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 Libyan law does not regulate the pre-contractual period (negotiation period). This issue is particularly relevant within the broader framework of Libyan investment law governing foreign participation. The written contract, the end-result of the negotiations, “makes the law of the parties,” especially when contracting with Libyan government entities. and it can only be amended by mutual consent of the parties (Article 147(1) of the Libyan Civil Code).
In addition to the legal articles on contract interpretation, the Libyan judge plays an essential role in court proceedings. One of the judge's roles is to interpret vague contract terms based on the parties' intent and the customs applicable to the contract's nature. In the meantime, if the contract terms are clear, they should not be interpreted in any other meaning. This judicial power aligns with the doctrine of rebalancing administrative contracts.
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 contract's missing terms and determine the method of payment for 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 may be ordered to provide security.
