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Libyan Construction Law: Contractor Liabilities

Prior to the upheaval of the February 2011 revolution, Libya was already contending with various economic problems. Forty years of the Gaddafi regime’s irrational strategic planning and an apathetic mindset left Libya among the least developed countries. Hospitals taking 30 years for completion was common practice. Presently, the Libyan deteriorated infrastructure is in total disarray: housing shortages, dilapidated road networks, and airports stuck in a 40-year time warp, left without modernization since completion. Other neglected sectors included small, unequipped seaports, substandard or nonexistent hospitals and schools. In other words, most of the infrastructure built in the ’60’s and ’70’s was left without any renovation. As a result most if not all, public service facilities needed to be demolished and rebuilt. The New Libya, in its road to modernization, will need massive reconstruction in all aspects of its economy. Fortunately for Libya it has zero debt and a lucrative oil industry to fund the reconstruction. The international financial community believes that with wise, comprehensive planning, Libya will be able to climb out of the economic hole the regime dug for it. An International Monetary Fund (IMF) report stated that in 2012 the Libyan GDP was expected to increase by a record-breaking 122%. It is expected to continue growing at 17% in 2013, and at an average of 7% per year from 2014 to 2017. The Libyan Minister of Economy issued decree no. 207 for year 2012 amending decree no. 103 of 2012 which organizes the legal framework of foreign investment in Libya. Foreign investment is allowed in all economic sectors except certain areas which are strictly limited to Libyan citizens such as the legal profession, accountancy firms, and commercial agencies. For foreign companies, the decree details the form of the legal entities; i.e. limited liability, joint venture, branch of a foreign company and representative offices.

 

Branch of Foreign Construction Company 

As recognition of the construction industries’ significance to the Libyan reconstruction, the Ministry of Economics’ decree no. 207 of 2012, granted the foreign construction sector the right to open a direct branch. A branch of a foreign construction company means that the shares of the company are totally owned by the mother company. The only restriction is that a manager of Libyan branch, or his deputy, must be a Libyan citizen. As a result the Libyan Government is hoping that it will experience a phenomenal growth in all areas of the construction sector. 

 

Libyan Law for Contractors and Supervising Architects (or Supervising Engineer): 

The Libyan Civil Transactions Code of 1953 imposes liabilities on both the contractor and the architect. Article 650 of the Civil Code holds the contractor and the architect (or supervising engineer) jointly liable for any minor or major collapse of the building even if the collapse was due to ground defects and/or the building had been approved and accepted by the owner. The contractor and the architect are also jointly liable for major defects affecting the stability and safety of a structure. The guarantee period to be provided by the contractor and the architect lasts for 10 years from the date of completion and handling over to the owner.  However, the architect’s liability could be limited to drawing and design errors under Article 651 of the Civil Transactions Code as long as the architect’s scope of work was only to provide the design and not to supervise the implementation of the design. Any clause exempting the contractor and the architect from their liabilities shall be void. 

In general, the only method of resolving commercial conflicts in Libya is to resort to litigation. It is unfortunate that the Libyan judicial system had suffered during the Gaddafi regime. Many of the judges’ appointments were based on political loyalty while the legal profession was stifled. Lawyers were not permitted to practice law through their own law firms as they were considered employees of the courts. Moreover, the English language and other languages were not a part of the school curriculum which became an obstacle for lawyers to be involved in international disputes. In Libya there is no Arbitration Act as such. However, arbitration measures have been mentioned in general in the 1953 Code of Civil Procedures. Cabinet Resolution no. 333 for year 2012 has granted the Chamber of Commerce and Industry the power to arbitrate commercial disputes occurring between its members. It also required the regional Chambers to establish arbitration and reconciliation councils just for this purpose. It should be noted that, contrary to many other countries in the MENA region, Libya permits a foreign party to a state contract (Public Contract) to choose arbitration as a method for dispute resolution. In other countries of the MENA region, public contracts fall under the jurisdiction of the national courts. This precedent of compromising over the method of dispute resolution shall help in enacting an advanced, comprehensive, and modern system of arbitration in Libya. As for the near future, Libya may utilize mediation in the short run until it is able to establish a comprehensive system of arbitration.

 

About KARBAL & CO

 

With offices in Dubai, United Arab Emirates and Tripoli, Libya, KARBAL & CO is an international law firm that provides legal consultancy and arbitration services to contribute to the growth and development of the Middle East and North Africa.

In our extensive experience in the region, our firm has provided legal and arbitration services to clients in the governments of both Libya and the United Arab Emirates, as well as corporations and individuals. 

 


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