Libya Sanctions Pursuant and in Response to Executive Order 13566
Kelley Drye Client Advisory
In response to the ongoing strife in Libya, on Friday, February 25, 2011, President Obama signed an Executive Order (“the Order”) declaring a national emergency under the International Emergency Economic Powers Act (“IEEPA”). The Order directs targeted sanctions against Libyan dictator Colonel Muammar Qadhafi, his government, and certain individuals within it.
The General Counsel of the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) recently stated that the Executive Order prohibits the export of goods to the government of Libya and to any entity controlled by the government of Libya. Other U.S. government officials have warned that the individuals named in the Executive Order have interests in almost every major business in Libya. In short, any proposed export to Libya should be reviewed very carefully. It is likely that most proposed shipments will not be permissible under the Executive Order.
For United States persons, the Order’s key provisions are as follows:
- No transferring, paying, exporting, withdrawing, or otherwise dealing in the property or interests in property of: (1) certain individuals listed in the Order,1 (2) anyone subsequently designated by the U.S. Department of the Treasury,2 (3) the Government of Libya (including its agencies, instrumentalities, and controlled entities), or (4) the Central Bank of Libya.
- Includes but is not limited to (1) the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked; and (2) the receipt of any contribution or provision of funds, goods, or services from any such person.
- Applies to any property or interests in property that are in the United States, that later come within the United States, or that are or later come within the possession or control of any United States person.3
- Applies notwithstanding any contract entered into or any license or permit granted prior to the effective date of the Order.
- Donations of food, clothing, medicine, or other articles intended to be used to relieve human suffering by, to, or for the benefit of any person whose property and interest in property is blocked per the above are prohibited.
- The Order specifically prohibits any transaction by a United States person or within the United States that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions discussed above. Conspiracies formed to violate any of the above prohibitions are also prohibited.
After the President issued the Order, federal agencies in charge of administering export controls were quick to take action:
The provision of goods or services in the United States to the employees of the diplomatic missions of the Government of Libya to the United States and the United Nations are allowed simply provided that (1) the goods or services are for personal use of the employees of the missions, and are not for resale; and (2) the transaction is not otherwise prohibited by law.
- In addition to updating the SDN List, OFAC issued General License No. 1, which authorizes all transactions with financial institutions4 owned or controlled by the Government of Libya that are organized under the laws of a country other than Libya.
- OFAC also issued General License No. 2, which authorizes the provision of goods or services in the United States to the diplomatic missions of the Government of Libya to the United States and the United Nations provided that:
- The goods or services are for the conduct of the official business of the missions, or for personal use of the employees of the missions, and are not for resale;
- The transaction does not involve the purchase, sale, financing, or refinancing of real property;
- The transaction is not otherwise prohibited by law; and
- The transaction is conducted through an account at a U.S. financial institution specifically licensed by OFAC.5
- The U.S. Department of State’s Directorate of Defense Trade Controls suspended all licenses for exports or reexports to Libya issued pursuant to the Arms Export Control Act and International Traffic in Arms Regulations. No further exports may be made against them until further notice, and no exemptions may be used for exports to Libya. The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) has similarly suspended all licenses for exports or reexports to Libya under the authority of the Export Administration Regulations. No further shipments may be made against these licenses by any person. As of this writing, whether exports under license exemptions are also disallowed remains unclear.
Non-U.S. persons, including separately incorporated and independently operating foreign subsidiaries of U.S. companies are not directly covered by certain of these regulations. Non-U.S. persons, however, are strongly cautioned not to re-export U.S.-origin items to Libya at this time and to ensure that no U.S. persons are involved in any transactions with Libya, including approving or otherwise facilitating those transactions. In fact, any transaction with Libya should be reviewed with compliance and/or legal personnel for compliance with the provisions described in this memorandum. Moreover, other countries are expected to issue sanctions in the near future if the situation in Libya continues to involve violence.
Given this fluid mix of economic sanctions, the difficulty of identifying ownership interests in Libyan businesses and banks by listed individuals, and the ongoing instability in Libya, U.S. persons are advised to consult with export counsel before engaging in any business involving that country. Many export transactions with Libya are likely to be prohibited.
For more information, please contact:
1 Those individuals, as of this writing, are (1) Ayesha Qadhafi [Lieutenant General in the Libyan Army, born circa 1976 or 1977], (2) Khamis Qadhafi [born 1980], (3) Muammar Qadhafi [Head of State of Libya, born 1942], (4) Mutassim Qadhafi [National Security Advisor and Lieutenant Colonel in the Libyan Army, born circa 1975], and (5) Saif Al-Islam Qadhafi [born June 5, 1972].
2 The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has added several individuals to the Specially Designated Nationals (“SDN”) List per the authority granted it under the Order. The Treasury’s Financial Crimes Enforcement Network (“FinCEN”) has also issued a broad advisory reminding U.S. financial institutions to apply enhanced scrutiny for private banking accounts held by or on behalf of senior foreign political figures and to monitor transactions that could potentially represent misappropriated or diverted state assets.
3 The Order defines United States person as any United States citizen or national, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States. “Person” means individuals and entities, and “entities” includes partnerships, associations, trusts, joint ventures, corporations, groups, subgroups, and other organizations, including overseas branches of any of the above.
4 General License No. 1 does not provide a definition for “financial institutions,” but under the Iran Sanctions Act of 1996 and the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, the term includes (1) any bank or savings association, including a branch or agency of a foreign bank, meaning any company (including subsidiaries and affiliates) organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands, which engages in the business of banking; (2) a credit union; (3) a securities firm, including a broker or dealer; (4) an insurance company, including an agency or underwriter; and (5) any other company that provides financial services.
5 U.S. financial institutions are required to obtain specific licenses to operate accounts for, or extend credit to, the diplomatic missions of the Government of Libya to the United States and the United Nations.