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The United Nations and U.S. Government Substantially Ease Libyan Economic SanctionsSeptember 19, 2011
Following adoption by the United Nations Security Council of Resolution 2009 (2011), on September 19, 2011, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) released two General Licenses that immediately authorize substantially all transactions involving Libya, the Government of Libya, and Libyan state-owned enterprises. Authorized transactions may not involve previously blocked property, except that blocked property belonging to the Libyan National Oil Company (NOC) and its controlled affiliates may be released. Also, the General Licenses do not authorize transactions involving members of the Gaddafi family, the Gaddafi regime, and entities under their control.
New OFAC General Licenses Nos. 7A and 8 may be found here.
UN Security Council Resolution 2009 (2011) may be found here.
The UN and U.S. Government actions are the latest in a multilateral effort first to impose, and now to dismantle, economic sanctions adopted beginning in late February 2011. United Nations Security Council Resolution 1970, adopted on February 26, 2011, among other measures required member states to freeze the assets of specific members of the Gaddafi regime. The Security Council broadened the asset freeze in Resolution 1973, and the Council’s Sanctions Committee took further actions to implement the sanctions, including designation of the NOC, Zueitina Oil Company, and the Central Bank of Libya, among other entities specifically designated under the UN sanctions.
Consistent with the UN actions, on February 25, 2011, President Obama issued Executive Order 13566, imposing new economic sanctions on Libya. Implementing this Order, OFAC promulgated the Libyan Sanctions Regulations (LSR) on July 1, 2011.
While partially maintaining some sanctions, Security Council Resolution 2009 (2011) recognizes the changes that occurred with the removal of the Gaddafi regime and the advent of governance under the leadership of the National Transitional Council (NTC), as well as the vital need to assist the Libyan people by eliminating barriers to foreign trade and investment. Resolution 2009 (2011) specifically removed the NOC and Zueitina from the asset freeze and other sanctions measures without limitation. It further removed the Central Bank and other financial institutions from the sanctions, subject to certain limitations and a continued freeze on funds and other financial assets that were previously frozen under the sanctions. Member states may release such funds for humanitarian reasons, following certain reporting and other requirements.
OFAC General Licenses
The U.S. Government has continued to adhere closely to the UN approach. On September 9, the OFAC issued General License No. 7, which authorized transactions involving entities owned or controlled by the NOC – although, because of the UN sanctions, not with NOC itself or with the Zueitina Oil Company. This license also did not extend to other Libyan Government entities.
Effective September 19, 2011, General License No. 7A replaces General License No. 7 in its entirety, and includes two distinct authorizations:
- First, the license permits U.S. persons generally to engage in all transactions involving either the NOC or entities owned or controlled by the NOC, including Zueitina Oil Company and numerous other specifically named subsidiaries. Such transactions must not, however, involve any person whose property is blocked (such as a Gaddafi family member, for example).
- Second, the license authorizes release of property or property interests of NOC and its affiliates that were previously blocked. Reports must be filed with the OFAC concerning the release of any blocked funds. For example, payments by NOC to U.S. persons that were blocked by U.S. financial institutions may be released, with a corresponding report to the OFAC.
Also effective on September 19, 2011, General License No. 8 differs from General License No. 7A in that it broadly authorizes U.S. persons to engage in transactions involving the Government of Libya, its agencies, instrumentalities, and controlled entities, and the Central Bank of Libya. Unlike General License No. 7A, however, General License No. 8 does not permit transactions involving property that is currently blocked under the LSR; such property remains blocked except with respect to the entities covered by General License No. 7A. Further, U.S. persons may not engage in transactions with persons listed on the Annex to General License No. 8. These persons include members of the Gaddafi family, former Gaddafi regime, and entities controlled by them.
Accordingly, U.S. persons are now broadly free under the LSR to engage in business involving Libya, including with the Libyan Government. The principal exceptions to this lifting of the sanctions are those involving currently frozen assets (other than assets owned by the NOC or its controlled affiliates), or persons closely associated with the former Gaddafi regime. The European Union and individual members of the UN doubtless will issue their own new regulations unwinding Libyan sanctions in the near future.
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