21
CONSTRUCTION EUROPE
DECEMBER 2013-JANUARY 2014
LAW AND CONTRACT
government is responsible for the
acts of its predecessor, despite a
change in regime.
It could also be possible to rely
on Bilateral Investment Treaties
(BITs)
concluded
between
two states, and Multilateral
Investment
Treaties
(MITs).
These allow the investor to start
arbitration proceedings against
the State of Libya when it has
suffered a loss of its investment.
Libya has signed and ratified
BITs with several states, including
Austria, Belarus, Belgium and
Luxembourg, Bulgaria, Cyprus,
France, Germany, Italy, Portugal,
Russia, Serbia, Spain, Switzerland
and Turkey.
Under these BITs, Libya has
undertaken to give full protection
and security to investments
made by foreign individuals and
companies.
Certain BITs are less prescriptive
than others with regard to the
nationality of the foreign investor
and its owners.
The BIT between Libya and the
Belgo-Luxembourg Economic
Union simply requires that an
investor company be resident
and have its registered office in
one of the contracting states.
The BIT between Libya and
Austria, however, allows Libya
to deny any of the protections
set out in the BIT to an Austrian
company which is owned or
controlled by an investor from
a third party state, and where
the Austrian company “has no
substantial business activity” in
Austria.
BITs containing these types
of clauses prevent investors
registered in countries which do
not have BITs with Libya from
obtaining treaty protections
through subsidiaries based in
countries which have ratified a
BIT with Libya. The wording of
each BIT and MIT will need to be
carefully scrutinised to ascertain
the extent of the protections.
PROTECTIONS
The
protections
that
are
commonly offered are against
direct and indirect expropriation
and nationalisation, unfair and
inequitabletreatment,discriminatory
treatment with respect to local
or other foreign investors and
restrictions in fund transfers.
BITs and MITs often ensure
protection and security against
civil unrest, insurrection, armed
conflicts, revolution, war and
other similar situations.
For example, the BIT between
Libya and the Belgo-Luxembourg
Economic Union provides that
losses through war or other
armed conflict, revolution, or state
of national emergency must be
compensated to the same extent
as losses suffered by investors of
the most favoured nation.
The BIT between Libya and
Austria, however, provides further
bases on which most favoured
nation protection must be
afforded, including insurrection,
civil disturbance, acts of God and
force majeure.
A similar protection is offered by
the Agreement on the Promotion,
Protection & Guarantee of
Investments among member
states of the Organisation of
Islamic Co-operation (OIC).
The OIC is an organisation of
Islamic countries which aims
to strengthen ties among its
members. Libya is a member
state and has ratified the OIC
Investment Agreement.
The protections afforded by
the OIC Investment Agreement
are available to firms established
within the signatory states.
A recent award has been
rendered in favour of a Kuwaiti
investor against Libya on the
basis of a Unified Agreement.
In Mohamed Abdulmohsen
Al‐Kharafi & Sons Co v State of
Libya & others (2013), the foreign
investor
began
arbitration
against some Libyan state entities
for the cancellation of a large
tourism project in Tripoli, which
had become bogged down in
disputes with local land-owners.
The Arab Investment Court,
composed of three arbitrators,
awarded the claimant US$9
million (€6.62 million) – mostly
for loss of profit and opportunity.
The court said that the
cancellation of the contract
by governmental decree was
contrary to Libyan investment
law and also amounted to the
freezing or confiscation of assets,
contrary to Article 9 of the Unified
Agreement.
Of further note, the arbitrators
also held that the Unified
Agreement
constituted
an
integral part of Libyan law, and
that Article 3(2) of the Unified
Agreement operated so as
to supersede any conflicting
provisions of Libyan law.
However, the Unified Agreement
is quite strict in terms of
nationality of the investors,
who may take advantage of the
investment protections that it
offers. A company must have the
nationality of an Arab State, which
is party to the LAS, and cannot be
owned directly or indirectly by a
non-Arab citizen or company.
ce
Protecting investments
amid unrest in Libya
I
n the two years since the fall
of the Gaddafi regime, Libya
has seen the emergence of
a fragile central government in
Tripoli.
The continued uncertainty over
the country’s political future,
along with severe disruption
to the hydrocarbon production
chain, has led to predictions of a
contraction in Libya’s economy of
up to 5% in 2013.
The post-war redevelopment of
the country’s infrastructure may
nevertheless provide a tempting
opportunity for foreign investors
and contractors. Options are
available for protecting investments
of those who may have suffered
losses arising out of the regime
change, and of those considering
Libya as a potential destination.
Investors dealing directly with
the Libyan government may have
negotiated specific clauses into
their contracts, which provide for
protection, indemnification and
compensation for damages or
losses arising out of the regime
change or other hostilities.
Where such contracts were
signed before the fall of the
previous regime, they will still
be capable of being enforced
against the new government. This
is due to the operation of the
international legal principle of the
continuity of states, by which a
Pinsent Masons LLP is a full service international law firm with
over 1,100 lawyers worldwide. Pinsent Masons has offices in the
UK, Munich, Paris, Ireland, Quatar, UAE, China, Hong Kong and
Singapore.
Pinsent Masons has over 200 lawyers specialising in international
construction and infrastructure development and is ranked by
legal directories as a leading adviser to the sector. The firm was
awarded Global Construction Law Firm of the Year 2008 to 2010, and
Infrastructure Team of the Year 2008.
■
For more information on any legal or contractual issue, please
contact Virginie Colaiuta at Pinsent Masons.
Tel: +44 (0)20 7490 6498
e-mail:
Virginie Colaiuta
, partner at Pinsent Masons in London, and
James Elwen
,
managing partner of Pinsent Masons in Doha, explain the treaties that
could be called upon if investors suffer losses in Libya
