Further to our earlier client alerts on Libya sanctions [please click here to view], the following is an update on the EU-Libya sanctions regime.
The EU Libyan sanctions comprise measures to freeze funds and the economic resources of listed Libyan parties as well as an arms embargo and a ban on sales of equipment that could be used for repression against Libyan civilians. Certain individuals are also subject to a travel ban.
New measures adopted on April 12, 2011 increase pressure on Libya’s oil and gas sector, in particular, as new energy companies and related investment companies are brought into the scope of the sanctions regime. The Libyan sanctions now extend to a host of oil and gas companies operating in Libya, in affiliatino with the Libyan National Oil Corporation (which was itself designated for sanctions in March). Certain tourist sector operators are also targeted, notably Libyan Arab Airlines. Moussa Koussa, the former Libyan Minister for Foreign Affairs was removed from the list following his defection on 30 March.
The EU first adopted measures to implement and expand on UN sanctions against Libya with Council Decision 2011/137/CFSP on February 28, 2011 and Council Regulation 204/2011 on March 2, 2011. Subsequently, a series of supplementary Council Decisions and Regulations were adopted in short succession as well as national legislation implementing various aspects of the sanctions regime.
The table below lists the Council Regulations in place, as these measures are the most relevant for the asset freezing aspects of the sanctions regime. In the interests of brevity, it does not list the additional measures which the Member States have implemented through national legislation to assist economic operators with compliance.
Please click here to view table.
All financial institutions and other bodies and persons in the EU need to exercise particular vigilance to ensure they do not maintain any accounts or otherwise hold funds or economic resources for the entities and individuals named in the lists contained in Annexes II and III of the Council Regulation (EU) No 204/2011, as amended.
Although the Council Regulation is directly applicable to economic operators carrying on business in the EU, the individual Member States of the EU have asset freezing legislation and regulations in place as well as additional provisions, such as measures to implement the FATF standards on terrorist financing and the Third Anti-Money Laundering Directive, and economic operators need to be mindful of those. Operators in the EU who have dealings with Libyan parties should familiarise themselves with the specific provisions in their Member State of residence or establishment as there can be slight differences in approach.
The EU sanctions regime provides exemptions to the general ban on the use of funds and economic resources by designated parties, but these are mainly restricted to the use of personal assets which cannot be used to obtain funds, goods or services, and must be authorised by a competent authority in one of the 27 Member States.
Council Regulation (EU) No 296/2011, adopted on March 25, provides exemptions for persons and entities that are connected to designated parties so that they may continue to conduct legitimate business. The Regulation also inserts a new Article 6a to Council Regulation (EU) 204/2011, which reads as follows:
‘With regard to persons, entities and bodies not designated in Annexes II or III, in which a person, entity or body designated in those Annexes has a stake, the obligation to freeze the funds and economic resources of the designated person, entity or body shall not prevent such non- designated persons, entities or bodies from continuing to conduct legitimate business in so far as this business does not involve making available any funds or economic resources to a designated person, entity or body.’;
Accordingly, the mere fact that a non-designated company is owned in part by a sanctioned party does not render that non-designated entity subject to the EU sanctions restrictions. However, due diligence should continue to be exercised where such ownership interests exist, including in particular where a non-designated party is majority owned or controlled by a sanctioned entity.