel for any purpose. In fact, the licence is specific: it authorises the defined payment, to the defined recipient, for the defined legal matter, over the defined period. Payments outside those parameters – including fees for a separate legal matter that arises while the licence is in force – require a new or amended authorisation.
Step 7: After the licence – record-keeping and renewal
A granted licence imposes obligations, not just permissions. The custodian bank and the receiving law firm both have record-keeping duties under the applicable rules. The law firm must retain records of how the licensed funds were applied – specifically, that they were used for the legal-fees purpose stated in the application. If the legal matter concludes before the licence period expires and funds remain, the applicable rules govern what happens to any balance.
Renewal applications are treated as new applications in substance, even if the same matter continues. The regulator will want an accounting of how the previous licence's funds were used before authorising a further release. Maintaining clean, itemised billing records from the outset – records that can be produced to the regulator on request – is not optional. It is a condition of the continuing licence relationship.
In our experience, clients who treat the licence as the end of the process rather than the beginning of a compliance obligation create avoidable problems at renewal. The regulator's case officer at renewal will ask: how much was released, to whom, for what, and what is left? A client who can answer those questions cleanly, with documentary support, obtains renewal faster and with fewer supplemental queries.
Related practices
- Frozen account management under BIS / EAR – managing blocked accounts and custodian obligations under US export-control and sanctions rules
- Legal-fees licences under BIS / EAR: advanced issues – multi-party blocked assets, renewal strategy, and cross-border sequencing
- Legal-fees licences under the Canadian regime – the Global Affairs Canada process compared with OFAC and OFSI