On September 13, 2010, the Office of Foreign Assets Control (OFAC) ended the former Iraq sanctions program, the Iraqi Sanctions Regulations (ISR), [1] and concurrently issued the Iraq Stabilization and Insurgency Sanctions Regulations (ISISR), codified at 31 C.F.R. Part 576. [2] The ISISR formally end the import and export restrictions with Iraq, block the property of designated entities and individuals and extend protection to certain Iraqi funds and property, including Iraqi cultural property.

Background

The ISR were originally published in 1991, in response to President George Bush’s declaration of a national emergency with respect to Iraq. [3] The ISR blocked all property and interests in property of the government of Iraq, its agencies, instrumentalities, and controlled entities, and the Central Bank of Iraq. The ISR prohibited the importation of any goods or services of Iraqi origin into the United States, as well as the exportation of any goods, technology or services from the United States to Iraq. Transactions relating to transportation and travel to or from Iraq by U.S. persons were also prohibited.

On July 30, 2004, after Saddam Hussein’s removal from power and other developments in Iraq, President George W. Bush issued Executive Order 13350, terminating the national emergency with respect to Iraq and ending the import and export prohibitions that had previously been imposed (although, as a practical matter, most import and export transactions had been authorized via OFAC general licenses since May 2003). To fully implement Executive Order 13350 (and four related Executive Orders [4]) and aid in the reconstruction of Iraq, OFAC has now terminated the Iraqi Sanctions Regulations and promulgated the ISISR.

Property Blocked Pursuant to Iraq Stabilization and Insurgency Sanctions Regulations

The ISISR block property and interests in property that are in the United States (or that come within the United States) or that are (or come within) the possession or control of U.S. persons (including overseas branches) of the following entities:

  • The former Iraqi regime or its state bodies, corporations or agencies;
  • Persons listed in the Annex to Executive Order 13315, as amended by Executive Order 13350;
  • Persons determined to be senior officials of the former Iraqi regime and immediate family members;
  • Persons determined to have committed, or to pose a significant risk of committing, an act or acts of violence that have the purpose or effect of threatening the peace or stability of Iraq or undermining efforts to promote economic reconstruction and political reform in Iraq or efforts to provide humanitarian assistance to the Iraqi people;
  • Persons determined to have materially assisted, sponsored, or provided financial, material, logistical or technical support for, or goods and services in support of, such acts or acts of violence or any person committing or who pose a risk of committing such acts; and
  • Persons determined to be owned or controlled by, or acting or purporting to act for or on behalf of, directly or indirectly, any of the above-listed persons.

Consistent with OFAC’s other list-based programs, blocked entities and individuals are published on OFAC’s Specially Designated Nationals and Blocked Persons List (the SDN List). Property blocked pursuant to the ISISR may not be transferred, paid, exported, withdrawn or otherwise dealt in. This prohibition includes: the making of any contribution or provision of funds, goods or services by, to or for the benefit of any person whose property is blocked; the receipt of any contribution or provision of funds, goods or services from any person whose property is blocked; and any dealing in any security held within the possession or control of a U.S. person and either registered or inscribed in the name of, or known to be held for the benefit of, or issued by, any person whose property is blocked.

Like the 2009 Cote d’Ivoire Sanctions Regulations (CISR) [5] and Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDPSR), [6] the ISISR codify OFAC’s February 14, 2008 guidance on blocked property, [7] stating that U.S. persons must block not only the property of an SDN, but also the property of other entities in which an SDN has a 50 percent or greater interest (including indirect ownership) —even if this other entity is not on OFAC’s SDN list. This standard continues to raise potential concerns for businesses, who may encounter difficulty in determining the beneficial owners of an entity in countries like Iraq where business formation and ownership information are not readily publicly available.

Exemptions/Exceptions

Consistent with OFAC’s other programs promulgated pursuant to the International Emergency Economic Powers Act, the ISIR also exempt:

  • Personal (such as telephonic) communications that do not involve the transfer of anything of value are excepted from the new sanctions;
  • Information and informational materials exemption; and
  • Travel to Iraq

Unique to the ISISR, however, most of the prohibitions do not apply to property which comes under the control of U.S. military forces and their coalition partners in Iraq.

Protected Iraqi Property

In an effort to aid in Iraq’s rebuilding, the ISISR protect certain Iraqi funds from attachment, judgment, lien, garnishment or other judicial processes. The protected funds are those belonging to the Development Fund for Iraq, related to Iraqi petroleum and petroleum products, [8] and held by the Central Bank of Iraq. To ensure consistency with United Nations Security Council Resolution 1546, [9] the prohibition on attachment and other judicial processes with regard to protected funds does not apply with respect to any final judgment arising out of a contractual obligation entered into by the Government of Iraq.

The ISISR provide unique protection to Iraqi cultural property or “other items of archeological, historical, cultural, rare scientific, and religious importance” which were (or are suspected to have been) illegally removed from Iraqi museums and other locations since August 6, 1990. [10] Regardless of whether other legal requirements (such as U.S. Customs and Border Protection regulations) are obeyed, trade in, transfer of ownership of, or possession of these cultural artifacts is prohibited. [11]