Introduction
On March 4, 2011, the Department of the Treasury's Office of Foreign Assets Control (OFAC) issued General License No. 1A, refining the scope of strict sanctions that had been previously imposed by the United States upon the Libyan regime on February 25, 2011. This memorandum describes the contents of General License No. 1A, and the scope of U.S. sanctions on the Libyan regime as of March 7, 2011.
For additional background on U.S., UN, and EU Libya-related sanctions, please refer to our previous client memorandum.
President Obama's Executive Order
On the evening of Friday, February 25, 2011, President Obama issued an Executive Order freezing the assets of individuals and entities determined to be responsible for human rights abuses in Libya.
The Executive Order blocks all property (and interests in property) of the Government of Libya (and its agencies, instrumentalities, and controlled entities) and the Central Bank of Libya, and the property (and interests in property) of the following individuals and entities:
1. Muammar Qadhafi and four of his children (Ayesha Qadhafi, Khamis Qadhafi, Mutassim Qadhafi and Saif Al-Islam Qadhafi)
2. Any person1 determined by the Secretary of the Treasury, in consultation with the Secretary of State:
a. To be a senior official of the Libyan government;
b. To be a child of Muammar Qadhafi;
c. To be responsible for, or complicit in, or responsible for ordering, controlling or otherwise directing, or to have participated in, the commission of human rights abuses related to political repression in Libya; d. To have materially assisted, sponsored, or provided financial, material, logistical, or technical support for, or goods or services in support of (1) the activities described in (c) above or (2) any person whose property and interests in property are blocked pursuant to this Order;
(i) Notably, the Order explicitly prohibits donations to blocked persons by persons subject to the U.S.'s jurisdiction of food, clothing, and medicine intended to relieve human suffering.
e. To be owned or controlled by, or to have acted or purported to act for or on behalf of, any person whose property and interests in property are blocked pursuant to this order; or
f. To be a spouse or dependent child of any person whose property and interests in property are blocked pursuant to this order.
These restrictions apply to the property of the designated individuals and entities that is located in the United States, or that subsequently comes within the United States, or that is within the possession or control of any United States person (including any foreign branches, but not foreign-organized subsidiaries, of such person).
The Order mandates that any such property or interest is blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in. In effect, the Order prohibits, absent a new license issued by OFAC,2 virtually any transaction between a United States person and a person whose property is blocked by, or pursuant to, the Order. Specifically delineated prohibited actions include:
1. The contribution or provision of funds to or for the benefit of anyone whose property is blocked;
2. The receipt of any contribution or provision of funds, goods, or services from any such person;
3. Transactions that evade or avoid, or attempt to evade or avoid, the restrictions; or
4. Conspiracies formed to violate the restrictions.
The Executive Order exempts from its purview transactions for the conduct of the official business of the Federal Government and actions otherwise provided for by statutes, or by regulations, orders, directives or licenses issued pursuant to (i.e., after) the Order. Actions taken pursuant to pre-February 25 contracts, licenses, or permits are not exempted from the Order's prohibitions.
The Executive Order provides that no prior notice is required before blocking any of the targeted property and that the Secretary of the Treasury is authorized to determine when circumstances no longer warrant the blocking of property.
In a letter to Congress describing the Executive Order, President Obama also noted that the Secretary of State is suspending all existing licenses and other approvals for the export of defense articles and services to Libya.3
Recent Developments
After the President issued the Executive Order, many practical questions were raised about the scope of the targeted U.S. sanctions on the Libyan regime. For example, in a March 1, 2011 letter to the OFAC Director, the National Foreign Trade Council sought a general license for U.S. companies to send money to Libyan bank accounts from abroad to allow the U.S. companies to continue paying the salaries of their employees in Libya. The letter also posed a number of questions to OFAC, including whether, under the sanctions, companies may receive certain payments from Libyan banks and not deposit those payments into blocked accounts, and whether OFAC will distinguish between entities controlled by opposition forces and entities controlled by Qadhafi or other Libyan persons or entities whose assets have been frozen.4
In response to these and other questions, OFAC issued General License No. 1A on March 4, 2011. This license replaced and superseded General License No. 1, which had been issued on February 25 and authorized all transactions involving banks that are owned or controlled by the Government of Libya and organized under the laws of a country other than Libya. General License No. 1A authorizes all transactions involving banks that are owned or controlled by the Government of Libya and organized under the laws of a country other than Libya provided the transactions do not otherwise involve the Government of Libya or any person whose property and interests in property are blocked.5
Conclusion
In light of the still evolving U.S. sanctions policy with respect to Libya, we urge our clients to continue to reassess the possible impact of U.S. (and other) economic sanctions regimes on their business activities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
