XOM Exxon Mobil Corp

By Dylan Tokar 

Exxon Mobil Corp. won't have to pay a fine for continuing to do business with a Russian state-run oil company amid increasing U.S. sanctions on the country, a federal judge ruled.

The U.S. District Judge Jane Boyle's ruling this week voids a $2 million fine the U.S. Treasury Department imposed on the Irving, Texas-based oil giant in July 2018 for allegedly violating U.S. sanctions on Russia when it entered into contracts with Russian oil firm PAO Rosneft.

"ExxonMobil acknowledges the court's decision, which confirms we complied with the applicable sanction," a company spokesman said in a statement.

Exxon was fined for executing contracts with state-run Rosneft after President Barack Obama issued sanctions against Russia for annexing Ukraine's Crimea region. Even though Rosneft wasn't added to the U.S. sanctions list, the contracts were signed by the company's chief executive, Igor Sechin, who was.

Exxon in 2018 said it was abandoning its venture with Rosneft after failing to secure a waiver from President Donald Trump to drill with the company in several areas banned under U.S. sanctions. But the company continued to fight the fine imposed by the Treasury's Office of Foreign Assets Control.

The lawsuit was seen by some sanctions lawyers as an opportunity to clarify an ambiguity about how OFAC enforces sanctions against blacklisted individuals with ties to nonblacklisted companies.

The agency has since released additional guidance on the issue, cautioning companies against entering into contracts signed by blacklisted individuals. The guidance was issued after Exxon and Mr. Sechin signed the contracts.

In its lawsuit, Exxon pointed to a press release and public statements by White House officials, saying that the focus of the sanctions was on blacklisted individuals' personal assets, rather than on any companies they managed on behalf of the Russian government.

Judge Boyle on Tuesday admonished Exxon for not seeking further guidance from OFAC -- which is tasked with interpreting and enforcing the executive branch's sanctions orders -- at the time of the contracts, calling the company's decision risky and possibly imprudent.

The judge, however, said OFAC ultimately failed to give the company fair notice of its interpretation of the Ukraine sanctions, a violation of the due process clause of the Fifth Amendment.

A Treasury spokeswoman declined to comment on the ruling.

OFAC had argued that the plain language of the executive branch's sanctions orders was enough to give Exxon fair notice. At issue in particular was whether Mr. Sechin's signing of the contracts constituted a service.

The signing could be considered a service, Judge Boyle said, given that it was performed in Rosneft's interest. But the text of the Obama administration's executive order didn't give Exxon fair notice that the receipt of such a service would violate U.S. sanctions, according to the judge.

The ruling is a rare win by a company against the U.S. government's sanctions enforcer, which has broad authority to enforce U.S. foreign policy.

Write to Dylan Tokar at dylan.tokar@wsj.com

(END) Dow Jones Newswires

January 02, 2020 18:55 ET (23:55 GMT)

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