Libya: Identifying Government Entity Under Libyan Administrative Law

Dr. Mohamed Karbal is licensed to practice law in Libya, New York and Washington D.C. and served as an expert witness on Libyan law for Tekfen-TML Joint Venture v. Man-made River. Karbal & Co is a full-service international law firm that serves the needs of businesses and governments in Libya, Washington D.C.and Turkey.

After the fall of Gaddafi's regime, foreign companies which had performed works in Libya rushed to the international tribunals seeking compensation. Since the counterparty in agreements for public procurements in Libya is a public entity established by the Libyan government, foreign companies file their claims against both the public entity and the state of Libya. It is understood that the aim of such a litigation strategy is to have the state of Libya jointly liable.

Since I served as expert witness on Libyan administrative and civil law on behalf of the Respondent in Tekfen-TML Joint Venture v. Man-made River Authority and the State of Libya and my law firm was retained to advise the Respondent, it is worth mentioning that the said case dealt with the issue of defining a "government entity". The case was first brought before the International Chamber of Commerce in Geneva, Switzerland. The Arbitral Tribunal decided not to hear the allegations against the State of Libya based on its conclusion that the Man-Made River Authority was not a "government entity." As a result, the Arbitral Tribunal determinated that the State of Libya is not responsible for violations committed by the Man-Made River Authority and by a majority decision, dismissed the claim against the State of Libya.

The Arbitral Tribunal upheld the claim against the Man-made River Authority in part. It awarded the Tekfen-TML Joint Venture sum of USD 40,134,129 payable immediately by the Man-made River Authority, after setting-off a counter-claim of USD 354,520.

The Arbitral Tribunal (by majority decision) found that the Man-made River Authority is an independent legal entity under Libyan law. Therefore, the Arbitral Tribunal rejected Tekfen-TML Joint Venture's notion that the Man-made River Authority was an organ of the Libyan state or an auxiliary of the state, and thus identical to the state.

Under Libyan law, the Libyan Supreme Court (the "Supreme Court") considers various factors to determine whether an entity is a "state entity" or a "state organ." The Supreme Court examines, inter alia, whether the entity/organ:

1. has an independent legal personality;
2. is chaired by a minister or under the direct influence and supervision of a minister;
3. exercises a legislative function such as enacting policies for public sectors;
4. serves public needs, i.e., providing health service, education, food products, etc.;
5. recruits employees to be governed by the Civil Service Code or other laws or special policies and procedures.
6. was intended by the legislature to be a part of the government and exercise public functions or whether the legislature intended the entity to operate as a commercial company.

(the "Test").

In practice, the Supreme Court did not rely merely on the "independent legal personality" factor alone to determine whether an entity is a "state entity." An example of a precedent where the Supreme Court considers the Test is its decision in Cassation No. 296/24 dated 25 April 1978 where the Supreme Court concluded that the Agriculture Development Board ("ADB"), which had an independent legal personality, is a government entity. The Supreme Court reviewed and analyzed in detail the power and practices granted to ADB by Law 146/1972 which established the ADB.

As mentioned by the Supreme Court, and based on the Law 146/1972, the ADB:

1. has a separate legal personality;
2. is chaired by the Minister of State for Agricultural Development;
3. has a mission to participate in the development of the national economy in the agriculture sector by increasing agricultural production to ensure self-sufficiency in grain, meat and other protection of natural resources, etc.;
4. establishes general policy for agricultural development in areas listed in Law 146/1972; and
5. oversees the integrated agrarian development plan.

In its conclusion, the Supreme Court ruled that

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