On various occasions during proceedings to solve a claim, Libyan government foreign contractors relied on pre-contractual period in the form of representations and statements. When doing business in Libya by signing a Libyan government contract, foreign parties should expect that the Libyan government will insist that the law governing the contract will be Libyan law, not the English law or any other law.
A foreign investor should know that the Libyan law does not regulate the pre-contractual period (negotiation period). The written contract, the end-result of the negotiations, “makes the law of the parties,” and it can only be amended by the mutual consent of the parties (Article 147 (1) of the Libyan Civil Code).
In addition to the law articles related to the interpretation of contracts, the Libyan judge plays an essential role during court proceedings. One of the roles of the judge is to interpret the vague terms of a contract based on the intention of the parties to the contract and customs practiced in affairs related to the nature of the contract. In the meantime, if the contract terms are clear, they should not be interpreted in any other meaning.
In case the parties to the contract agreed on essential points but decided that other details would be agreed to later, Article 95 of the Libyan civil code grants the judge the right to determine the details. The judge can also enforce the missing details of the contract and decide the method of payment of damages. Article 174 (1) relates to the payment method of damages and grants the judge the decision on the payment method of damages in accordance with the circumstances. The damages may be paid by installments, or in the form of a regular periodical payment, in either of which cases the debtor maybe order to provide security.
