A designated company receives a winding-up petition. Its directors want to instruct counsel. Every bank account is frozen. The legal-fees question – can blocked funds be released to pay for representation? – is urgent, and the answer under EU sanctions law is not obvious.
EU sanctions regulations include a standing authorisation that permits competent national authorities to release frozen funds for essential legal expenses, including professional legal fees and disbursements. The mechanism is regime-specific: each EU thematic sanctions regulation sets its own conditions, and the authorising authority is the member state's designated competent authority, not an EU-wide body. Processing timelines and administrative requirements vary by jurisdiction. As of June 2026, this authorisation is available across the principal EU sanctions programmes, though the precise procedural rules differ from one regulation to another.
This guide takes you through the governing legal basis, the step-by-step application procedure, the cross-regime comparisons that matter for a business with multi-jurisdictional exposure, and the risk flags that most often cause applications to fail or stall.
What is the legal basis for releasing frozen funds to pay legal fees?
EU sanctions regulations provide an explicit carve-out for legal expenses. The authorisation covers reasonable professional fees and associated disbursements necessary to provide legal services. It does not extend to any broader business payment; its scope is tightly defined by the text of the relevant regulation.
The legal basis sits in the EU Council regulation applicable to the specific sanctions programme. Each regulation authorises member states' competent authorities to permit the release of frozen funds for this purpose, subject to conditions. The EU is not a single licensing authority: Belgium's competent authority handles applications for entities operating in Belgium, France's authority handles French-based requests, and so on. This decentralised structure is a common source of confusion for cross-border businesses that assume a single EU-level filing suffices.
A second point that practitioners regularly raise: the authorisation for legal fees is conceptually distinct from other humanitarian or extraordinary-expense authorisations in EU regulations. It is not a discretionary hardship relief; it is a defined category. That distinction matters because the conditions for legal-fee releases – such as prior notification to the Council – are specific and non-negotiable.
In our practice, clients sometimes conflate the legal-fees authorisation with a general licence for operating expenses. They are different mechanisms with different procedural routes and, in some regulations, different notification obligations. Misidentifying the applicable route can cause significant delay at a point where the client urgently needs representation.
Step 1: Identify the applicable sanctions regulation and competent authority
Before preparing any application, confirm which EU sanctions regulation catches the frozen assets and which member state's competent authority has jurisdiction. Both determinations shape every subsequent step.
Identify the regulation first. A company can be designated under multiple EU regulations simultaneously. Each regulation has its own legal-fees provision, and a single application filed under the wrong instrument may be rejected on formal grounds, wasting time the client does not have. The relevant instrument is the Council regulation under which the designation was made – check the designation entry on the EU Consolidated List and the associated Council Decision.
Identify the competent authority next. EU regulations assign licensing competence to member states. The relevant authority is ordinarily the competent authority of the member state in which the frozen funds are held, or where the designated party or the instructed law firm is established – though regulations vary on this point. If assets are frozen across multiple member states, multiple competent authorities may be involved, and filings may be required in more than one jurisdiction.
We regularly advise clients at this preliminary stage. A mapping exercise – which regulation, which accounts, which authority – usually takes one to three business days and prevents the more costly error of filing in the wrong place. Have you confirmed which authority actually holds licensing competence over the accounts you need to unblock?
Step 2: Assess eligibility and structure the application
Eligibility for a legal-fees release turns on whether the payment falls within the definition of allowable legal expenses under the applicable regulation and whether the procedural conditions are met. Both elements must be satisfied.
Allowable expenses. EU regulations typically cover reasonable professional fees for legal representation and associated disbursements. Counsel fees for litigation, arbitration, or regulatory proceedings are standard. Fees for compliance consultancy unconnected to an active legal matter may fall outside the definition, depending on the regulatory text. The application should set out the nature of the legal work, the legal proceedings or matter to which it relates, and why the fees are necessary.
Procedural conditions. Most EU sanctions regulations require the applicant or the competent authority to notify the Council of the European Union before or concurrently with the release. This notification requirement is frequently overlooked, and failure to satisfy it can expose the releasing institution to liability even when the underlying application has been approved by the national authority. The notification is not an approval step; it is a disclosure obligation. Its timing and form are set by the regulation and should be checked against the current text of the applicable instrument.
The application package typically includes:
- A formal written request to the competent authority, identifying the designated party, the frozen accounts, and the legal matter for which fees are sought
- Evidence of the designation and the accounts affected
- A fee estimate or invoice from the instructed lawyers, broken down by anticipated work
- Evidence that the funds will be paid exclusively to the law firm for legal services (not returned to the designated party or used for any other purpose)
- A draft or confirmation of the Council notification, where required
In our experience, applications that arrive at the competent authority incomplete are the most common cause of delay. Most authorities will not proactively request the missing item; they will return the file or place it pending, which can mean weeks of lost time. Prepare the full package before filing.
Step 3: File, notify, and manage the authority's review
Filing procedures differ by member state. Some authorities accept applications by email with a standardised form; others require a signed original or a portal submission. Processing timelines are set by national administrative law and are not harmonised across the EU. A well-supported application to a responsive authority can produce an outcome within a few weeks. A more complex case, or one where the Council notification raises questions, can take considerably longer. Neither timeline should be taken as a guarantee; verify the current position with the relevant authority before relying on it.
During the review, the competent authority may request additional information or clarifications. Respond promptly and completely. A gap in the response delays the clock and, in some member states, triggers a fresh review period. Designate a single contact point for the authority's queries and ensure that person can turn around substantive responses quickly.
