International arbitration as a method of resolving disputes in Libya is fairly prevalent. Despite the negative effects of the 17 February 2011 uprising on political and economic life in Libya, and later COVID-19, some 20 international arbitrations involving foreign investors and the State of Libya and/or its organs were initiated since 2009, and some are still active.

While Libyan parties prefer litigation before Libyan courts, many of them find themselves forced to engage in international arbitration because of agreements to arbitrate that have already been concluded. Local arbitration is not prevalent, and international arbitration is frequently agreed by and between the Libyan parties and their counterpart international parties in public contracts, which form the backbone of contracted work to execute major projects.

Article 83 of the current Administrative Contracts Regulation No 563/2007 permits agreement to international arbitration subject to approval by the Council of Ministers. Most of the resulting international arbitrations were initiated under such arrangements.

The ICC and LCIA were chosen as arbitration institutes, and major cities such as London, Paris, Geneva and Cairo were used as seats of arbitration.

Major international arbitrations involving the State of Libya have been ad hoc arbitrations based on Clause 28 of the Oil and Gas Concession Deeds. The BP, LIAMCO and Mobil Oil of Libya arbitrations were such ad hoc arbitrations, which were later amicably settled.

Article 24 of Law No 9/2010 (re Encouragement of foreign capital investment) provides for dispute settlement under multilateral or bilateral agreements between Libya and the home country of the investor or arbitration as provided for in the investment contract.

Also, the Exploration and Production Sharing Agreements (EPSAs) provide for ICC arbitration to resolve disputes between the National Oil Corporation and its foreign partners. A number of disputes have arisen under an EPSA and were arbitrated under the ICC Rules.

The lockdowns and travel restrictions worldwide did affect the conduct of international arbitrations to which Libyan entities were parties by causing delays in scheduling hearings and travel to follow up on pending proceedings.

Key industries most affected by the pandemic were oil and gas, foreign investment, infrastructure and general contract works.

The above sectors enjoy the visible presence of foreign investors and have international arbitration protections.

Other than ad hoc arbitration agreements contained in oil concessions, the ICC and LCIA are the most used institutions. Companies working in Libya and their legal support work with the above institutions and know them very well.

Also, Libyan entities and the State Litigation Department have developed experience and contacts with said institutions.

There are no specific courts in Libya designated to hear disputes related to international arbitrations other than courts having jurisdiction to decide on requests for “exequatur” of foreign awards, objections and annulment requests. These are the normal courts of first instance and are not designated courts for such matters.

There is no national legislation in Libya which governs international arbitration.

Chapter IV of the Libyan Civil and Commercial Procedure Code (LCCPC) governs all arbitrations taking place in Libya. The chapter consists of 78 articles from Article 739 to Article 777. The LCCPC was first issued on 20 February 1954 and has been amended from time to time. Section 6 of Chapter I of the LCCPC (Articles 405 to 411) deal with the enforcement in Libya of court orders and arbitration awards made outside Libya.

Since 1954 there have been no major developments or amendments to arbitration rules under Libyan law.

There have been two efforts to devise new law dealing with international arbitration, one in 2010 by a panel of experts upon instruction from the Ministry of Economy and the other one an extensive draft law prepared in 2016 by an entity named “The Libyan Board for International Commercial Arbitration”. However, these remain drafts and neither was enacted into law.

Under the current Libyan political circumstances it is not expected that the Libyan legislature will enact any new laws pertaining to local or international arbitrations.

On 28 January 2010, Law No 4/2010 was issued to organise conciliation and arbitration between individuals to resolve small claims disputes relating to civil and commercial matters and personal rights to damages for criminal acts.

The process under this Law No 4/2010 is more of a conciliatory nature than that of a formal arbitration. It is to be conducted by a designated committee formed in the local council constituency where the parties reside. It has jurisdiction over small claims, the value of which cannot exceed LYD1,000, equal to USD200 at the current rate. The designated committee will consider disputes between individual natural persons. Corporate entities cannot be parties to this process. Conciliation and arbitration under this Law No 4/2010 is not compulsory. 

The local council system collapsed as a result of the 17 February 2011 uprising. The conciliation and arbitration system under Law No 4/2010 lost significance and currently is not applied.

The provisions of the LCCPC of Libya govern all arbitrations conducted in Libya.

Under Libyan law, an arbitration agreement has to be concluded in writing, it must be signed by a person having authority and capacity, and its subject must be an arbitrable dispute.

Under Article 740 of the LCCPC, the following matters cannot be the subject of arbitrations:

• matters of public order;
• labour disputes relating to industrial injury and social security cover; and
• nationality and personal status.

Libyan courts adopt a rather strict approach in determining arbitrability.

