On 5 July 2023, the new Libyan Law on Commercial Arbitration 10/2023 (Arbitration Law) was published in the Official Gazette. The Arbitration Law is inspired by the UNCITRAL Model law and modernizes the legal framework for arbitration in Libya, bringing it in line, by and large, with international standards. It is a major step forward for arbitration in Libya.
The recognition and enforcement of foreign arbitral awards, however, remains unclear. Given that Libya is not a member country of the New York Convention (1958), this is a major shortcoming from the perspective of international investors.
Background
The Arbitration Law establishes a modern framework for commercial arbitration in Libya.
In the past, the legal framework for arbitration was contained in a chapter of the Code of Civil and Commercial Procedure (1953). The framework was outdated and incomplete in many respects.
The new Arbitration Law is the outcome of more than a decade of discussions and is inspired by the UNCITRAL Model Law and the arbitration laws of Egypt and Tunisia. Due to the diversity of sources, the drafting is at times ambiguous and will benefit from further clarification by the courts and the arbitral community.
The Arbitration Law was approved by the House of Representatives on 17 April 2023 and entered into force on that day (Article 100 Arbitration Law), already prior to publication in the Official Gazette.
Application of the Law
The Arbitration Law applies to all arbitration proceedings, if (i) the seat of the arbitration is in Libya or (ii) the parties have provided for the Arbitration Law to be applicable (Articles 11 and 97 [1] Arbitration Law). It applies to all arbitrations commenced, and arbitration agreements concluded, after it came into force.
Arbitrability of Disputes
The Arbitration Law adopts a broad approach towards the arbitrability of disputes.
In principle, all commercial disputes can be submitted to arbitration, with the exception of matters relating to public order or disputes that cannot be the subject of an amicable settlement (Article 5 Arbitration Law).
In addition, exemptions and restrictions can be contained in special laws. The most important exemption are transactions with the public sector that are subject to the Administrative Contracts Regulation (Decree 573/2007). Arbitration clauses in contracts with public authorities are only valid under narrowly defined exceptional conditions.
The Arbitration Agreement
An arbitration agreement must be concluded in writing.
This includes electronic form as well as the reference to general terms and conditions, an international treaty, or another document that is part of the agreement (Article 2 Arbitration Law). The Libyan courts generally take a conservative approach to incorporation by reference, so the general terms should be attached to the contract and initialed; it is questionable whether terms are deemed “incorporated” if they are not attached to the contract, for example, where they can only be downloaded from the internet.
Severability and Kompetenz-Kompetenz
The Arbitration Law enshrines the principle of severability in Article 4 (1) by providing that an arbitration agreement remains intact if the contract in which it is contained is invalid or rescinded. The law provides for an exception if the contract was void ab initio, e.g. if the contract was not validly concluded or the parties lacked capacity or authority (Article 4 [2] Arbitration Law).
Within these boundaries, the Arbitration Law also acknowledges the Kompetenz-Kompetenz principle in stating that the arbitral tribunal is competent to decide on its own jurisdiction or any objection related to the validity of the arbitration agreement (Article 25 Arbitration Law). The tribunal’s decision is subject to judicial review.
Exclusion of jurisdiction of the State Courts
An arbitration clause excludes the jurisdiction of the state courts if invoked by either of the parties (Article 13 Arbitration Law).
The state courts, however, remain competent to issue interim measures until the arbitral tribunal has convened (Article 14 Arbitration Law), subject to the provisions of the Code of Civil and Commercial Procedure.
Seat and Language of the Arbitration
The parties are free to determine the language (or several languages) of the arbitration. Otherwise, the language of the arbitration will be determined by the tribunal (Article 31 Arbitration Law). The law does not provide for any default language.
Rules applicable to the Proceedings and the Dispute
The Arbitration Law permits the parties to determine the rules governing the proceedings (Article 28 Arbitration Law).
The Arbitration Law mostly contains default rules that only apply if the parties did not agree otherwise. This means that the parties are free to agree on any of the standard international arbitration rules. In transactions relating to Libya the ICC rules, but also the rules of CRCICA and DIAC, are popular.
Moreover, the parties are free to determine the law applicable to the substance of the dispute. According to Article 9 (1) Arbitration Law, the tribunal shall decide the dispute in accordance with the law determined as applicable by the parties (Article 9 [1]), within the limits of public order.
