Legal-fees licences under EU: a practical guide

A multinational company faces an unexpected designation. Its assets are frozen, its bank accounts blocked, and its legal team is advising that contesting the designation will require substantial fees. The funds to pay those fees are themselves frozen. How does a designated person or entity actually pay counsel under the EU sanctions regime? This is the question that sits at the intersection of designation law, licensing procedure, and fundamental rights – and the answer is not obvious.

EU sanctions regulations contain a specific carve-out for legal fees and incidental expenses, allowing competent national authorities to release frozen funds for that purpose. The mechanism is a specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction, issued by the relevant Member State authority). As of June 2026, the procedure is uniform in its legal basis across EU regulations but is administered at national level, which creates practical divergence in processing times and documentation standards that practitioners must account for from the outset.

This guide sets out the legal basis for legal-fees licences under the EU regime, the step-by-step procedure for obtaining one, the documentation requirements, the cross-regime comparison with OFAC and OFSI, the common risk flags, and when to involve counsel early.

What is the legal basis for funding legal representation from frozen assets?

EU sanctions regulations consistently include a provision permitting competent national authorities to release frozen funds specifically to meet reasonable professional fees and reimbursement of expenses in connection with legal services. The authority to grant this release is not automatic: it is conditional on the designating body – in practice the relevant Council working group – having no objection, and on the competent authority in the Member State being satisfied that the funds will not, directly or indirectly, benefit a listed person beyond the scope of the authorised legal representation.

The legal basis sits in the applicable Council Regulation. That regulation defines the prohibition on making funds available to listed persons, and then carves out an exception for legal fees. The carve-out is not unlimited: it typically specifies a threshold approach under which payments below a defined ceiling may be processed by the competent authority without further notification, while larger amounts require additional scrutiny. No section numbers are required here – the instrument relevant to your designation and the applicable Council Decision implementing it will carry the operative text.

It is worth pausing on the constitutional dimension. The right of access to a lawyer is recognised in the EU Charter of Fundamental Rights. The legal-fees carve-out in sanctions regulations directly operationalises that right. This does not mean the carve-out is unconditional – it does not, for instance, allow a designee to fund litigation unrelated to the designation itself – but it does mean that a competent authority refusing a legal-fees licence must engage with fundamental-rights arguments. In our practice, that argument has real traction before both the national authority and, on challenge, the EU General Court.

How does the competent authority system work, and which authority do you apply to?

The EU is not a single licensing authority. Each Member State designates one or more competent authorities (the national bodies empowered to issue licences and authorisations under EU sanctions regulations) – typically the treasury, finance ministry, or a dedicated financial-intelligence unit. The licence application is submitted to the competent authority in the Member State where the frozen funds are held or, in some instruments, where the legal services are to be provided.

This matters practically. A designated entity with accounts in two Member States may need to file two separate applications, with two different authorities, applying subtly different procedural rules. Processing speed varies. Some competent authorities have established fast-track procedures for urgent legal-fees applications; others do not. Documentation expectations differ: one authority may accept a solicitor's letter of engagement; another may require a detailed fee schedule and evidence of prior billing.

In our experience, identifying the correct authority and understanding its current practice is step zero – before a single document is assembled. Getting this wrong adds weeks. And in a contested designation, weeks matter enormously to the client's ability to mount an effective legal challenge.

The position above covers the standard case. Your facts – the Member State where funds are held, the currency and account type, the nature of the legal services being funded, and the specific regulation under which the designation was made – all change the analysis. For an assessment of your position under the EU regime, contact Calder & Vance at info@caldervance.com.

Step-by-step: how to obtain a legal-fees licence under EU sanctions

The procedure follows a broadly consistent sequence across Member States, though the detail at each step varies. A structured approach minimises the risk of rejection and re-application delay.

1. Identify the governing regulation and the designation decision. Confirm which Council Regulation applies, which Council Decision lists the entity or individual, and whether the designation is at EU level only or also reflected in a UN Security Council listing. A UN listing affects the analysis because additional conditions apply where the Security Council has mandated the asset freeze.
2. Confirm the competent authority. Identify the Member State authority with jurisdiction over the specific frozen assets. Where assets are held in multiple jurisdictions, prepare to file separately.
3. Prepare the application package. At minimum: a description of the legal proceedings or advice for which funds are sought, a fee estimate or schedule from the instructed lawyers, confirmation that the lawyers are not themselves listed or associated with listed persons, and the legal-services engagement terms. Some authorities require the applicant to confirm the scope of the legal services and certify that funds will not be diverted.
4. Submit and await the no-objection period. Under most EU instruments, the competent authority notifies the Council and allows a defined window – typically measured in business days – during which objection may be raised. The application cannot be approved before that window closes without objection. In practice, verify the current period with the relevant authority before relying on any stated figure.
5. Receive the licence and implement its conditions. If granted, the licence is typically specific to a defined amount, a defined legal matter, and a defined time period. It does not authorise general use of frozen funds. Any deviation from its terms may constitute a breach of the applicable regulation.
6. Record-keeping throughout. The paying institution and the legal-services provider should retain all documentation for the period required under the applicable regulation. In our cross-border practice, we consistently advise clients to treat record-keeping as part of the licence compliance obligation – not as an afterthought.

