On February 25, 2011, President Obama issued an executive order (the order) sanctioning the Government of Libya for its use of extreme tactics in suppressing the people of Libya and for possible misappropriation of funds. The order blocks all U.S. Persons (U.S. Citizens, permanent residents, entities organized in the United States, or any person in the United States) from transactions involving the property or property interests of the following persons or entities:
- The Government of Libya, its agencies, instrumentalities, and controlled entities, including the Central Bank of Libya;
- Colonel Muammar Qadhafi, some of his family members, and certain enumerated officials; and
- Persons determined by the Secretary of the Treasury to be (a) senior officials of the Government of Libya, (b) children of Qadhafi, (c) responsible for participating or assisting in Libyan political repression, or (d) spouses and dependent children of any blocked person.
Under the order, U.S. Persons are prohibited from directly or indirectly, transferring, paying, withdrawing, exporting, or otherwise dealing in any property or property interests of the targeted persons or entities without authorization from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).
It is unclear at this point just how broadly the executive order will be interpreted, or what the impact will be on entities not involved with the Libyan government. As drafted, the order only applies to certain enumerated persons, the Government of Libya and its agencies, and controlled entities. For now, the order does not impact private entities not connected with a named party.
However, exporters should be aware that in the past these types of orders have been broadly construed, sometimes to include private entities funded in part by or loosely affiliated with the state. Drinker Biddle & Reath is closely monitoring events as they unfold, and as additional guidance is provided by the State or Treasury Departments, we will update our client alert to clarify the application of sanctions beyond those persons or entities currently blocked.
In addition to the sanctions imposed on Colonel Qadhafi and some of his children, the Directorate of Defense Trade Controls (DDTC) announced on February 28, 2011, that all export licenses issued for exports to Libya have been suspended until further notice and no exemption set forth in the International Traffic in Arms Regulations could be utilized for export of defense articles and services to Libya.
Finally, please note that on February 25, 2011, OFAC issued General License Number 1 authorizing transactions with financial institutions owned or controlled by the Government of Libya that are organized under the laws of a country other than Libya. The general license allows non-targeted persons with assets in third-country Libyan banks to access their assets. This does not, however, in any way allow transactions with the blocked persons and entities described above, even through third-country Libyan banks.