United States Imposes Sanctions on the Government of Libya

March 1, 2011

On February 25, 2011, President Obama issued an Executive Order imposing economic sanctions on the Libyan regime.1 As a result, U.S. persons, and persons of any nationality acting within the jurisdiction of the United States (including U.S. branches of foreign financial institutions) are prohibited from engaging in any transactions with, and must freeze any assets within their control belonging to, the following persons:

  • The Government of Libya or the Central Bank of Libya;
  • Certain members of the Qadhafi family (Muammar Qadhafi and four of his children) specified in an annex to the Executive Order; and
  • Any entity owned or controlled by any of the foregoing, including any state-owned or state-controlled Libyan company.

Furthermore, any person of any nationality engaging in U.S. dollar transactions with any of the blocked persons risks having clearing transactions for those payments occur within the jurisdiction of the United States, which would result either in the payments’ being blocked or in a violation of U.S. sanctions by all persons involved in the transactions.

Simultaneously with the Executive Order, the Office of Foreign Assets Control (“OFAC”) issued General License No. 1, which exempts financial institutions owned or controlled by the Government of Libya from sanctions if they organized under the laws of a country other than Libya.

As a practical matter, given the large role played by the state in the Libyan economy, the new sanctions will broadly prohibit transactions with many Libyan companies. The Executive Order does not contain a “grandfather” provision permitting the continuing performance of pre-existing contracts, and so any such action to close out a pre-existing obligation would require a person bound by U.S. sanctions to seek relief from OFAC. As yet there is no distinction being drawn between nominally state-owned companies that are or are not still under the effective control of the Qadhafi government, but Administration officials have indicated that they are following events closely and are prepared to amend the sanctions regime quite quickly to account for new developments.

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If you have any questions, please feel free to contact any of your regular contacts at the firm.

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1. Official publication is still pending, but the order may be found by clicking here. The order is effective immediately.