Rebalancing Administrative Contracts under Libyan Law
by Dr. Mohamed Karbal
Dr. Mohamed Karbal is licensed to practice law in Libya, New York and Washington D.C. and served as an expert witness on Libyan law for Tekfen-TML Joint Venture v. Man-made River.
Under the Libyan Civil Code, a Libyan tribunal is empowered to adjust or rebalance a civil contract to “restore its equilibrium” as a result of extraordinary or unforeseen events if one party may still continue the performance of the contract. A Libyan judge may rebalance the contract due to unforeseen events or circumstances (La théorie de l’imprevision).
The doctrine of unforeseen events or circumstances is also applicable to administrative contracts. Article 105 of the Administrative Contract Regulations (“ACR”) requires an administrative unit to rebalance the contract in the case of unforeseen circumstances that render performing an obligation under the contract difficult, but not impossible.
The Libyan law empowers a tribunal to rebalance a contract, whether civil or administrative, only when the contract is “excessively onerous.” However, if the contract is impossible to perform, it is illogical to adjust the terms of the contract. The contract will be terminated in this case.
The doctrine of unforeseen events or circumstances (La théorie de l’imprevision) is provided under Article 104 and 105 of the ACR and is detailed in Art. 147(2), and Art. 657(4) of the Libyan Civil Code.
Art. 147(2) of the Libyan Civil Code states:
“When … as a result of exceptional and unpredictable events of a general character, the performance of the contractual obligation, without becoming impossible, becomes excessively onerous in such way as to threaten the debtor with exorbitant loss, the Judge may, according to the circumstances, and after taking into consideration, the interests of both parties, reduce to reasonable limits the obligations that have become excessive. Any
agreement to the contrary is void.“
The rebalancing of a contract under the Libyan Civil Code is also applicable to lump-sum contracts. Article 657(4) of the Libyan Civil Code, which deals with lump-sum contracts states:
“As a result of exceptional events of a general character which could not be foreseen at the time of the contract was concluded, the economic equilibrium between the respective obligations of the master and of the contractor breaks down, and the basis on which the financial estimates for the contractor were computed has subsequently disappeared, the judge may grant an increase of the price or order resiliation of the contract.“
For administrative contracts, article 105 of the ACR provides:
“If general exceptional conditions occur, being unforeseeable, as would make execution of the obligation burdensome threatening the contractor with serious loss, without [being] impossible, the contractor shall have right to compensation for recovering the contract financial balance to the reasonable limit.”
In summary, the doctrine of unforeseen events or circumstances requires that an event must (i) be exceptional and unpredictable, (ii) of general nature and (iii) occurs during the performance of the obligation under the contract.