United States Court of Appeals: In an appeal challenging sanctions imposed under the Russian Harmful Foreign Activities sanctions regime, Katsas and Childs, Circuit Judges, and Edwards, Senior Circuit Judge, considered whether German precious-metals traders who purchased precious metals, including finished gold bars, from Russian nationals could be regarded as operating in the “metals and mining sector of the Russian Federation economy”.
The Court held that the term “procuring” under the applicable regulations includes obtaining or acquiring geological materials through special effort and is not limited to acquiring equipment used in mining operations. Finding no error in OFAC’s interpretation of the sanctions framework or its determination that the appellants’ activities fell within the Russian metals and mining sector, the Court upheld the sanctions.
Background
The appellants Axel Diegelmann and Fritz Diegelmann are German nationals engaged in the precious metals trade. In 2024, the OFAC blocked the property of the Diegelmanns and three companies owned by Axel Diegelmann pursuant to Executive Order 14024 (Executive Order), which authorized sanctions against persons operating in specified sectors of the Russian economy. OFAC concluded that the appellants had assisted Russia-based metals companies in buying and selling precious metals and thereby operated in the metals and mining sector of the Russian economy.
OFAC extended the Executive Order to the “metals and mining sector of the Russian Federation economy”. OFAC relied on evidence showing that the appellants purchased precious metals, including gold bars, from Russian clients. Subsequently, the appellants filed a suit, challenging the sanction, following which the District Court granted summary judgment in the Government’s favour. Aggrieved thereby, the appellants preferred the present appeal.
Analysis, Law, and Decision
The Court noted that the applicable regulation defines the metals and mining sector to include any act of “procuring, processing, manufacturing, or refining” geological materials. Since the term “procuring” was not defined in the regulation, the Court adopted its ordinary meaning, namely obtaining, acquiring, or getting something through special effort. The Court therefore held that acquiring precious metals from Russian clients constituted an act of procuring within the meaning of the regulation.
The appellants contended that, in the mining industry, “procuring” refers only to obtaining equipment or services necessary for mining operations. Rejecting this argument, the Court held that industry references to procurement in mining merely demonstrate that mining equipment can be procured; they do not limit the ordinary meaning of the word. The Court observed that nothing in the regulation suggested that “procuring geological materials” meant procuring equipment used to obtain geological materials.
The appellants alternatively argued that refined precious metals such as finished gold bars are not “geological materials” and therefore fall outside the sanctions regime. The Court emphasized that this argument had not been properly raised before the District Court. On the contrary, the appellants’ submissions before the lower court had proceeded on the assumption that the regulation covered precious metals generally, while disputing only their connection to Russia. Therefore, the Court held that the argument was forfeited and could not be raised for the first time on appeal.
Regarding the appellants claim that their activities lacked a sufficient connection to Russia, the Court held that the classified records adequately supported OFAC’s determination. The Court found no basis to disturb the agency’s conclusion that the transactions at issue were sufficiently connected to Russia to fall within the sanctions regime.
Finding no error in OFAC’s interpretation of the governing regulations or in its determination that the appellants operated within the metals and mining sector of the Russian economy, the Court affirmed the judgment of the District Court and upheld the sanctions.
[Axel Diegelmann v. Scott Bessent, No. 24-5277, decided on 14-7-2026]
Advocates who appeared in this case:
For the Appellants: Amir Toossi.
For the Appellees: Sean R. Janda, Attorney, U.S. Department of Justice.