Courts in Libya give due regard to and respect any agreement of the parties on their choice of law governing arbitrations, subject to public order restrictions.

National courts give due regard and respect to any arbitration agreement. When a party requests that a case be dismissed because of the existence of an arbitration agreement, courts accept such request and uphold the arbitration agreement.

In Civil Appeal No 100/40JD, the Supreme Court of Libya decided that a lawsuit will not be accepted if an agreement to arbitrate exists.

Libyan law makes a distinction between absolute and relative invalidity. If a contract is absolutely invalid it will be considered as non-existent and no clause, including an agreement to arbitrate, will survive such invalidity. If, on the other hand, the invalidity is relative and affects only immaterial parts of the contract, an agreement to arbitrate could still be considered valid and said arbitration clause upheld in order to maintain the free will of the parties.

Article 741 of the LCCPC stipulates that an arbitrator may not be a minor, a person deprived of his civil rights because of a criminal penalty, or a person declared bankrupt unless his status is restored.

Otherwise, there are no limits on the parties' autonomy to select their arbitrators. Libyan law stipulates that in the case of multiple arbitrators, their number must be odd.

If the chosen method for appointing arbitrators fails and in the absence of a special agreement on a substitute method, the court that has jurisdiction over the subject matter should interfere upon request of a party and make a binding appointment.

A court in Libya can intervene in the selection of arbitrators only if the agreed method of selection fails for any reason. Intervention requires a joint or individual request of the party(ies).

The court will have to observe same restrictions spelled out in 4.1 Limits on Selection. 

Challenge and removal of arbitrators is provided for in Article 749 of the LCCPC, which stipulates that removal is admissible, either by agreement of all the parties, or by force of a judicial order, made by demand of a party and after hearing the other party and the arbitrator himself. The decision of the judge to either accept or reject the demand is not subject to objection.

The arbitrators are recusable only for reasons that arise on the basis of the agreement or terms of reference.

The arbitrator is recusable and removable for the same reasons allowed for recusation of judges or if considered not suitable for the task. Recusation or removal is not admissible if the arbitrator’s decision has already been issued or if the case has already been assigned to judgment.

The grounds for challenge and removal are the same as those for challenge and removal of judges. Article 720 of the LCCPC provides that challenge is accepted in the following cases: “1) if in the exercise of his functions the arbitrator is found responsible for fraud, fraudulent intent, blackmail, or serious professional fault; 2) if the arbitrator refuses or omits to answer without justifiable cause a request or petition of a party or likewise if he refuses to render a decision in a case tried before him and ripe for judgment. In this case the action against the arbitrator may be brought only if the interested party deposits, in the record office of the court, in which the arbitrator is serving, a petition directed to him in which the party formally request action on the petition or decision of the case, and if twenty days pass without action; 3) in the other cases in which the law establishes responsibility of the arbitrator and makes him liable for his faults.”           

Requirements of independence, impartiality and/or disclosure of potential conflict of interest are not specifically and clearly stated in Libyan law on arbitration. However, as an arbitrator can be challenged and removed for fraud, gross professional fault and misconduct under Article 720 of the LCCPC, it can be safely stated that appointed arbitrators remain subject to requirements of impartiality and disclosure of potential conflict of interest.

The following matters cannot be subject of an arbitration:

• matters of public order such as gambling, slavery and prostitution;
• labour disputes relating to work injury and social security compensation;
• personal status matters; and
• nationality.

The principle of competence-competence is not clearly stated in Libyan law. The prevailing view is that arbitrators do not have the right to rule on competence issues as Article 757 of the LCCPC stipulates:  “If in the course of the arbitration there arises a question of principle which exceeds the jurisdiction of the arbitrators, or if an incident of falsehood in deeds arises, or if a penal action for forgery of deeds is brought forward, or if any other penal matter arises, and likewise if an incidental question is presented which the arbitrators think can affect the subject of the arbitration, the arbitrators shall suspend the prosecution of their work and order the parties to submit their requests to the competent judge. In this case the time limit fixed for the arbitration decision is extended until one of the parties notifies the arbitrators of the happening of the pronouncement of the final judgment which decides on the incident. After this action the remainder of the time limit must be extended to twenty days if it is less than twenty days.” (emphasis added)

Court intervention in arbitration proceedings under Libyan law takes place upon order of the arbitral tribunal for forgery claims, issues affecting the arbitration proceedings, and issues of jurisdiction as discussed above. In such a case, the tribunal will suspend the proceedings and refer the matter to the court that has jurisdiction over the subject matter of the dispute and await decision of said court.

All arbitration awards are subject to appeal unless the right to appeal has been waived in writing by the parties. If an appeal is filed it may involve review of a negative ruling on jurisdiction.

