Author: Michael Bosco

Michael Bosco has broad experience in structuring and executing M&A, corporate finance, and private equity transactions and acting on cross-border dispute resolution and insolvency matters. During his nearly 30 years as an international lawyer, Michael has advised on numerous complex and innovative acquisitions, divestitures, joint ventures, IPOs, foreign direct investment transactions, privatizations, and high-yield and leveraged financings, including various market firsts.

Foreign Investment in Libya is Being Greatly Discouraged in Practice 

While Law No. 9 of 2010 on the Promotion of Investment (the “Investment Law”) provides a remarkably favourable framework for the promotion of inbound foreign investment on paper, the Ministry of Economy’s overly restrictive interpretation of said law and its efforts to slow-walk the procession of applications by foreign investors gravely undermine this policy framework and create a deeply unfriendly environment for foreign investors in Libya – as if the unstable security situation and the uncertainties caused by the division of the Libyan government into competing authorities were not bad enough.


Itkan has had extensive direct experience with this restrictive approach through its representation of two separate foreign investors in their applications for foreign investment licenses. In the first case, the application of Itkan’s client has been pending before the Ministry for six months. Itkan has repeatedly demanded a justification for this egregious processing delay, but so far, in vain. It does not seem that the Ministry grasps the idea that for investors, time is precious.


In the second case, the story becomes almost ridiculous. The client’s application was approved by the Investment Board and forwarded to the Ministry according to the standard procedure. The Legal Department of the Ministry then rejected the application for illegality on the grounds that it envisaged the establishment of a limited liability company 100%-owned by the foreign applicant – even though the Investment Law clearly allows for this. After negotiations with the Minister and the submission of a legal memorandum explaining why the Legal Department of the Ministry had wrongly interpreted the Investment Law, the Ministry requested Itkan to resubmit the application once again, promising that approval would be granted this time. Itkan did so but, nonetheless, the Ministry delayed approval for a few weeks because it “lacked the approval forms”. The General Manager of the Investment Board even confirmed to Itkan that he personally witnessed the Minister signing his approval of the application.

However, this approval then somehow “disappeared” from the Ministry and was never forwarded to Itkan. It was then decided to submit a third application to the Ministry. This time the Legal Department of the Ministry of Economy requested that the file be forwarded to the Law Department of the Ministry of Justice to obtain a confirmatory legal opinion as to the legitimacy of establishing a company wholly owned by a foreign investor – the exact plan of action Itkan had suggested from the very beginning. This referral was finally accomplished after eight months of back-and-forth discussions between Itkan and the Ministry and several wild goose chases. Three months then passed, waiting for the legal opinion from the Ministry of Justice. At the request of the Ministry of Justice, Itkan then resubmitted the application a fourth time – this time requesting the establishment of a branch under the Investment Law. After three more weeks of waiting, Itkan was informed that the approval of this fourth application has been signed, but – naturally – no one seems to know where the approval document actually is.


Meanwhile, the Ministry of Economy has directed the Investment Board to draft a resolution requesting that the Council of Ministers issues a decree placing restrictions on foreign ownership of activities permitted under the Investment Law – an action which arguably is not within the power of either the Ministry to undertake!


Finally, and most shockingly, on 13th November 2022, Mr. Gamal Lamouchi, Chairman of the Foreign Investment Board, was detained by security forces at Mitiga Airport, reportedly for being “too open” to the promotion of foreign investment in Libya by seeking to facilitate investment license applications by foreign investors. Mr. Lamouchi remains in custody as of this writing.


The events outlined in this post, are direct indications of efforts by elements within the Libyan bureaucracy to discourage foreign investments in Libya and thereby undermine a longstanding and clearly articulated policy of the Libyan State. Itkan believes that these efforts must be rejected by the political leadership of Libya because increasing foreign investment over current levels remains an essential precondition for the continued growth and development of Libya.

Recent National Oil Corporation Leadership Changes in Libya

On Tuesday, July 7, Libyan Prime Minister Abdul Hamid Dbeibeh signed Decree 642/2022, which removed from office with immediate effect the entire board of directors of the National Oil Corporation (“NOC”) – including long-time NOC Chairman Mustafa Sanalla. Former Libyan Central Bank Chairman Farhat Bengdara was appointed as Mr. Sanalla’s replacement. 

