Dr. Mohamed Karbal is licensed to practice law in Libya, New York, and Washington D.C. and served as an expert witness on Libyan administrative law. Karbal & Co is a full-service international law firm that serves the needs of businesses and governments in Libya, Washington, D.C., and Turkey.
The Administrative Contracts Regulations
Like any other government, the Libyan government, and its entities, purchases from the private sector, goods, services and works, such as construction and maintenance service. Libyan government contracts, with few exceptions, are considered as "administrative contracts" and regulated by the Administrative Contracts Regulations ("the Regulations") (Decree no. 563/2007).
As a general rule, contracting with the public sector is subject to the Regulations, which applies to all contracts entered with the Libyan government and entities or relating to development projects funded from the general budget. A government entity may avoid enforcing the Regulations if it has its own procurement and contracting rules stating that the Regulations will not be applicable. Sometimes, the Regulations are used as secondary rules to matters that are not mentioned in the entity's procurement and contracting rules.
Article 2 of the Regulations clearly stipulates that the Regulations will apply to (i) all administrative contracts signed with administrative bodies and units, and (ii) contracts signed for executing development projects financed by the general budget regardless of the nature of the contracting entity. However, the last paragraph of Article 2 allows the General People's Committee to exclude the enforcement of the Regulations on entities and projects for the public interest.
In addition to tendering rules, the Regulations contains special rules for state contracts. The Regulations' provisions are mandatory, subject to the Libyan courts' exclusive jurisdiction, and a choice of law is not permissible.
An administrative contract is defined by Article 3 of the Regulations as a contract signed by an "administrative entity," which is defined in Article 1 of the Regulations. The definition of the "administrative entity" covers the Libyan government and its agencies and authorities. However, a government entity could be exempted from applying the Regulations when contracting with the private sector. Article 2 of the Regulations states that the Regulations shall not be prejudicial to contracting rules and regulations that were issued by entities that have their own contracting regulations or such regulations that were approved by the General
In addition, in a Supreme Court's decision (13/23, 16 February 1978), there was a definition of "an administrative contract." The Court stated that administrative contracts are distinguished from civil contracts in a way that the administrative contracts are based on the needs of the public utility. It also gives priority to the public interest over the interests of the contractor. The administrative contracts' original aim is to maintain inequality between the contracting parties where the public interest is superior. It also grants the administration unit the right to amend the contract.
Termination for "Public Interest"
Libyan government entities have terminated contracts signed with the private sector based on the principle of public interest. Since an administrative contract differs from other contracts that are considered as "private contracts," the Libyan law has a different body of jurisprudence and judicial system governing and applying administrative law and private law issues. There is a department within the civil law courts called "Administrative Judiciary," which has jurisdiction over "administrative contracts."
In the Supreme Court's case (Administrative Appeal 1/8, 24 June 1961), the facts involved a road construction contract signed in 1958 by and between the Ministry of Transportation and a Libyan private company. The contract price was based on unit price. After commencing the works, the contract price increased due to the Ministry's wrong calculation of the material prices that makes up a unit. The contract became costly to complete, and the Parliament terminated the contract based on the principle of "public interest."
The Supreme Court held that a public works contract is an administrative contract, and it is different from a civil contract in the sense that the parties to the contract are not equal. In an administrative contract, the public interest prevails over the private interest. The Court added that an administrative unit has the right to terminate a contract under two circumstances (i) if the contractor failed to perform and in this case, the termination of the contract will be decided by the judiciary, and (ii) if the public interest necessitates the termination of the contract by canceling the project and in this case there should be fair compensation.
In conclusion, private contractors who enter into contracts with Libyan government entities should be aware of the fact that the government entity could terminate a contract for convenience based on the principle of public interest. Nevertheless, the private contractor has other basis to rely on to terminate an administrative contract.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.