In rapid succession, the United States Government, United Nations Security Council, British Government, European Union and Government of Canada have adopted sanctions targeting Muammar Qadhafi, those closely associated with his regime, and by extension, the Government of Libya (GOL). Each of these sanctions measures is briefly summarized below. As a result of the sweeping sanctions, financial institutions are expected to scrutinize all transactions originating or terminating in Libya. In addition, any transactions involving Libyan Government-controlled entities are being stopped. While no official list of GOL-controlled entities is available in any jurisdiction, some industry sectors are working together to compile informal lists.

Executive Order Blocking Property and Prohibiting Certain Transactions Related to Libya

On February 25, 2011, President Obama signed Executive Order 13566 blocking the property and interests in property of Muammar Qadhafi, certain of his family members,[1] the Government of Libya (including its agencies, instrumentalities and controlled entities) and the Central Bank of Libya. Exempt from these prohibitions are transactions for the conduct of the official business of the U.S. Government (including grantees and contractors). [2] In addition, the Department of the Treasury's Office of Foreign Assets Control (OFAC) has issued two general licenses. General License 1 authorizes all transactions with financial institutions owned or controlled by the Government of Libya that are organized under the laws of a country other than Libya. [3] The British Government issued a similar General License today. [4] OFAC General License 2 authorizes the provision of goods or services in the United States to the diplomatic mission of the Government of Libya to the United States and the United Nations under specified circumstances. [5] U.S. financial institutions are required to obtain specific authorization from OFAC to operate accounts for, or extend credit to, the diplomatic missions of the Government of Libya to the United States and the United Nations.

There has been some confusion about the scope of the Executive Order, with some readers concluding that it requires only property of Colonel Qadhafi and his family to be blocked. It bears reiterating that property of the Government of Libya and the Libyan Central Bank is also blocked.

In addition, on February 26, the Department of State's Directorate of Defense Trade Controls (DDTC) issued a notice suspending all licenses involving Libya pursuant to DDTC's authorities under the International Traffic in Arms Regulations, 22 C.F.R. Parts 120-130. [6]

United Nations Security Council Resolution 1970 (February 26, 2011)

The United Nations Security Council unanimously adopted Resolution 1970 in response to "the gross and systemic violation of human rights" in strife-torn Libya. UNSCR 1970 calls on Member States to:

  • Impose an arms embargo to prevent the direct or indirect supply, sale or transfer to the Libyan Arab Jamahiriya, from or through their territories or by their nationals, of arms and related materiel of all types;[7]
  • Inspect all cargo to the Libyan Arab Jamahiriya in their territory where the State has reasonable grounds to believe the cargo contains items prohibited above;
  • Discourage their nationals from traveling to Libya to participate in activities on behalf of the Libyan authorities;  
  • Take necessary measures to prevent the entry into or transit through their territories of the 16 individuals listed in Annex I (Travel Ban) of the Resolution; and
  • Freeze without delay all funds, other assets and economic resources of the six Qadhafi family members identified in Annex II (Asset Freeze) of the Resolution, and persons acting on their behalf or owned or controlled by those persons.

UK Sanctions (February 27, 2011)

On February 27, 2011, the British Government published a Financial Sanctions Notice, Notice of the Libya (Financial Sanctions) Order 2011 (the UK Order), which gives effect to the UNSCR 1970 (2011). [8] The UK Order freezes the funds, financial assets and economic resources of persons (or those they own or control or those who act for or on their behalf) listed in Annex II to UNSCR 1970. The UK Order provides notice that Muammar Qadhafi and his family have "considerable control over the Libyan state and its enterprises. . ." As a result, like the U.S. sanctions imposed under the Executive Order, the UK sanctions appear intended to sanction the Government of Libya.

To emphasize this point, we understand that HM Treasury has notified UK financial institutions to be wary of entities owned or controlled by the Government of Libya. In addition, on March 3, the British Government issued a second Financial Sanctions Notice specifically addressing Council Regulation (EU) No 204/2011. [9] The March 3 Notice reiterates the obligations of Council Regulation (EU) No 204/2011.

EU Sanctions (February 26 and March 2, 2011)

On February 26, the Council of the European Union adopted a decision implementing the UNSCR 1970 and imposed additional restrictive measures against "those responsible for the violent crackdown on the civilian population." [10] Annex 1 to the EU Regulation contains a list of equipment which might be used for internal repression; Annex II contains a list of persons identified by the United Nations Security Council as subject to an asset and property freeze (Colonel Qadhafi and his five family members); and Annex III contains a list of persons identified by the EU as being persons involved in or complicit in ordering, controlling or otherwise directing the commission of serious human rights abuses against persons in Libya. The Council Regulation (EU) No 204/2011, implemented on March 2, 2011:

  • Bans the supply to Libya of arms, ammunition and related material;
  • Prohibits the provision, directly or indirectly, of technical assistance relating to certain military goods;
  • Prohibits trade with Libya in (including the brokering of, or financial services related to) equipment which might be used for internal repression; and
  • Imposes an asset freeze on the persons identified in Annexes II and III.

The Regulation exempts certain exports to Libya by United Nations, European Union or Member States personnel; representatives of the media and humanitarian and development works. [11] It also grants Members States certain licensing authorities.

Government of Canada Sanctions

Also on February 26, the Government of Canada implemented the prohibitions of UNSCR 1970. [12] Under the Canadian Regulations, no person subject to Canadian jurisdiction shall:

  • Export, sell, supply or ship arms and related material to Libya or a person in Libya;
  • Cause a Canadian vessel or aircraft to carry arms and related material to or from Libya or for any person in Libya;
  • Provide or transfer to any person in Libya technical assistance, financial assistance or other assistance related to military activities; or
  • Import or procure arms and related material, wherever situated, from any person in Libya or any national of Libya.

In addition, with respect to persons identified in Annex II of the UNSCR 1970, no person subject to Canadian jurisdiction shall:

  • Deal in property in Canada that is owned or controlled by a designated person, anyone acting on behalf of a designated person, or any entity controlled by a designated person;
  • Enter into or facilitate, directly or indirectly, any financial transaction related to a deal addressed above;
  • Provide any financial or other related service in respect to property identified above;
  • Make property or service available to a designated person (or to a person acting on behalf of or at the direction of a designated person); or
  • Make property or any service available for the benefit of a person identified above.

Finally, certain financial services industries in Canada have a continuing duty to determine whether they are in possession or control of property owned or controlled by or on behalf of a designated person. [13] The Canadian regulations will apparently contain a provision allowing the Foreign Affairs Minister to exempt certain payments under contracts entered into before any party was named a designated person.

Regulations regarding trade with and investment in Libya are moving quickly, as are military and humanitarian developments within the country. Parties involved in transactions directly or indirectly involving Libya or entities controlled by its government should carefully monitor regulatory developments and consider implementing screening mechanisms to ensure they are capable of complying fully with applicable laws.