The Administrative Contracts Regulations govern the Libyan government and its entities' purchases of goods, services, and works from the private sector, including construction and maintenance services. With few exceptions, Libyan government contracts are considered "administrative contracts" and are regulated by the Administrative Contracts Regulations ("the Regulations") (Decree no. 563/2007).
The Administrative Contracts Regulations govern the Libyan government and its entities' purchases of goods, services, and works from the private sector, including construction and maintenance services. With few exceptions, Libyan government contracts are classified as "administrative contracts" and are regulated by the Administrative Contracts Regulations ("the Regulations") (Decree no. 563/2007).
Generally, contracting with the public sector is subject to the Regulations, which apply to all contracts entered into with the Libyan government and entities, as well as to contracts for development projects funded from the general budget. This framework has direct implications for foreign investors operating under Libyan investment law. A government entity may avoid enforcing the Regulations if its procurement and contracting rules state that the Regulations will not apply. In some cases, the Regulations serve as secondary rules for matters not addressed in the entity's procurement and contracting rules.
Article 2 of the Regulations provides that the Regulations apply to (i) all administrative contracts entered into with administrative bodies and units and (ii) contracts for executing development projects financed by the general budget, regardless of the nature of the contracting entity. However, the final paragraph of Article 2 authorizes the General People's Committee to exempt certain entities and projects from enforcement of the Regulations. The Regulations also contain special rules for state contracts, in addition to tendering rules. These provisions are mandatory and subject to the Libyan courts' exclusive jurisdiction, and a choice of law is not permissible.
Under Article 3 of the Regulations, an administrative contract is one entered into by an "administrative entity," as defined in Article 1. Our study of government entities under Libyan administrative law examines the criteria for determining whether a body qualifies as an administrative entity. The definition of the "administrative entity" encompasses the Libyan government and its agencies and authorities. However, a government entity may be exempt from applying the Regulations when contracting with the private sector.
Article 2 of the Regulations provides that the Regulations shall not prejudice contracting rules and regulations issued by entities with their own contracting regulations or by the General People's Committee. In addition, in a Supreme Court decision (13/23, 16 February 1978), the Court defined "an administrative contract." The Court stated that administrative contracts are distinguished from civil contracts in that they are based on the needs of the public utility and prioritize the public interest over the contractor's interests. The original aim of administrative contracts was to maintain inequality between contracting parties, with the public interest as superior.
It also grants the administrative unit the right to amend the contract. In situations where performance becomes excessively burdensome but not impossible, Libyan courts may apply the doctrine of rebalancing administrative contracts. Libyan government entities have terminated contracts with the private sector based on the principle of "public interest." Because an administrative contract differs from other contracts considered "private contracts," Libyan law has a distinct body of jurisprudence and a separate judicial system that governs and applies administrative and private law.
In civil law courts, there is a department called "Administrative Judiciary" that has jurisdiction over "administrative contracts." In the Supreme Court case (Administrative Appeal 1/8, 24 June 1961), the facts concerned a road construction contract signed in 1958 between the Ministry of Transportation and a Libyan private company. The contract price was based on unit pricing. After the works commenced, the contract price increased due to the Ministry's incorrect calculation of unit material prices. The contract became costly to complete, and the Parliament terminated it based on the principle of "public interest." The Supreme Court held that a public works contract is an administrative contract, distinct from a civil contract in that the parties 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 fails to perform, in which case the termination of the contract will be decided by the judiciary, and (ii) if the public interest requires terminating the contract by canceling the project, in which case fair compensation is required.
In conclusion, private contractors that enter into contracts with Libyan government entities should be aware that the government entity may terminate a contract for convenience on the basis of the public interest. Nevertheless, the private contractor also has additional grounds 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 regarding your specific circumstances.