The tribunal can decide according to equity (ex aequo et bono) if the parties so agree (Article 9 [2] Arbitration Law). This also permits to determine general principles of law or non-state rules (such as the UNIDROIT Principles) as the proper law of the contract.
Annulment of Arbitral Awards
The Arbitration Law distinguishes between the annulment of domestic and the annulment of international arbitral awards. The grounds on which an international award can be annulled are defined more narrowly.
According to Article 12 Arbitration Law, an arbitration is deemed “international” if it relates to international trade, the parties are domiciled in different jurisdictions, or if the place of performance of a contract or the seat of the arbitration is different from the parties’ domicile. This renders most arbitrations involving foreign parties “international”.
An international arbitral award can be annulled pursuant to Article 59 Arbitration Law if (i) a party lacked the capacity to agree to an arbitration clause, (ii) the award is based on an invalid arbitration agreement, (iii) the applicant was not duly notified of the proceedings or the appointment of the arbitrators or, due to force majeure, prevented from defending himself, (iv) the award is not based on an arbitration agreement or exceeds its scope, (v) the composition of the arbitral tribunal is flawed, or if (vi) the award is inconsistent with public order (understood in the sense of private international law).
According to Article 56 Arbitration Law, the annulment action must be raised at the court of appeal at the seat of the arbitration. This appears to exclude the challenge of awards rendered by a tribunal seated outside Libya, in line with the UNCITRAL Model Law.
Recognition and Enforcement of Foreign Arbitral Awards
The Arbitration Law deals for the first time with the recognition and enforcement of foreign arbitral awards in more detail. In the past, the recognition of foreign arbitral awards was subject to the rules on the recognition of foreign court decisions under the Code of Civil and Commercial Procedure.
Given that Libya is not a member country of the New York Convention (1958), the section on the recognition of foreign awards in the law is of particular relevance from a practical perspective. In relation to other Arab states, the Convention of Riadh (1983) can apply and provide for a basic framework for the recognition and enforcement of arbitral awards (however confined to the member states). Most international investors, though, will in the end be dependent on seeking recognition and enforcement under municipal law.
Article 62 Arbitration Law provides that foreign arbitral awards shall be recognized on the basis of reciprocity. The application for recognition is to be submitted in writing to the court of appeal, accompanied by an original of the award and the arbitration agreement, and with an official translation into Arabic.
Interestingly, the Arbitration Law does not spell out any grounds on which the recognition can be denied (such as the lack of an arbitration agreement, the non-arbitrability of the subject matter, or a violation of public order). Arguably, however, the Libyan court will mirror the grounds which permit the denial of recognition at the seat of the arbitration in applying the principle of reciprocity. This means that in the event a certain country recognizes a Libyan arbitral award in applying Article V of the NYC, the Libyan court would apply the same rules when recognizing an award from that country.
Electronic Arbitration
In an effort to respond to modern technology, the Arbitration Law contains a separate chapter on “Electronic Arbitration”, defined as proceedings in which the dispute is settled online or using modern means of communication. This is an important statement supporting the use of modern technology in arbitration. How the rules in the special section will interact with the general rules remains to be seen.
If you would like more information about this topic then please contact us.
-
PARTNER
-
PARTNER
BERLIN | AMERELLER Rechtsanwälte | Kurfuerstenhöfe, Spreeufer 5, 10178 | Berlin, Germany | T: +49 30 609 895 660
TRIPOLI | AMERELLER in association with P&A Legal | Asbah Assoubhu Street, Zawiyat Al Dahmani | Tripoli, Libya
CAIRO | MENA Associates in association with AMERELLER | Downtown: Immobilia Building | 26 A Sherif St. | Office No. 1029 | Postal Code 11121 | Cairo, Egypt | T +20 2 2395 0442 | +20 2 2393 6946
Sheikh Zayed office: Polygon Business Park | 7-3B1 SODIC-West | Sheikh Zayed | Postal Code 12451| Cairo, Egypt
This client alert is a public document for informational purposes only and should not be construed as legal advice. Readers should not act upon the information provided here without consulting with professional legal counsel. This material may be considered advertising under certain rules of professional conduct. Copyright © 2023
