A financial institution in the Netherlands receives a payment instruction from a corporate client. The beneficiary's parent company was designated under EU sanctions three weeks earlier. The funds are frozen. What happens next – and who is responsible for seeking their release? These are not hypothetical questions. They arise in practice every week across the EU's internal market, and the answers are less straightforward than most compliance teams expect.
Under EU sanctions, release of blocked funds (the process by which a designated person, or a third party holding frozen assets, obtains a competent authority authorisation to unblock or disburse those assets) requires an application to the relevant Member State authority under the applicable Council regulation. No single EU-wide licensing body exists. Each Member State designates its own competent authority, and practice – including timelines, documentation expectations, and the scope of permitted derogations – varies materially between jurisdictions. As of June 2026, the legal architecture rests on a layered system of Council regulations, Member State implementation, and the European Commission's role in coordinating consistent application.
This guide walks through the governing regime and authorities, the step-by-step procedure, the cross-regime comparison that matters for businesses with parallel US or UK exposure, the most frequent risk flags, and the points at which specialist counsel adds the most value.
Step 1: Understand the governing regime and the competent authority
EU sanctions are enacted through Council regulations that are directly applicable across all Member States. The regulations prohibit making funds or economic resources available to designated persons and require that assets already under the control of a designated person be frozen. The central point for any release application: there is no single EU licensing body. Each Member State appoints one or more competent authorities (the national body empowered to grant authorisations under the relevant regulation) – typically a national treasury, finance ministry, or central bank unit. The identity of the correct authority depends on where the assets are held, not where the applicant is incorporated.
That distinction matters in practice. A German subsidiary holding funds on behalf of a designated entity applies to the German competent authority. Its French parent, sitting at arm's length, has no authority over that process. In our experience, one of the earliest errors is submitting to the wrong authority – either the authority of the applicant's home Member State, or a general EU body that does not exist. Time lost in that misdirection can be significant, particularly when a payment deadline is running.
The applicable Council regulation also defines which derogations are available. Different thematic sanctions programmes contain different authorisation categories – for pre-existing obligations, for humanitarian purposes, for legal fees, for extraordinary expenses, and occasionally for specific commercial needs. The first task in any release application is to identify which regulation governs the frozen asset, which derogation ground applies to the applicant's facts, and which competent authority in which Member State holds jurisdiction.
Step 2: Map the derogation grounds available under the relevant regulation
Council regulations typically provide several discrete authorisation grounds, and choosing the correct ground before drafting the application is the single most consequential preparatory step. An application that invokes the wrong derogation will almost certainly be refused, and a refusal starts a record that can complicate subsequent attempts.
The most commonly invoked grounds in a commercial context are those relating to pre-existing contracts or obligations – that is, obligations that arose before the designation and that remain due and owing to a non-designated party. A second common ground covers basic needs: payments for food, rent, utilities, and medical treatment for a designated natural person or entities sustaining them. A third covers legal costs – the fees of counsel acting for the designated person in proceedings. Humanitarian derogations are a fourth category, administered with some involvement of the European Commission in certain programmes.
What ground is NOT available under EU regulations? Unlike OFAC's specific-licence regime, EU regulations do not contain a general humanitarian or public-interest override that a competent authority can invoke on its own initiative across all programmes. The grounds are programme-specific and exhaustively listed. If no listed derogation applies to the applicant's circumstances, no authorisation is available under that route. The applicant's only remaining option would be a challenge to the designation itself – a fundamentally different proceeding. Understanding that boundary early prevents months of futile licensing effort.
The position above covers the standard case. Your facts – the counterparty's designation date, the nature of the obligation, the jurisdiction holding the assets, and the specific regulation in force – change the analysis materially. For an assessment of which derogation applies to your situation, contact Calder & Vance at info@caldervance.com.
Step 3: Assemble the documentation package
Competent authorities across the EU apply broadly consistent documentary standards, though the precise checklist varies by Member State and by the derogation ground being invoked. A well-prepared package avoids the back-and-forth of supplemental information requests, which can add weeks or months to the timeline.
For a pre-existing-contract derogation, the core documentary requirements typically include: the contract or instrument giving rise to the obligation (executed before the designation date); evidence of the amounts due and the payment schedule; evidence of the counterparty's designation status at the time of application; a statement of how the funds would be disbursed; and confirmation of the intended recipient's sanctions status. That last point is critical: if the release is intended to flow to a non-designated third-party creditor, the applicant must demonstrate that the released funds will not benefit the designated person.
For natural persons seeking release of funds for basic needs, documentary requirements shift to identity documentation, evidence of the person's financial position, and evidence that the funds will be used for the stated purpose. For legal fees, the competent authority will typically require the engagement letter, a fee estimate, and confirmation that the lawyer is not themselves subject to restrictions.
We regularly advise clients on structuring the supporting narrative that accompanies the documents – the explanatory memorandum that maps each fact to the applicable derogation ground and pre-empts the authority's likely questions. Competent authorities are not obliged to request additional information before refusing; a complete and coherent first submission is materially better than a minimal one.
Step 4: Submit and manage the authority's review
Once the application package is complete, it is submitted to the competent authority of the Member State where the funds are held. Most authorities accept submissions by secure email or through a dedicated portal; some still require physical delivery of original documents. Checking the authority's current submission protocol is a preliminary step that is often skipped.
EU regulations do not universally impose a statutory decision deadline on competent authorities for commercial derogation applications. Some Member State authorities operate within informal service-level periods – often in the range of one to three months for straightforward applications – but these are not guaranteed. Complex cases, cases touching large values, or cases where the authority requires a Commission opinion under the applicable regulation can take considerably longer. Applicants should not plan commercial timelines around an assumed licensing decision date unless the authority has given a written indication.
