By Dr. Mohamed Karbal, Managing Partner at Karbal & Co.
Since the fall of Gaddafi in 2011, the Libyan oil industry has suffered a loss through the closure of its oil ports and the fall in oil production. Various armed factions have taken turns in controlling the oil ports, leading to a halt in oil exports emanating from certain ports.
The political division, instability and armed struggle in Libya have dominated the scene since 2014. Last week, another struggle surfaced among Libyan government entities, and in this instance, the struggle was of a legal nature.
On March 25, 2017, the Presidential Council (named the “Council of Ministers” by the Libyan Political Agreement) issued Decree no. 270/2017 which dissolves the Ministry of Oil & Gas, an organ of the executive branch, and designates the former’s responsibilities and functions to both the Presidential Council and the National Oil Corporation (NOC).
History of the Ministry of Oil & Gas
Prior to the aforementioned Presidential Council’s decree, the Petroleum Law No. 25 enacted in 1955 and its amendments stipulated the responsibilities of implementing the law which divided the powers between the Ministry of Oil & Gas and the NOC. The duties of the Ministry of Oil & Gas have always been limited to overseeing the production of the oil & gas industry.
The most recent law in this regard was the Council of Minister’s Decree no. 32 for year 2012. Article 2 of Decree no.32 named twenty-three duties of the Ministry of Oil & Gas, most important of which are the approval of production plans and concession licenses.
Responsibilities of the NOC
As early as 1968, Libya sought to create a corporation that will manage the production and marketing of oil and operate as a commercial corporation free from government intervention and bureaucratic hurdles. The Libyan Petroleum Corporation was founded in 1968 by a royal decree which granted it the right to negotiate and supervise the execution of oil concession agreements. With the arrival of Gaddafi at the end of 1969, the National Oil Company (NOC) was established under Law no. 24/1970, effectively replacing the Libyan Petroleum Corporation.
Today, the NOC is the sole entity responsible for oil & gas exploration and production. It conducts such operations through its affiliated or wholly-owned companies as well as joint ventures with international companies.
Reaction by the NOC to Decree no. 270/2017
The Chairman of the NOC, Eng. Mustaf Sanallah, has denounced the Presidential Council decree dissolving the Ministry of Oil & Gas, describing it as illegal due to the fact that the Presidential Council is merely “an executive” organ. Sanallah added that the House of Representatives is the legislative body charged with enacting laws including any laws that modify the Ministry of Oil & Gas’ responsibilities.
Legal Justification for Issuing Decree 270/2017
The only possible legal justification upon which the Presidential Council relied when issuing Decree 270/2017 to cancel the Ministry of Oil & Gas is Article 9-7 of the Libyan Political Agreement (LPA). Article 9-7 of the LPA states that the Council of Ministers shall “issue decisions regarding the structure and management of the executive bodies and institutions affiliated with the Government as it deems necessary and appropriate.” However, Article 9-7 requires the Presidential Council to issue its decisions “after consultation with the relevant authorities.”
One could argue that the “relevant authorities” in this regard would be the House of Representatives and the NOC. However, the House of Representative could not have been consulted on dissolving the Ministry of Oil & Gas as the House of Representatives no longer recognizes the LPA.
Legal difficulties concerning Decree 270/2017
It is clear that the House of Representatives has not recognized the Government of National Accord as required by the LPA, which includes the Ministry of Oil & Gas. In addition, in order to amend the responsibilities of the NOC, the House of Representatives is required to enact a law in this regard.
The difficulty with enabling the House of Representatives to amend the powers of the internationally recognized NOC in Tripoli is that the House of Representatives has established its own NOC in Benghazi and neither recognizes the Presidential Council nor the LPA which gives legitimacy to the Presidential Council.
Simply, the legal difficulties lie with the existence of different governing bodies, each of whom claims to be the legitimate representatives of Libya.
Practical Issues with Decree 270/2017
At present, issuing Decree 270/2017 shall create more confusion and uncertainties in the oil & gas industry. Libya has three organs claiming to be the legitimate representative government of Libya and two NOCs, each of which claims to govern the oil industry. However, the international community only recognizes the Presidential Council, the Government of National Accord, and the NOC headquartered in Tripoli as legitimate governing bodies.
In summary, issuing Decree 270/2017 is unnecessary and illegal based on constitutional law since a law issued by a legislative body could not be amended through the issuance of a decree by the executive branch.
Dr. Mohamed Karbal is a New York lawyer and founder of Karbal & Co, a full-service international law firm with offices in Libya and Dubai that serve the needs of businesses and governments of Libya and the United Arab Emirates.
With offices in Dubai, United Arab Emirates and Tripoli, Libya, KARBAL & CO is an international law firm that provides legal consultancy and arbitration services to contribute to the growth and development of the Middle East and North Africa.
In our extensive experience in the region, our firm has provided legal and arbitration services to clients in the governments of both Libya and the United Arab Emirates, as well as corporations and individuals.
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