Recent civil unrest in Libya and the ongoing conflict between the government of Colonel Muammar Qadhafi and protestors and opponents to his 42-year rule have generated a substantial international response from the United States, the United Nations, and the European Union. The focus of their efforts thus far has been directed toward economic sanctions against the regime and its senior officials, preventing the export to the regime of armaments and other materials, and increasing the Western military presence in the region. To date, more than $30 billion in assets has been frozen in US financial institutions, and governments and multinational organizations around the world are intensely focused on implementing, and possibly expanding, economic sanctions and the possible establishment of a no-fly zone. This sudden imposition of new economic restrictions on the Qadhafi government has created substantial uncertainty for businesses operating in the region, and given the current political situation in the country, additional developments are likely. Set forth below is a summary of key developments to date.
On February 25th, President Obama issued an Executive Order (EO) imposing sanctions on the Government of Libya. In determining that there is "an unusual and extraordinary threat to the national security and foreign policy of the United States," the President found, among other things, that "Colonel Muammar Qadhafi, his government, and close associates have taken extreme measures against the people of Libya, including by using weapons of war, mercenaries, and wanton violence against unarmed civilians." The EO became effective at 8:00pm eastern on February 25, and the Acting Under Secretary of the Treasury for Terrorism and Financial Intelligence, David Cohen, has reported that the sanctions resulted in the blocking of $30 billion in assets, the largest amount ever blocked by US sanctions. To view the EO, see http://www.treasury.gov/ resource-center/sanctions/Programs/Documents/2011_libya_eo.pdf. The US sanctions on Libya mark the resumption of US sanctions against that country - prior US sanctions were lifted in 2004.
The EO prohibits US persons from doing business with the Government of Libya and any of its instrumentalities or controlled entities, including the Central Bank of Libya, as well as certain persons determined to be responsible for human rights abuses in Libya. US persons are also required to block all property or interests in property of the Government of Libya and designated persons that come within their possession or control. ("US persons" is defined to include US nationals, entities organized under US law or the law of any US jurisdiction, or any person actually in the US.)
The sanctions operate by broadly prohibiting transactions with the Government of Libya (and its various organs and controlled entities) and by authorizing the inclusion of certain persons on the Specially Designated Nationals (SDN) list administered by the US Treasury Department's Office of Foreign Assets Control (OFAC). US persons, wherever located, are barred from all transactions with persons on the SDN list in the absence of proper licensure from the Treasury Department. US persons are also prohibited from engaging in any transaction that evades or avoids, or attempts to evade or avoid, the prohibitions on doing business with Libya or any person on the SDN list.
While the EO expressly identifies (in Appendix A) five members of the Qadhafi family for inclusion on the SDN list, it also authorizes the Treasury Department, in consultation with the US State Department, to designate as an SDN any person who is (i) a senior official of the Government of Libya; (ii) a child of Colonel Muammar Qadhafi; or (iii) who is determined to be responsible for or complicit in human rights abuses with respect to political repression in Libya. Treasury and State are further authorized to designate any person who provides material support for human rights abuses with respect to political repression in Libya; any person owned or controlled, or acting on behalf of, a person blocked by this EO; or the spouse or dependent child of a person blocked by this EO.
OFAC has issued two General Licenses to the Libyan sanctions. General License No. 1 (issued along with the EO on February 25) 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." To view General License No. 1, see http://www.treasury.gov/resource-center/sanctions/Programs/Documents/libya2_gl1.pdf. General License No. 2 (issued March 1) authorizes, under certain conditions, the provisions of goods and services to the diplomatic missions of Libya to the United States and to the United Nations, and their employees. To view General License No. 2, see http://www.treasury.gov/resource-center/sanctions/Programs/Documents/ libya2_gl2.pdf.
The UN has also imposed multilateral sanctions against Libya for the first time since 2003. On February 26th, the UN Security Council unanimously adopted UNSC Resolution 1970, which imposes financial blocking, asset freezing, and a travel ban on certain designated senior Libyan government officials and certain members of their respective families. UNSC Res. 1970 also imposes an arms embargo on Libya and formally refers the situation in Libya for review by the International Criminal Court, which has jurisdiction over crimes against humanity and genocide.
The official text of UNSC Res. 1970 is available at http://www.un.org/News/Press/docs/2011/sc10187.doc.htm. A UN statement announcing the adoption of the Resolution can be found at http://www.un.org/apps/news/story.asp?NewsID=37633&Cr=Libya&Cr1. The US Mission to the UN has also put out a fact sheet on the Resolution, which is available at http://usun.state.gov/briefing/statements/2011/157194.htm.
On March 1, the UN General Assembly suspended Libya from membership on the UN Human Rights Council. This marked the first time that a member had been suspended from the UN Human Rights Council or its predecessor, the UN Human Rights Commission. To view the UN announcement, seehttp://www.un.org/apps/news/story.asp?NewsID=37654&Cr=libya&Cr1.
