IEEPA Refunds: 4 Agency Legal Insights for 2026

Understanding the intricate relationship between the International Emergency Emergency Economic Powers Act (IEEPA) and contractual obligations is paramount for marketing agencies working through global operations, especially when considering IEEPA refunds. The complexities of sanctions law intersect directly with contract law, creating unique challenges and opportunities for both agencies and their clients, demanding precise legal insights. This intersection often determines the viability of refund claims and the enforceability of contractual terms under unforeseen geopolitical shifts.

1. Scrutinize Sanctions Clauses in Client Contracts

The initial step for any marketing agency operating internationally involves a rigorous review of existing and prospective client contracts for clauses pertaining to sanctions. Many standard contracts may include boilerplate language that does not adequately address the nuances of IEEPA. I’ve seen countless agencies get caught flat-footed because they assumed a generic “force majeure” clause would cover everything, but IEEPA is a different beast entirely. Agencies need to look for specific language that dictates what happens if a client, or a client’s beneficial owner, becomes a Specially Designated National (SDN) or is otherwise blocked under IEEPA. This includes provisions for immediate contract termination, the treatment of funds already paid, and the process for any potential refunds. A detailed clause might specify that, upon designation, all services immediately cease, and any unearned portion of a prepayment becomes subject to regulatory guidance from the Office of Foreign Assets Control (OFAC). Without this clarity, agencies face significant legal and financial exposure.

Pro Tip:

Consider adding a clause that explicitly states that the agency reserves the right to terminate the agreement without penalty if the client or any party involved in the transaction becomes subject to U.S. sanctions, including those imposed under IEEPA. This preemptive measure protects the agency from inadvertently violating sanctions.

2. Document All Service Deliverables and Expenditures

In the event of an IEEPA-related disruption, thorough documentation becomes the agency’s primary defense and evidence for any refund discussions. This isn’t just good business practice. It’s a legal necessity. Agencies must maintain careful records of all work performed, hours logged, resources expended, and third-party costs incurred for each client project. For example, if an agency is running a digital advertising campaign for a client, documentation should include screenshots of ad placements, performance reports from platforms like Google Ads or Meta Business Suite, invoices from media buys, and internal time tracking logs. A granular breakdown of expenditures demonstrates what services were delivered and what costs are non-recoverable. This level of detail is critical when arguing that services were already rendered and therefore not eligible for a full refund, even if IEEPA intervenes. According to a 2023 IAB report, digital ad spending continued to climb, reinforcing the need for precise tracking of these significant investments.

Common Mistake:

Agencies often rely on high-level project summaries rather than detailed activity logs. This makes it incredibly difficult to justify retained funds or argue against blanket refund demands if a sanctions event occurs mid-project. Specificity here is your friend.

3. Understand OFAC’s Interpretive Guidance on Blocked Funds

The Office of Foreign Assets Control (OFAC) is the primary enforcer of IEEPA sanctions. Their guidance on blocked funds is not merely advisory. It carries significant weight. When a client or their funds become blocked, the situation isn’t as simple as issuing a refund. In many cases, U.S. persons (including marketing agencies) are prohibited from returning funds to blocked entities without a specific license from OFAC. This means agencies cannot simply process an IEEPA refund if they hold funds belonging to a now-sanctioned entity. Instead, those funds must be placed into a blocked account. Agencies should familiarize themselves with OFAC’s General Licenses and specific guidance related to particular sanctions programs. Consulting the OFAC FAQ page regularly is a must, as interpretations can evolve. This is where legal experts specializing in sanctions law become indispensable. They can navigate the often-complex licensing process or advise on the appropriate handling of blocked assets.

4. Integrate IEEPA Considerations into Payment Terms

The structure of payment terms can significantly mitigate risk related to IEEPA refunds. Agencies should consider incorporating payment schedules that align closely with service delivery milestones rather than large upfront payments for long-term projects. This reduces the amount of “unearned” revenue that could become problematic if sanctions are imposed. For example, instead of requesting 50% upfront for a six-month campaign, structure payments to be 20% upfront, followed by monthly installments tied to specific deliverables like content calendar approval, ad creative launch, or quarterly performance reports. This reduces the potential for large sums of client money to be caught in limbo if a sanctions event occurs after only a fraction of the work has been completed. This granular approach to payment aligns risk with service progression.

Pro Tip:

For high-risk jurisdictions or industries, agencies might consider requiring clients to provide a legal opinion from reputable counsel confirming their compliance with U.S. sanctions laws before contract execution. This adds another layer of due diligence.

5. Establish Clear Communication Protocols with Clients

Transparency and clear communication are vital, especially when dealing with the potential impact of IEEPA. Agencies should proactively discuss the implications of sanctions with clients, particularly those operating in geopolitically sensitive regions or sectors. This conversation should happen during contract negotiation, not after an incident. The contract should outline a process for notification if either party becomes aware of a sanctions issue. It should also detail how information will be shared regarding blocked funds or services halted due to IEEPA. Setting these expectations upfront can prevent misunderstandings and legal disputes down the line. It’s about managing expectations before they become problems.

6. Seek Specialized Legal Counsel Promptly

When an IEEPA issue arises, prompt engagement with specialized legal counsel is not optional. It’s mandatory. General corporate lawyers may not possess the specific expertise required to navigate OFAC regulations, licensing requirements, or the intricacies of international sanctions. An attorney specializing in international trade and sanctions can provide important advice on whether funds are truly blocked, the appropriate steps for reporting to OFAC, and the process for applying for specific licenses if necessary. They can also assist in drafting communications to the affected client and, if needed, represent the agency in discussions with OFAC. The cost of specialized legal advice pales in comparison to the potential fines and reputational damage associated with a sanctions violation. This is where contract law truly gets tested against geopolitical realities.

Common Mistake:

Delaying legal consultation or attempting to resolve IEEPA issues internally without expert guidance. This often leads to missteps that can escalate compliance risks and financial penalties.

7. Regularly Review and Update Compliance Policies

The sanctions field is dynamic. OFAC updates its SDN list and issues new guidance frequently. What was permissible last year might not be today. Agencies with international clients must commit to regularly reviewing and updating their internal compliance policies and contractual templates. This involves monitoring OFAC announcements, subscribing to relevant legal updates, and conducting annual internal audits of client portfolios for sanctions exposure. Using compliance software that screens clients against global sanctions lists can automate a significant portion of this ongoing due diligence. This proactive stance ensures that the agency remains compliant and prepared for any shifts in IEEPA regulations, safeguarding against unforeseen IEEPA refunds or violations. Working through IEEPA’s impact on contractual agreements requires diligence, foresight, and expert guidance. By carefully structuring contracts, documenting services, understanding OFAC’s mandates, and engaging specialized legal counsel, marketing agencies can effectively manage the risks associated with sanctions and protect their financial and reputational standing.