In the first of a series on difficult jurisdictions, Chris Hill turns the focus on Libya where the opportunities are on a par with its challenges

After years of political and economic isolation, Libya is rebuilding and upgrading its infrastructure and urban development. Roads, highways, railroads, ports and airports all need an overhaul. A growing population is fuelling the need for homes, schools and hospitals. An expanding tourism industry requires hotels and resorts.

The Libyan government recently announced plans to spend £36bn on new infrastructure and housing projects, on top of a planned £66bn announced in June 2009. Its ambitious plan is for Libya to become the “gateway to Africa”, in which it is the fourth largest country. The new airport at the capital, Tripoli, is nearing completion, and high-speed rail and roads projects are already under way. So are hotels, shopping malls and mixed-use office developments. The Libyan Housing and Infrastructure Board has a US$50bn-plus programme to transform housing, roads, bridges, water and other utilities for the country’s residents.

However, the business environment can be challenging. Persistence and adaptability are required to navigate the decision-making process. Securing a visa for workers can be time-consuming, and competition for the work is high - the Chinese and Russians have won significant projects. Business is built on long-term personal relationships, so frequent visits, face-to-face meetings and contact are required before contracts can be won.

Regulatory environment
Firms seeking to take advantage of opportunities in Libya can set up a branch office or open a representative office there, but new foreign businesses wanting to operate in the construction, electricity, communications and transportation sectors are required by General People’s Committee Decree No 443 to form joint ventures with Libyan partners, and foreign participation is limited to 65% of the capital.

Foreign companies can also enter the Libyan market in ventures established under Law No 5/1426 for the Promotion of Investment of Foreign Capital, designed to promote foreign direct investment, promote exports and minimise imports and provide employment.

It is important to get good local advice on the specific requirements. Lack of publicly available information can lead to difficulties as it is not always clear if rules and regulations have changed. And remember to allow sufficient time to get constitutional documentation authenticated and translated into Arabic.

Libyan courts
Under Libya’s constitution, civil laws must conform with Sharia law. The Libyan civil code has its origins in the Egyptian civil code, in common with other jurisdictions such as the UAE. Advice on Libyan law will need to be obtained on specific issues. The judicial system has three levels, with the Supreme Court as the highest judicial authority. There is no specialist construction court.

Libya does not have a widely recognised arbitration centre or a developed body of international arbitration law. As the country has not signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards,all arbitration awards have to be ratified by the Libyan courts before they can be enforced. That can lead to delay in enforcement and ultimately payment, even if the award is recognised by the Libyan courts.

There is no bilateral investment treaty (BIT) between the UK and Libya. As the name suggests, in a BIT two countries each agree to give certain protections and benefits to investments made by citizens and companies of the other country. A BIT may provide additional protection beyond anything to which the investor is entitled contractually and enable the investor to have recourse against the host state.

The Transparency International Corruption Perceptions Index ranks Libya 146 out of 178 countries, although we should emphasise that this is a “perception” only, and ranking countries according to a single score on a wide scale is necessarily a simplistic measure of a complex issue.

Indeed, Libya has signed and ratified the UN Convention against Corruption which aims to promote and strengthen measures to prevent and combat such practices. The passage of Law No 2 of 2005, Combating Money Laundering, demonstrates that Libya is aware of the potential negative impact of corruption.

Chris Hill is partner at Norton Rose

Hints and tips

  • Allow plenty of time to secure visas
  • Find a good local driver - all signage is in Arabic and there are few street names or addresses in Tripoli so you need someone who really knows their way around
  • Make sure your contract contains clear provisions for payment by instalments
  • Find a trusted Libyan partner as they are key to securing contacts
  • The postal system is unreliable; internet access can be intermittent
  • Take plenty of cash as credit card use is limited