On February 28th, the European Union (EU) adopted measures that both implement UN Security Council Resolution 1970 and establish additional EU restrictions on the Qadhafi regime. Pursuant to UNSC Res. 1970, the EU prohibited the export to Libya of arms and ammunition, as well as equipment that might be used for internal repression. The EU enacted the UN's visa ban on 16 persons, including Qadhafi, and the UN's asset freeze order for Qadhafi and five members of his family. The EU also adopted its own visa ban on 10 other persons and an asset blocking and freezing order on 20 other persons. To view the EU Council's announcement of sanctions, see http://www.consilium. europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/119524.pdf.
The EU is expected to hold a March 11 summit on the situation in Libya.
On February 27, the UK government made the Libya (Financial Sanctions) Order 2011 (the Order), which gave effect to UNSC Res. 1970 in the UK. The Order took effect from 5:15pm that day. It applies to all persons (legal or natural) in the UK, and all UK persons (natural persons or legal persons established under UK law) anywhere outside the UK. So it applies to banks, financial institutions, charitable organisations, nongovernmental organisations and other corporates or partnerships in the UK or established under UK law. But it does not apply to subsidiaries of UK companies that operate wholly outside the UK and which do not have a UK legal personality.
The Order requires the freezing of all funds, assets or other economic resources of persons listed in UNSC Res. 1970 or designated under it, or of persons acting on their behalf, at their direction, or owned or controlled by them. The HM Treasury notice advising of the measures noted the that participation, knowingly and intentionally, in activities the object or effect of which is, directly or indirectly, to circumvent the measures is prohibited and warned institutions to be aware of the considerable influence over many enterprises of Muammar Qadhafi and his family, when deciding what due diligence to carry out.
Amounts may be added to frozen funds, but institutions must tell Treasury of any additions. Prior approval from Treasury is required before any amount may leave a frozen account for any reason. Treasury has discretion to allow release of funds in specific circumstances, including payment of professional fees and routine service charges and, in some cases, where the UN or the EU has approved payment of moneys due before the sanctions took effect which are not due to designated persons and where it is not contrary to public policy to make the payment.
All institutions covered by the Order were to inform Treasury of any accounts held or other assets frozen under the Order.
On March 3, HM Treasury made the Libya (Asset Freezing) Regulations 2011, which took effect from 3:30pm that day and extended the sanctions to cover the additional persons designated in the EU measures.
HM Treasury has also issued a general license to allow dealings with certain non-Libyan financial institutions that would otherwise fall within the scope of the sanctions.
For further information on the UK sanctions, see
With most of their nationals evacuated from Libya, the US and key European allies are now calling upon Qadhafi to leave power. In addition to the US, UN, and EU blocking and asset freezing measures, Austria, Canada, Switzerland, and the UK have each also reportedly frozen the assets of Qadhafi and his inner circle that are within their respective jurisdictions. While there is not yet a consensus as to possible additional measures that might be taken against the Qadhafi regime, there is the potential for an expansion of sanctions as well as more coercive tactics, such as the establishment of a no-fly zone to ground the Libyan air force assets that remain under Qadhafi's control.
On March 1, the US Senate passed by unanimous consent a non-binding resolution authored by Senator Bob Menendez (D-NJ) that calls upon the UN Security Council "to take such further action as may be necessary to protect civilians in Libya from attack, including the possible imposition of a no-fly zone over Libyan territory." The US military has reportedly repositioned naval and aviation assets near Libya, and the Pentagon is said to be considering various contingency plans that include the establishment of a no-fly zone over Libya as well as humanitarian assistance. With that said, senior US military officers and the US Secretary of Defense have underscored that any such no-fly zone would be a complicated undertaking and that the US military has no desire to engage in a new war in the region. There are also indications that UK Prime Minister David Cameron has directed the British military to review the possibility of planning a no-fly zone. While not dismissing the idea, the French Prime Minister has said that any such no-fly zone would require UN authorization. The Russian Government is said not to be supportive of a no-fly zone, which given Russia's veto power at the UN Security Council could prove problematic in any effort by the US and other allies to secure a UN Security Council resolution for such a no-fly zone.
While the German Foreign Minister has proposed a 60-day economic embargo on Libya to prevent the Qadhafi regime for using oil and other revenues to fund repression, at this point, there does not appear to be a consensus for an energy embargo on Libya. The EU Energy Commissioner, Guenther Oettinger, is reported to have dismissed the idea of an EU embargo on Libyan oil exports because they could, in his view, punish the wrong people, as it appears that many of Libya's oil and gas fields are no longer under Qadhafi's control. US Ambassador to the UN Susan Rice also apparently has indicated that imposing a broader embargo on Libya is not currently a focus for US diplomacy.