There is no single timeline that applies across all Member States or all regulations. Some competent authorities process straightforward applications within weeks; complex or politically sensitive matters take longer. Build realistic time into the litigation or advisory plan accordingly.

What documentation does the application require?

Documentation is where most applications either succeed or create delay. The threshold question is whether the competent authority can be satisfied, on the materials presented, that the funds will be used exclusively for reasonable professional fees and related expenses in connection with the defined legal services.

The core elements of a well-prepared application file are:

• A covering letter from the applicant identifying the legal basis for the application and the relief sought, with a summary of the legal matter for which fees are required.
• A letter of engagement from the instructed counsel, confirming the scope of the legal representation and the fee arrangements. Some authorities require this to be on counsel's headed paper with a named lawyer identified.
• An itemised fee estimate or, where services have been partially rendered, a fee schedule showing amounts already incurred and amounts anticipated.
• A sanctions-compliance declaration from the law firm, confirming that neither the firm nor its relevant personnel appear on any applicable list, and that the firm has conducted appropriate checks on its own position.
• Evidence of the frozen account or the asset location, sufficient for the competent authority to verify jurisdiction.
• Where the legal matter relates to the designation itself – an annulment action before the EU General Court, for instance – confirmation of the procedural status and the court or forum seized.

What does a competent authority find insufficient? In our experience, the most common documentation failure is a vague fee estimate that does not distinguish between the anticipated work streams. An authority that cannot assess proportionality will typically revert with questions, not grant the licence. A precisely scoped application – even if it covers only the initial phases of the legal matter – is more likely to be processed efficiently than an open-ended request. Is your fee estimate framed in a way that allows the authority to assess it against the legal-fees carve-out standard?

How does the EU approach compare with OFAC and OFSI?

Cross-regime comparison is essential for any multinational or dual-listed designee. The legal-fees carve-out exists in all three major Western regimes, but the mechanics differ in ways that shape both the application strategy and the risk profile of the instructed legal team.

Under OFAC (the US Office of Foreign Assets Control), legal-fees authorisations for services to designated persons are typically handled through general licences that apply to a defined category of programmes. Where a general licence covers the matter, no specific application is required: the transaction may proceed within the licence's parameters. Where no general licence applies, a specific licence application to OFAC is necessary. OFAC's licensing function is centralised, which means a single application covers US-nexus services; there is no state-by-state filing. OFAC licence applications are subject to their own processing timelines, which in complex cases can extend well beyond the initial period.

Under OFSI (the UK Office of Financial Sanctions Implementation), the legal-fees licensing route is also available. OFSI issues specific licences for legal services to UK-designated persons. The ownership and control test (the UK and EU test for whether a non-listed entity is caught through a listed person) applies for determining the scope of who must seek a licence. Unlike the EU, where licensing is decentralised across Member States, OFSI is the single licensing authority for UK financial sanctions. This can make the OFSI procedure more predictable procedurally – though OFSI, like EU competent authorities, applies its own documentation standards and its own assessment of reasonableness of fees.

The key practical divergences, viewed from the perspective of a dual-listed designee:

• Centralisation: OFAC and OFSI are single points of contact for their respective regimes. The EU is not: each Member State authority is the point of contact for assets in its jurisdiction.
• General licence availability: OFAC general licences can cover a broad class of legal-fees transactions without a specific application. EU regulations do not use general licences in the same structural way for individual designee categories.
• Notification and objection periods: The EU regime builds in a Council notification window. OFAC and OFSI do not have an equivalent inter-institutional objection mechanism as a standard procedural step.
• Stricter prohibition governs: Where a designee is listed under both the EU and UN regimes, the stricter prohibition governs, and the applicant must satisfy both the EU competent authority and, where the UN listing imposes additional conditions, the parameters set by the relevant Security Council committee.

