A weary John Ellicott rubbed his eyes and said he hoped things settled down so that he could take a scheduled vacation next week. But the prospects don't look good for Ellicott, an attorney at the Washington law firm of Covington & Burling, or for other lawyers like him who've spent the week fielding calls from clients who do business with Iraq or Kuwait.
Can a container ship off the coast of Texas with a shipment of crude oil purchased from Iraq prior to the embargo be unloaded? If a bank has issued a letter of credit for goods from Kuwait, should the bank pay into a blocked account? If the U.S. Customs Service has seized an Iraqi cargo intended for a U.S. company, how does the company document its right to the goods?
Attorneys in Washington and New York have spent their days and nights dealing with such questions since President Bush issued two executive orders last week that placed a protective freeze on Kuwaiti assets and embargoed all trade with Iraq.
"There's a lot to be done," said Ellicott, who along with other attorneys and staff worked through the weekend at Covington's Pennsylvania Avenue offices. "I guess we're getting 20 to 30 calls a day on behalf of 30 to 40 clients."
Big money-center banks, oil companies, petrochemical concerns, foreign exchange traders and essentially anyone who does business with Kuwait or Iraq is walking on eggshells trying to figure out what they can and cannot do in light of the president's action.
Most attorneys are counseling caution, yet they admit that it's hazardous no matter what they do.
"If you end up freezing something that shouldn't be, you'll probably be sued," said Victor DeSantis, an attorney at the Washington office of New York's White & Case. "If you don't freeze something, you could be sued by the government. So there's going to be lots of good litigation either way."
One of the difficulties for legal experts attempting to help clients navigate the uncertain seas of a new presidential embargo is that, while the orders are broad, the specific regulations governing them have not yet been formulated.
The writing of those regulations is done by the Office of Foreign Assets Control (OFAC), an arm of the Treasury Department with about 40 employees who are charged with implementing and enforcing sanctions. "We hope to have them as soon as possible, but we don't have a target date," a Treasury spokesman said.
Over the last week, while lawyers were answering questions from corporate clients, OFAC was responding to the lawyers' questions and, in some cases, ruling on exceptions to the freezes. Though there are no regulations, lawyers say there are some precedents for them to follow as they guide clients.
There have been numerous embargoes dating back to the early 1900s, including those with Cuba, Iran and Libya. But each of those has had its own specific quirks. The present situation is complicated because there really are two embargoes: for Iraq, a complete trade embargo and assets freeze that is punitive; for Kuwait, a freeze that is designed to protect its assets from Iraq.
In the early stages of any embargo, much of the legal effort is focused on determining the effect on transactions already begun but not completed. In many of those cases, the Treasury Department allows the entities to complete the transaction because otherwise it would injure an innocent party.
Banks in general are affected by incomplete transactions: securities purchases and sales, money transfers and foreign exchange trades where one step was taken before the freeze and the other is left hanging, according to John E. Hoffman, an attorney at New York's Shearman & Sterling and counsel to Citibank.
"Banks need to know whether they can release funds or whether they have to sit on them," said DeSantis. "Are they somehow exempt from the president's orders? Banks have been through this wringer before."
Another problem area is foreign exchange markets. One lawyer said there is "gridlock" in the particular sector that depends on the receipt of Iraqi and Kuwaiti currencies.
Banks like Citibank, Chase Manhattan, Chemical Bank and Bank of America each trade several hundred million dollars each day that might involve Kuwait. "Everybody is talking to Treasury" to figure out what to do, said the attorney.
But after the initial flurry over Kuwait and Iraq, the activity should settle down, said Thomas M. Dyer, an international maritime attorney with Washington's Dyer, Ellis, Joseph & Mills.
"The next problem will be new projects," said Dyer. "But with the situation now, nobody expects there to be any new projects."