Objection to jurisdiction issues should be raised immediately upon filing a request for arbitration.

Libyan courts adopt a deferential standard to jurisdiction and admissibility issues. The courts will conduct a review of the facts as well as the legal aspects raised by the parties which relate to jurisdiction and admissibility objections only.

Libyan courts will respect and enforce any agreement of the parties to arbitrate and will not accept court proceedings in breach of an arbitration agreement. However, the objection must be raised by the party having interest in the first hearing attended by said party. The Libyan court will not, on its own, raise the issue and rule accordingly.

In general, Libyan law will not allow arbitral tribunals to assume jurisdiction over third parties who are not signatories/parties to the arbitration agreement. However, the Libyan State has been named as party to a number of international arbitrations involving disputes between foreign investors and state entities subject to the Libyan State's control and supervision based on certain bilateral investment protection treaties despite the fact that the Libyan State was not party/signatory to the underlying contracts.

An arbitral tribunal in Libya can take decisions and measures necessary for the proper conduct of the arbitration but cannot award preliminary or interim relief. Such measures can only be ordered by a court that has jurisdiction over the subject matter upon request of the arbitration tribunal. According to Articles 758 and 759 of the LCCPC, an arbitration tribunal cannot order provisional attachments, compel witnesses to appear or investigate forgery of fake documents. For such matters the arbitration tribunal will seek the intervention of courts.

The courts of Libya play a role in granting relief upon request of the arbitration tribunal.

Granting relief in aid of foreign-seated arbitrations is possible but it is necessary to follow a specific procedure of “judicial delegation”.

Libyan law does not allow the use of emergency arbitration and there are no provisions organising this subject.

Judicial delegation is provided for in Article 152 of the LCCPC, which stipulates that a Libyan court may request a foreign judicial authority to carry out certain measures by sending the request through diplomatic channels. Following rules of reciprocity, a Libyan court should be expected to carry out similar measures if a request is duly received from a foreign-seated arbitration. Normally bilateral agreements organise the subject of judicial delegation. 

Security for costs is not addressed by Libyan law. Court fees and costs are paid up front. The arbitration tribunal will decide on fees and costs, which will be due and payable as ordered by the tribunal. We are not aware of a situation where security was ordered or accepted.

The laws and rules governing local arbitration procedures are provided for in the LCCPC. Article 754 of the LCCPC stipulates that the parties may agree on rules and procedures for the conduct of the arbitration prior to commencement thereof (terms of reference). In the event of failure by the parties to agree on such procedures, the arbitration tribunal will fix such rules and procedures as it deems necessary or appropriate. Rules and procedures fixed by the parties and/or tribunal may not violate the mandatory rules determined by the LCCPC.

Many of the provisions of Chapter IV of the LCCPC are mandatory unless stated otherwise.

The arbitrators have all duties and powers of judges to conduct the arbitration and decide the dispute. They are bound by the mandatory provisions of the law and the agreement of the parties as reflected in the agreed terms of reference.

The parties are free to choose and appoint their legal representatives. There are no particular qualifications or other requirements for representatives appearing in arbitrations, local or international, in Libya.

The general approach to collection and submission of evidence before arbitration tribunals is not normally as rigid as that before the courts. The terms of reference agreed by the parties and endorsed by the tribunal will have to be observed. Of course, the evidence rules contained in the Civil Code of Libya remain relevant and an arbitration tribunal should find guidance in these rules. As the arbitration award is subject to appeal, issues involving collection and submission of evidence could be raised. 

The rules of evidence contained in the terms of reference, if any, will have to be observed. The rules of evidence contained in Chapter 6 of the Libyan Civil Code will apply, which deals with “Proof of Obligations” and is divided into four sections:

• documentary evidence;
• witnesses;
• presumptions; and
• other.

Power of compulsion is vested with the chairman of the court that has jurisdiction over the subject matter, who should, upon request from the arbitration tribunal, compel witnesses and experts to appear or face penalties (Article 759 of the LCCPC). The arbitration tribunal can order production of documents.

Arbitration proceedings and hearings are private and confidential. Information in an arbitral proceeding may not be disclosed in subsequent proceedings unless released with the consent of the parties.

Article 760 of the LCCPC sets the legal requirements for arbitral awards. It stipulates that the arbitration decision is to be decided by majority vote after deliberation of the arbitrators made in joint meeting.

The decision must be set out in writing in the same way court decisions are written.

The decision must contain a copy of the terms of reference, a summary of the positions of the parties, the titles and documents in support, the reasoning on which the decision is based, the verdict, the place and the date of the pronouncement, and the signatures of the arbitrators.

If one or more arbitrators refuse to sign, this fact must be recorded in the decision, which nevertheless remains valid if signed by majority of the arbitrators.

