Experts say Libyan assets will be hard to unfreeze

WASHINGTON Tue Apr 12, 2011 7:24pm EDT

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WASHINGTON (Reuters) - Any attempt to unfreeze Libyan assets and hand them to the opposition, even for humanitarian purposes, faces legal obstacles that could take years to clear, U.S. and European officials and experts say.

A Washington representative of the Libyan rebels asked the Treasury Department at the weekend for access to the "Gaddafi regime's" assets frozen by U.S. authorities, according to a letter made public by the opposition.

The United States is holding more than $34 billion as part of sanctions against Libyan leader Muammar Gaddafi and his entourage. Billions more have been frozen by the European Union and several European countries.

The Obama administration theoretically could free up those assets but not as rapidly as the rebels would hope for.

"I don't expect it could be done cleanly and expeditiously. It would be impossible to do quickly," said Victor Comras, a former economic sanctions expert for the U.S. State Department and the United Nations.

Even if President Barack Obama were to issue an order allowing Libyan rebels access to the assets, his decision could face legal challenges, said former Treasury official Hal Eren, a lawyer who specializes in economic sanctions.

"Gaddafi could win in court," he said.

In his April 7 letter to the Treasury, Ali Aujali, who was Tripoli's ambassador to Washington until he defected to the opposition in February, said Libya's transitional national council, which he now represents, "needs immediate access to the Gaddafi regime's frozen assets."

The council is anxious for funds to "meet the basic needs of the Libyan people," Aujali said.

In the past three weeks, he said, "humanitarian conditions in opposition-held areas have deteriorated," leading to food and medicine shortages and an acute crisis for newborn babies due to a lack of infant formula supplies in several cities.

Aujali proposed that the United States appoint a trustee committee to manage unfrozen Libyan assets in consultation with representatives of the rebel council.

The trustees, his letter said, would then hire "globally recognized audit and asset management firms to account for the assets" and would also make available funds for "urgent humanitarian needs" that "should be routed via respected, internationally recognized organizations."

A Treasury official, asked about the frozen assets, said efforts to help the rebels are being discussed.

"We are considering a range of options to help the opposition meet some of the costs they're facing and to provide humanitarian assistance to the people of Libya but nothing has been decided yet," the official said.

"THERE WOULD BE COMPETING CLAIMS"

Unfreezing assets is cumbersome and time-consuming, said James Kreindler, a New York lawyer who represented families of victims of the 1988 bombing of Pan Am flight 103 in cases that saw Gaddafi's government pay out more than $1 billion.

"I don't see how they're going to get this done until there's a new (Libyan) government," he said.

Nikos Passas, a criminal law expert at Northeastern University, agreed.

"If these are state assets then the question becomes 'Who is the representative of the state of Libya?' There would be competing claims," he said.

Eren, the former Treasury official, described Aujali's proposal for a trustee committee as "clever thinking."

Obama does have the power to unfreeze Libyan assets and issue an order making them immune to lawsuits, at least under U.S. law, he said, but any such move still could be subject to challenges under international law.

Eren and other experts said any move toward unfreezing Libyan assets for the benefit of the rebels probably would have to be preceded by official U.S. recognition of the opposition as the new Libyan government.

Although France and a handful of other governments have announced recognition of the national transitional council, the Obama administration has not made such a declaration.

The Harbour Group, a politically connected Washington public relations firm, last week registered with the Justice Department to represent the transitional council, on an unpaid basis, in its efforts to "gain official U.S. recognition" and persuade the administration to unfreeze Libyan assets.

(Additional reporting by David Lawder; Editing by John O'Callaghan and Bill Trott)

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