During the review period, the authority may issue a request for additional information. Responding promptly and completely to these requests is important: silence or delay from the applicant typically suspends any informal timeline and can be treated as withdrawal in some jurisdictions. Our practice includes ongoing correspondence management during the review period, including preparing supplementary submissions and attending any formal or informal dialogue with the authority.
How does the EU procedure compare with OFAC and OFSI?
Businesses with assets frozen in more than one jurisdiction – or with US or UK nexus to the transaction – face a procedural environment that diverges in important respects between the EU, OFAC, and OFSI. The comparison matters because a release authorised in one jurisdiction does not authorise the same payment in another, and the grounds for authorisation are not equivalent.
Under OFAC's regime, a specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction) is applied to the US Treasury's Office of Foreign Assets Control directly, using a centralised process. OFAC administers all US sanctions programmes from a single body. The grounds for a specific licence include a general "specific circumstances" basis that gives OFAC broader discretion than the exhaustive EU derogation structure. OFAC typically advises applicants of an informal processing period, though that period is not statutory and complex applications extend beyond it.
OFSI in the UK operates a licensing regime under the Sanctions and Anti-Money Laundering Act ("SAMLA"). OFSI issues licences under grounds defined in the relevant thematic UK sanctions regulations. The grounds broadly parallel the EU categories but are not identical. Importantly, OFSI has published guidance on licence grounds and on its expectations for supporting evidence, which is more detailed than the guidance published by most EU Member State authorities. Where an asset has both EU and UK exposure – for example, a payment routed through a UK correspondent bank for a EU-regulated transaction – both licensing regimes must be satisfied simultaneously.
The practical implication: if a client holds frozen funds under both EU and US designations of the same entity, the licensing applications proceed on parallel tracks with separate bodies, separate documentary requirements, and separate grounds. A grant by one authority does not guarantee a grant by the other. In our cross-border practice, we advise coordinating the two applications so that the substantive grounds and factual narrative are consistent, avoiding a position where one authority receives a description of the transaction that contradicts the description submitted to the other.
For situations involving blocked accounts under the US EAR or BIS controls, see also our guidance on frozen account management under the BIS/EAR.
Risk flags and common pitfalls in EU release applications
Several patterns recur in applications that fail or are significantly delayed. Identifying them early – ideally before the application is submitted – is the most efficient risk-management step.
The first is timing: an obligation that arose after the designation date will not qualify for the pre-existing-contract derogation, and the applicant who discovers this after submitting has wasted both time and credibility with the authority. Verify the designation date against the contract date before choosing the derogation ground.
The second is the flow-of-funds question. Competent authorities scrutinise whether released funds could reach the designated person – directly or indirectly. A release to a non-designated creditor who is itself controlled by the designated entity will fail the screening test. The ownership chain of the intended recipient must be mapped before submission, not after a query arrives from the authority.
The third is simultaneous US or UN designations. Where the same individual or entity is designated under OFAC and under EU regulations, a release under EU authorisation does not extinguish the OFAC prohibition. A payment made under EU licence to a party that remains on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons) exposes the paying institution to OFAC enforcement regardless of the EU authorisation. This is the most common myth in cross-border release applications: an EU authorisation is not global permission.
The fourth is the 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked) – and its EU counterpart. Under EU regulations, ownership and control (the EU test for whether a non-listed entity is caught through a listed person's ownership or control) can extend the prohibition to subsidiaries and affiliated entities. If the applicant is itself a subsidiary of a designated entity and has not assessed whether the control test captures it, the application may be defective at the threshold – the applicant may not be in a position to receive the released funds in any event.
The fifth is incomplete notification. Several EU regulations require the competent authority, and in some cases the Commission, to be notified of certain transactions even when an authorisation is not required. Failing to notify where notification is required is a separate breach, independent of the blocked-funds question.
If a transaction has already been flagged, or an application has been refused, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com for a confidential assessment.
When should a business involve specialist counsel?
The short answer: before the first submission. Competent authorities do not provide legal advice, and an ill-structured application cannot easily be repaired once it is on the record. The legal questions – which regulation applies, which derogation ground fits the facts, which authority has jurisdiction, and how the supporting narrative should be framed – are technical and, in our experience, are regularly misjudged by in-house teams encountering a frozen-funds situation for the first time.
There is a widespread belief that a well-resourced compliance team can handle a release application without specialist counsel. For straightforward cases involving a single EU jurisdiction, a well-defined derogation ground, and no US or UK exposure, that may be true. But the majority of commercial cases we encounter do not fit that profile. They involve assets held in multiple jurisdictions, ownership chains that are unclear, derogation grounds that overlap or conflict, and parallel US or UK exposure that the in-house team has not mapped. These are not administrative tasks. They are legal problems with enforcement consequences if mishandled.
Specialist counsel adds value at three specific points: structuring the application before submission (to ensure the correct derogation, the correct authority, and the correct documentary package); managing the authority's information requests (to avoid inadvertent concessions or inconsistencies); and, where a release application fails, advising on whether a designation challenge before the EU General Court is a viable alternative route. That last option – an annulment action (a challenge to the legal validity of the designation decision) before the EU General Court – is a distinct proceeding with its own procedural rules and timelines. It is not a substitute for a release application, but it is sometimes the only route available when no derogation ground applies.
For guidance on the Japan regime's approach to frozen assets, see our separate briefing on release of blocked funds under Japanese sanctions. For comparison of overlapping release procedures, see also our supplementary EU guide on derogation scope.
Related practices
- Frozen Account Management under BIS/EAR – US-side licensing and blocked-account management for exporters and financial institutions.
- EU Derogation Scope: Supplementary Guide – extended analysis of available authorisation grounds across EU thematic programmes.