Council notification. Where the regulation requires notification to the Council, this should be submitted concurrently with or immediately following the national filing. The Council does not approve or refuse the release; it is informed. However, if the Council raises an objection – which is a possibility in some regulatory frameworks – that objection must be taken seriously and addressed before the release proceeds. In practice, this step is administrative in the majority of cases, but it is not without legal significance.
A related point worth addressing early: the competent authority will want to be satisfied that the released funds go to the law firm and are not capable of being redirected. The instruction of a separate client account and a direct payment arrangement with the law firm, rather than a release to the designated party, is good practice and may be required.
How does the EU legal-fees authorisation compare with OFAC and OFSI?
The EU mechanism is structurally different from both the US and UK approaches, and a business facing simultaneous designation across regimes must handle three separate processes concurrently.
Under OFAC, legal fees for US-licensed counsel are addressed through a standing specific licence category. OFAC has historically authorised US persons to receive fees for bona fide legal services rendered to designated parties, subject to the requirement that the fees not involve a significant benefit to the designated party beyond the legal representation itself. The application is made to OFAC directly, not to a member state. There is a single licensing authority and a single procedural track. OFAC's licensing practice and its standard conditions differ materially from those applicable under EU regulations, and what is permitted under an OFAC licence does not automatically satisfy EU requirements.
Under OFSI, the UK financial sanctions authority, legal-fee releases similarly require an OFSI licence. OFSI administers licensing in a single tier – there is no sub-national competence question analogous to the EU's member-state structure. OFSI's licensing criteria and assessment standards are distinct from both OFAC and the EU. A party designated on both the UK Consolidated List and the EU list must file separately with OFSI and with the relevant EU member state competent authority; a single licence from one does not satisfy the other.
The practical consequence for cross-border businesses is that a multi-regime designation generates multiple concurrent licensing obligations, each with its own forms, timelines, and conditions. We have acted for clients who obtained a release under one regime and then encountered a blocked payment because a second regime had not been addressed. Coordination of the filings – ideally managed by a single team with sight of all three tracks – is essential. This is precisely the kind of multi-regime exposure that a sanctions lawyer with cross-border practice coverage is positioned to handle.
For a detailed treatment of the OFAC legal-fees process, see our guide at Legal-fees licences under OFAC. For the Japan regime, see Legal-fees licences under Japan sanctions. Businesses managing blocked accounts across multiple jurisdictions may also benefit from reviewing our frozen account management service.
What are the most common risk flags in EU legal-fees applications?
Applications fail or stall for a predictable set of reasons. Identifying these in advance reduces the risk of a costly delay at a moment of legal urgency.
Wrong competent authority. Filing with the authority of the member state where the designated party is incorporated when the frozen accounts are held in a different member state is a common error. The competent authority with licensing power over the release is ordinarily the authority of the member state where the funds are held, but the regulation's text governs and should be checked.
Missing Council notification. Failing to submit the Council notification, or submitting it after the release rather than concurrently, creates a procedural defect that can render the release unlawful under the regulation. This is the single most frequently overlooked step in our experience.
Over-broad fee estimate. Applications that lump together clearly allowable legal fees and advisory work that may not qualify – such as strategic consulting or PR advice – invite scrutiny and can result in a partial refusal or a request for the fee schedule to be broken down and resubmitted. Present only the legal work, described precisely.
Insufficient segregation of funds. An application that does not include a clear mechanism for ensuring that released funds go exclusively to the law firm – and not back to the designated party's general accounts – will face heightened scrutiny. The competent authority's concern is not merely procedural; allowing released funds to benefit the designated party beyond their stated purpose is a sanctions violation.
Parallel regime oversight. Where the same assets are subject to both EU and UK or US sanctions, a release approved by the EU competent authority may still be blocked at the bank because the bank's own compliance policy requires a licence under the parallel regime. Anticipate this. Obtain or confirm coverage under each applicable regime before instructing the bank to release.
Is your application package addressing the notification obligation and the fund-segregation requirement explicitly? These two points, addressed up front, resolve the majority of competent authority queries before they are raised.
When should a business involve external sanctions counsel?
Early involvement of compliance counsel is the single most effective step a business can take to reduce the risk of a failed or delayed application. The legal-fees licensing process is procedurally exacting and the consequences of error – a rejected application, a delayed release, or an unlawful payment to counsel that creates a fresh sanctions exposure – are significant.
Counsel should be involved at the mapping stage (identifying the regulation and the competent authority), at the eligibility assessment stage (confirming that the proposed fees fall within the allowable definition), and at the filing stage (preparing the package, managing the Council notification, and handling the authority's queries). Where the designation runs across multiple regimes – as it frequently does for businesses with US, UK, and EU exposure – counsel with cross-border practice coverage can coordinate the parallel filings and prevent the gaps that arise when each jurisdiction is handled in isolation.
A related concern: some businesses assume that once they have identified a sanctions lawyer willing to act, the legal-fees licence process is straightforward. In practice, even well-supported applications can take time, and an authority that is managing a heavy caseload may take longer than anticipated. Early instruction gives counsel the time to prepare a strong application without the compounding pressure of an imminent procedural deadline in the underlying legal proceedings.
The myth that a designated party cannot obtain legal representation because its funds are blocked is worth correcting directly. The legal-fees authorisation exists precisely to enable access to legal services. The process requires effort and expertise, but it is designed to function. What it is not is automatic: the authorisation is a route that must be applied for, not a self-executing permission.
If a transaction has already been flagged or a release has been refused, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com to discuss your position.
Related practices
- Frozen account management (BIS/EAR) – managing blocked-account situations under US export-control and sanctions regimes
- Legal-fees licences under OFAC – step-by-step guide to releasing funds for legal representation under the US regime
- Legal-fees licences under Japan sanctions – procedural guide to the Japan regime's legal-expense authorisation