For a business operating across all three regimes, the practical implication is that a coordinated multi-regime legal-fees strategy is needed from day one. Instructing separate counsel in each regime without a coordinated approach risks inconsistency in the fee records, scope descriptions, and declarations submitted to each authority – and any inconsistency is a risk point.

If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com to discuss your position.

What are the risk flags that delay or defeat an application?

A legal-fees licence application can fail or be significantly delayed for reasons that have nothing to do with the merits of the underlying legal matter. Understanding the failure modes in advance is the most effective way to avoid them.

The most common risk flags we see in practice are:

• Wrong authority approached. Filing with the competent authority in a Member State that does not have jurisdiction over the specific frozen funds wastes time and reveals the existence of assets in other jurisdictions. Map the asset location first.
• Instructed law firm has a sanctions exposure. Some competent authorities require confirmation not just that the law firm is unlisted, but that key individuals within the firm are not associated with listed persons. A firm that has not conducted this check creates a risk that the authority will raise it mid-process.
• Fees characterised as excessive. The legal-fees carve-out covers reasonable fees. An application that cannot demonstrate proportionality between the work scope and the requested amount invites the authority to seek further information or to impose a lower ceiling.
• Scope creep in the fee description. A licence that covers legal advice on the designation challenge cannot be used for general commercial legal advice. If the fee descriptions in the application blur the scope, the authority may narrow the licence or add conditions that make it difficult to use.
• Failure to address the UN dimension. Where the designation is also a UN listing, the application must confirm compliance with the Security Council conditions. Omitting this is a common error in applications prepared without specialist sanctions input.
• Ignoring the 50 percent rule (the test treating entities owned 50 percent or more by blocked persons as themselves caught): if the applicant entity is itself captured by the ownership and control rules under the applicable regulation – not just the designated individual – the licensing analysis and the scope of the prohibition differ. This is not always visible at first review.

A micro-scenario illustrates the point. In a recent matter, a trading company in an EU Member State found that its sole shareholder had been designated under an EU thematic regulation. The company was not itself listed, but under the ownership and control rules of the applicable regulation, it was subject to the same prohibitions. The company's counsel had applied for a legal-fees licence on the assumption that the designee individual was the applicant. The competent authority queried whether the company itself also required a licence. Clarifying the corporate structure and re-presenting the application as a combined matter added several weeks to the process. Early identification of the ownership question would have prevented the delay.

When should you involve sanctions counsel, and what will counsel do?

The point at which you involve specialist sanctions counsel is not when the application has already been filed and is in difficulty. It is before the application is assembled.

Here is a practical decision matrix:

• Situation A – Designee is an individual, assets in one Member State, straightforward legal proceedings: a single competent authority application is sufficient. Counsel assists by scoping the application correctly, preparing the fee estimate in the format the authority prefers, and managing the notification period. Timeline is typically a matter of weeks to months, depending on authority.
• Situation B – Designee is a corporate group, assets in multiple Member States, dual-listed under EU and UN: multiple competent authority applications, coordinated with the UN Security Council committee conditions. Counsel must harmonise the documentation across filings, anticipate the objection points in each jurisdiction, and manage the interplay between the EU regulation and the UN instrument. Timeline is longer and unpredictability is higher.
• Situation C – Legal-fees licence refused or reduced by the competent authority: counsel assesses the grounds of refusal, advises on any appeal or review route available under national administrative law, and considers whether an annulment action before the EU General Court is available in respect of the designation itself.

What does counsel specifically do? On a legal-fees licence application: assess the applicable regulation and its specific carve-out language; identify the correct competent authority or authorities; scope the eligible legal services and prepare the fee schedule in the format required; prepare the covering letter and compliance declarations; manage the notification period; and respond to authority queries. On a refused application: review the authority's reasoning, advise on the available challenge routes, and where appropriate initiate judicial-review or annulment proceedings.

There is a myth worth addressing directly: that a designation challenge and a legal-fees licence application are separate matters that can be handled by different legal teams without coordination. In practice, the documentation prepared for the licence application – including the scope of the legal representation, the fee estimate, and the characterisation of the legal proceedings – directly affects the credibility of the designation challenge itself. Inconsistencies between the two files are examined by reviewing authorities and, if the matter proceeds, by the EU General Court. A coordinated approach is not a luxury; it is a reliability requirement.

Related practices

• Frozen account management under BIS/EAR – managing blocked assets and licence applications under the US export-control regime.
• Legal-fees licences under EU: advanced questions – deeper analysis of complex multi-regime and contested scenarios.
• Legal-fees licences under Japan's sanctions regime – comparable procedure under the applicable Japanese sanctions instruments.