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. Rebalancing Administrative Libyan Law is explained in details here
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 its terms. In that case, the contract will be terminated. The doctrine of unforeseen events or circumstances (La théorie de l’imprevision) is provided for under Articles 104 and 105 of the ACR and is detailed in Articles 147(2) and 657(4) of the Libyan Civil Code. Article 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 a 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 also applies 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, unforeseeable and making the execution of the obligation burdensome, thereby threatening the contractor with serious loss, without being impossible, the contractor shall have the right to compensation to recover the contract’s financial balance to a reasonable limit.”
In summary, the doctrine of unforeseen events or circumstances requires that an event must (i) be exceptional and unpredictable, (ii) of a general nature, and (iii) occur during the performance of the obligation under the contract.
Under Libyan law, a Libyan tribunal has the authority to adjust or rebalance a civil contract to "restore its equilibrium" in the face of extraordinary or unforeseen events. If one party can still perform the contract despite unforeseen circumstances, the judge may intervene. This is known as the doctrine of la théorie de l’imprevision.
This doctrine is not limited to civil contracts but also extends to administrative contracts. According to Article 105 of the Administrative Contract Regulations (ACR), an administrative unit must rebalance a contract if unforeseen events make performing the contract difficult, but not impossible. The classification of an agreement as “administrative” depends largely on whether one party qualifies as a public body, an issue our analysis of government entities under Libyan administrative law.
The law allows the tribunal to rebalance a contract only if it has become "excessively onerous" for one party due to the unforeseen event. However, if the contract becomes impossible to perform, it is terminated, as there is no logical basis for adjusting its terms.
The doctrine of unforeseen events is outlined in Articles 104 and 105 of the ACR and further detailed in Articles 147(2) and 657(4) of the Libyan Civil Code. For example:
Article 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 a 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.”
Article 657(4) of the Libyan Civil Code explains:
“As a result of exceptional events of a general character which could not be foreseen at the time the contract was concluded, the economic equilibrium between the respective obligations of the master and 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 in the price or order the termination of the contract.”
For administrative contracts, Article 105 of the ACR provides:
“If general exceptional conditions occur, being unforeseeable, which would make execution of the obligation burdensome and threaten the contractor with serious loss, without being impossible, the contractor shall have the right to compensation for recovering the contract financial balance to a reasonable limit.”
In conclusion, the doctrine of unforeseen events or circumstances requires that the event be:
These institutional safeguards are consistent with international benchmarks discussed in the World Bank’s Doing Business 2021 publication.
This legal framework helps protect parties from unforeseen circumstances that could materially disrupt the financial balance of contracts, thereby ensuring fairness and equitable adjustments.
