Economic Sanctions

• Author: International Law Group

After the terrorist attacks of September 11, 2001, the U.S. President issued an Executive Order declaring a national emergency.

It froze the assets of groups that "assist in, sponsor, or provide financial, material, or technological support for, or financial or other services to or in support of, such acts of terrorism." See Executive Order 13224, Section 1(d)(1), 66 Federal Register 49079 (September 23, 2001). This Executive Order rested on the International Emergency Economic Powers Act (IEEPA) [50 U.S.C. Sections 1701-1707], which was later amended by the USA PATRIOT Act [Pub. L. 107-56, Title I, Section 106, 115 Stat. 272, October 26, 2001].

Global Relief Foundation, Inc. (GRF), is an Illinois charitable corporation operating in about 25 foreign countries, including Afghanistan, Albania, Pakistan, Somalia, and Syria. On December 14, 2001, the U.S. Secretary of the Treasury blocked its assets, pursuant to IEEPA, Section 1702(a)(1)(B). This provision authorizes the U.S. President to "investigate, block during the pendency of an investigation, regulate ... prevent or prohibit, any acquisition ... with respect to ... any property in which any foreign country or a national thereof has any interest ..., subject to the jurisdiction of the United States."

GRF requested a district court to enjoin the blocking order. It denied that any "foreign ... national" has an "interest" in its assets, and argued that IEEPA did not apply to corporations holding charters issued in the U.S. The district court turned down the request, and GRF appealed. (Meanwhile, on October 18, 2002, the Office of Foreign Assets Control listed GRF as a "Specially Designated Global Terrorist organization.") The U.S. Court of Appeals for the Seventh Circuit affirms and remands.

The Court first rejects GRF's argument that IEEPA does not apply to corporations that hold charters issued within the U.S. because all its assets are under U.S. control. It is incorrect to contend that the property of all corporations chartered within the U.S. is necessarily domestic U.S. property.

"Cases such as Sumitomo Shoji America, Inc. v. Avagliano, 457 U.S. 176 (1982), illustrate the application of this principle to federal statutes. Treaties that the United States has negotiated with many foreign nations grant citizens (including corporations) of those nations certain privileges within the United States. Avagliano holds that a U.S. subsidiary of a foreign corporation is a U.S. citizen, not a...