On February 25, 2011, one day before the UN Security Council endorsed economic sanctions against Libya, President Obama issued Executive Order 13566 imposing broad US sanctions against the country. The Executive Order consists solely of “blocking” measures against the Government of Libya, Muammar Gadhafi, and his close allies and family members. Although not a comprehensive embargo like the US sanctions programs against Iran or Cuba, the US Libya sanctions are surprisingly broad. Indeed, they are considerably more expansive than UNSCR 1970 or the country sanction programs implementing the UN resolution, including in the EU and EU Members States.
Executive Order 13566 consists of various blocking measures that apply to property and interests in property held by Muammar Gadhafi, his regime and five members of the Gadhafi family. These blocking measures apply to virtually any property of blocked persons, tangible or intangible, and any direct or indirect interest therein, including present, future or contingent interests. Property subject to the sanctions includes property or property interests that are in the United States or that come within the United States, or that are in the possession or control of a US person, including US-based companies and overseas branch offices (but not independent foreign subsidiaries).
US persons in possession or control of blocked property subject to the US Libya sanctions are prohibited from transferring, paying, exporting, withdrawing or otherwise dealing in the property. In addition, US persons must notify OFAC by written report within 10 days of receipt of blocked property.
The scope of the US sanctions against Libya is distinguishable from that of other countries implementing UNSCR 1970 in the sanction’s application to Libya’s government. Executive Order 13566 applies expressly to “the Government of Libya, its agencies, instrumentalities and controlled entities, and the Central Bank of Libya.” The Executive Order does not define the term “control,” but Treasury Department guidance indicates that it considers 50 percent or greater ownership to be one indicator of control (among others).
In light of the prevalence of state-owned enterprises in Libya, US sanctions potentially affect a significant volume of transactions. These include, for example, transactions by US companies with the Central Bank of Libya, Libya’s National Oil Corporation, Libyan Airlines and numerous other government “instrumentalities and controlled entities.” In fact, OFAC recently published a list of 14 oil and exploration companies owned or controlled by Libya’s National Oil Corporation, which OFAC considers to be subject to the blocking measures. US sanctions also apply to transactions involving banks that are owned or controlled by the government of Libya; however, OFAC has issued a general license permitting transactions with such banks that are organized under the laws of a country other than Libya, provided the transactions do not otherwise involve Libya’s government or any person whose property and interests in property is blocked.
Any activities by US persons in furtherance of the performance of contracts with these or other Libyan governmentowned entities would appear to violate the Executive Order, as would transactions by US persons that have the purpose or effect of evading or avoiding the prohibitions of the Executive Order. Further, there is no exemption in the Executive Order for contracts entered into prior to the effective date of the Order.
In subjecting Libya’s government entities to blocking measures, Executive Order 13566 goes beyond the Security Council Resolution and other countries’ measures to implement the resolution. In the EU, for example, Council Decision 2011/137 (February 28, 201) and Regulation 204/2011 (March 2, 2011) establish an arms embargo against Libya, as well as a visa ban and asset freeze against Muammar Gadhafi, his family members and certain government officials in Libya. The EU regulations do not, however, block transactions with the Libya’s government generally, or with its owned or controlled instrumentalities or entities.
In light of the breadth of Executive Order 13566, US companies should scrutinize carefully all transactions involving Libya. This is particularly important in sectors traditionally occupied by state-owned enterprises, such as the energy, utilities, transportation and infrastructure sectors. Where doubt exists as to whether or not a Libya-based company is government-owned, US companies are advised to request a specific license from OFAC.