On July 1, 2011, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) published a final rule imposing sanctions against Libya. New Part 570 to Title 31 of the Code of Federal Regulations, entitled the “Libyan Sanctions Regulations” (“LSR”), implements Executive Order 13566 of February 25, 2011, “Blocking Property and Prohibiting Certain Transactions Related to Libya.”
The final rule, in accordance with the Executive Order, is primarily a “blocking” regime. Accordingly, all property and interests in property of the Government of Libya, specified individuals and entities as set forth in Executive Order 13396 or otherwise designated by OFAC, and entities owned or controlled by the Government of Libya that are in the United States or within the possession or control of U.S. persons, are blocked, and may not be transferred, paid, exported, withdrawn or otherwise dealt in. The regulations further proscribe making any contribution or provision of funds, goods, or services (including charitable contributions) by, to, or for the benefit of any blocked party. They also prohibit the receipt of such funds, goods, or services from blocked parties.
Entities designated by the Secretary of the Treasury appear on OFAC’s Specially Designated Nationals List (SDN List) and indicated with the identifier “[LIBYA2].” However, entities of the Libyan Government are blocked regardless of whether or not they appear on the SDN List.
Continuing a practice seen in some recent blocking regimes, such as those targeting weapons of mass destruction proliferators (see our previous advisory here), the names of persons blocked during the pendency of an investigation will be published on the SDN list with the identifier “[BPI-LIBYA2].” (Part 570.201 Note 2). The LSR also specifically refer to OFAC’s rules (at §§ 501.806 and 501.807) setting out procedures for persons whose property is blocked to have their property unfrozen.
We offer several observations regarding the new LSR.
- The LSR explicitly provide that a blocked person has an interest in all property and interests in property of an entity in which it owns, directly or indirectly, a 50 percent or greater interest (see section 570.406). The property and interests in property of such a subsidiary entity are blocked regardless of whether it appears on the SDN List, and this guidance expressly does not limit the definition of the term “Government of Libya.”
- The new regulations do not contain a specific provision prohibiting the “facilitation” of transactions that would violate the LSR. Neither does any such prohibition appear in the Executive Order. Nevertheless, the broad nature of the prohibitions on “dealing in” property and the anti-evasion language of the LSR counsel caution before U.S. persons engage in any transaction with a non-U.S. person where an otherwise blocked person or entity may be involved.
- One closely watched issue left unaddressed by the LSR is OFAC’s licensing policy towards entities that have announced a break with the current Libyan regime. Because the LSR make no exception or carve-out for such entities, conducting business with such entities would require a specific license. Companies wishing to pursue opportunities with such companies may be advised to seek informal guidance from OFAC as to the likelihood of receiving such a license.
The LSR contain a highly limited category of exempt transactions, including certain legal services, bank debits for normal service charges and emergency medical services (see sections 570.505-507). The provision of goods or services to Libyan diplomatic missions in the United States and the United Nations is also authorized, providing certain conditions are met (see section 570.508). General Licenses No. 2 (diplomatic missions) and No. 3 (legal services) are superseded and replaced by these provisions of the LSR.