International Law Advisory - Anticipated Easing of Libya Sanctions

This is a follow-up to our advisory dated February 26, 2004.  In that advisory, we reported that the Department of Treasury, Office of Foreign Assets Control (OFAC) had issued a general license easing certain travel restrictions and related transactions vis-à-vis Libya.

On the same day that the above-referenced general license was issued, the White House issued a statement indicating that “US companies with pre-sanctions holdings in Libya will be authorized as of today to negotiate the terms of their re-entry into operations in Libya, subject to the requirement of a further US approval for implementation of any agreements if sanctions have not otherwise been lifted.”  That quotation subsequently has been reported widely in the media.  As noted in our advisory, however, the OFAC general license did not implement the authorizations indicated in the White House statement.  Executory contracts with Libyan entities remain subject to OFAC licensing requirements.

We have since spoken with OFAC staff and received clarification regarding the White House statement.  Executory contracts remain restricted under the Libyan Sanctions Regulations (LSR); therefore, companies with pre-sanction holdings currently need to obtain a specific license from OFAC to enter into executory contracts regarding those holdings.  With the White House announcement, OFAC is now willing to give favorable consideration to such license applications.  It is expected that OFAC will issue another general license in the near future, perhaps as early as three weeks from now, authorizing executory contracts for US persons (although the exact scope of any such general license is still under consideration).  That license could be followed, in monthly intervals thereafter, with additional general licenses progressively easing sanctions against Libya.  Such developments would depend on continuing cooperation between the Libyan and US governments.

It should be cautioned that until OFAC or the President act specifically to ease the sanctions set forth under the LSR, those sanctions remain in place and companies should act accordingly.  We are continuing to monitor the situation and will advise you of any developments.  In the meantime, please contact Ed Krauland at 202.429.8083 or David Lorello at 202.429.6757 if you have any questions.