The award must be given within the time limit fixed in the terms of reference, unless duly extended. If no such time limit is set, the award must be rendered within three months from date of appointing the tribunal unless extended by court order.

Libyan law does not provide limits on the type of remedies that an arbitral tribunal may award.

Generally, specific performance is the remedy most favoured by Libyan law, but all other types of remedies such as damages, amending the economic terms of the contract to reduce or eliminate the effects of hardship, or extension of the term of the contract are available and may be ordered.

Parties are entitled to recover interest and legal costs. There is a cap on legal interest of 4% for civil matters and 5% for commercial matters. The parties may agree on a higher interest rate, which should not exceed 10%. Awarding costs is a discretionary power of the arbitrators.

However, it should be noted that on 7 January 2013 the then General National Congress (Parliament) issued Law No 1/2013 preventing all interest in all civil and commercial dealings between individuals and corporate entities. Article 7 of Law No 1/2013 provided that the Law shall apply to dealings between corporate entities starting 1 January 2015. This effective date was later amended to 1 January 2020 by virtue of Law No 7/2015.

In Appeal No 467/64 J, the 3rd Civil Chamber of the Libyan Supreme Court interpreted Law No 1/2013 as applicable to “Loans” only, and therefore the prohibition in Law No 1/2013 does not apply to remedies ordered under Article 229 of the Civil Code for breach of contract (the above 4% and 5%).

Since decisions of the Supreme Court are binding on all public and private authorities as well as lower courts, Decision 467/64 is binding, and interest under Article 229 of the Civil Code is not to be considered prohibited by Law No 1/2013.

Unless waived in writing, an arbitral award can be appealed for any reasons pertaining to law and facts.

The procedure is to file the appeal with the court which has jurisdiction to decide an appeal from the lower court that had jurisdiction over the subject matter of the dispute.

The parties have a right to waive appeal, but they do not have the right to exclude or expand the scope of appeal. Either they waive the right to appeal or maintain such right, but they cannot interfere in the scope.

The standard of judicial review of the merits of a case is the de novo standard.

Libya has not signed or ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

However, Libya is party to the 1984 Maghreb Convention on Legal and Judicial Cooperation and the April 1983 Riyadh Convention on Judicial Cooperation. Both Conventions provide a simplified procedure for the recognition and enforcement of court orders and arbitration awards among member Arab countries.

For awards made in Libya, the court that has jurisdiction over the subject matter of the dispute and in whose chambers the award is deposited will grant an enforcement order for the award.

For foreign awards issued outside Libya and submitted for enforcement in Libya, Article 408 of the LCCPC requires that such awards be final and enforceable in the country where they were issued. Libyan courts apply reciprocity rules with the country where the award was issued.

It has to be established to the Libyan court that the laws of the country where the foreign award was issued allow enforcement of awards issued in Libya. The procedure for enforcement starts with filing a request with the court of first instance where enforcement is sought. The request must be duly notified to all parties.

Before rendering an enforcement order (“exequatur”) the Libyan court will verify that:

• the award was issued by a tribunal having jurisdiction and has acquired the force of a “chose jugée”; in other words it is final and enforceable in the country where it was rendered;
• the parties were duly notified and represented;
• the award does not contradict another award or court order issued in Libya; and
• the award does not violate public order in Libya.

The court of first instance is supposed to render a speedy decision. The court is not supposed to review the merits of the dispute and should follow a deferential standard of review. However, experience shows that such matters are never so easy or straightforward. A request for enforcement can be tedious, complicated and may take a long time.

Article 411 of the LCCPC stipulates that the above rules shall be without prejudice to multiple and/or bilateral treaties between Libya and other countries intended to facilitate enforcement of arbitration awards and court orders.

The defence of sovereign immunity is not available in commercial arbitrations, nor in foreign arbitrations where the State appears and takes part in the proceedings.   

Other than for delays caused by lengthy proceedings, the approach of local courts towards the recognition and enforcement of arbitration awards is positive. The courts will refuse to grant exequaturs only if the requisite conditions have not been met.

Libyan law does not provide for class-action and group arbitration.

Lawyers representing parties and arbitrators are bound by the professional rules of conduct stipulated in Judicial System Law No 6/2006 and Advocacy Law No 3/2014. Both these laws focus on the requirements of independence, impartiality and professional conduct.

There are no rules or restrictions with respect to third-party funding. 

Arbitration is an agreement between the parties. An arbitral tribunal cannot consolidate separate arbitrations without the consent of those parties and the various tribunals.

Under Libyan law, third parties cannot be bound by an arbitration agreement or award, nor can they benefit from it. A national court does not have the ability to bind foreign third parties.