Mr. Sanalla is resisting his removal as illegitimate and is challenging this decision before the Court of Appeal in Tripoli (administrative division). During a hearing held today (17th August 2022) the case has been adjourned until  7th Sep 2022. 

As Libyan Oil Minister Mohamed Emhamed Aoun has been strongly supportive of Mr. Bengdara’s appointment, Mr. Sanalla’s legal challenge appears unlikely to succeed in the short to medium term. Moreover, most of NOC’s subsidiaries and affiliates have already publicly acknowledged Mr. Bengdara’s appointment. 

Although, at first glance, this episode appears to be yet another example of worrisome institutional instability in Libya, upon reflection, this development may actually cause a positive ripple effect. For example, the ongoing blockade of Libya’s eastern oil ports of Brega and Zueitina was lifted within 24 hours of Mr. Bengdara’s appointment and, in a recent interview on Libyan television, Mr. Bengdara himself went as far as to raise the prospect that the NOC may for the first time seek to itself raise hard currency funds for future investment from outside the Libyan state budget, in the form of bonds or loans from financial institutions, foreign energy companies and/or the Libyan private sector.

Although allowing the NOC to raise finance in this way will require various changes to existing Libyan laws,  early indications are that the required legal flexibility may now become achievable, as Libyan political leaders consider how best to capitalise on the current geopolitical moment, with European countries scrambling to source alternative supplies of oil and gas in order to reduce their dependence on Russia and oil prices moving above $120 per barrel. Libya’s massive and under-exploited hydrocarbon reserves give it significant leverage in this environment.

We will continue to monitor developments and provide updates as they occur. 

A Review of the Oil & Gas Industry in Libya 

Although Libya is a member of the Organization of Petroleum Exporting Countries, it is not bound by a production ceiling because of its ongoing political crisis. Consequently, Libya is currently free to extract and export as much oil and gas as it wants. 

Moreover, the geographical location of Libya makes exporting oil by sea easier than for other producers. The Oil Ministry recently announced that Libya was targeting production of 1.2 million barrels daily in 2022, which represents a significant change considering that oil production stopped for three months, between April and July 2022. As the geopolitical impact of the Ukraine war accelerates the search for producers other than Russia, these additional barrels from Libya may play an important role in the oil and gas market going forward.   

Recent National Oil Corporation Leadership Changes in Libya
Oil and Gas Timeline Libya

Libyan Petroleum Law

The oil industry in Libya is governed by Law No. 25 of 1955 (the “Petroleum Law”). The Petroleum Law divided the Libyan territory into four petroleum zones and established an independent Petroleum Committee with several responsibilities, one of which is determining the eligibility of applications for licences and concessions. According to the Petroleum Law, companies are eligible to participate in the Libyan oil sector provided that they comply with all laws, have been previously active in the petroleum industry, and have adequate experience and financial and technical capacity to conduct the work. The Petroleum Committee is empowered to grant concessions pursuant to the terms set out in the Petroleum Law. These terms may be amended as required, provided that such amendments do not give prerogative rights to one company over the other.  

The Petroleum Law also determines the obligations of concession holders in respect of the nature and timing of the work to be done, as well as defining the fees, royalties, taxes and profit distribution obligations applicable to oil and gas activities.

Libya has traditionally used standard form Exploration and Production Sharing Agreements (“EPSAs”) to govern its oil and gas sector. All EPSAs are entered into between the National Oil Corporation (NOC) – representing the Libyan State – and international companies. Each EPSA determines the percentage of oil and gas projects that may be held by international companies and sets out various rules applicable to exploration and production activities.  Both parties share the expenses of exploration and production and pay taxes and royalties in agreed percentages. The economic conditions applicable to specific exploration and production projects are determined according to the level of difficulty of such projects, as adjusted for fluctuations in prevailing international prices. 

In 1974 Libya adopted its first standard-form EPSA (“EPSA1”). At the end of the seventies, a revised form EPSA2 was adopted, followed by EPSA3 in 1988 and EPSA4 in 2004. In general, EPSA4 increased NOC’s equity ownership in Libyan projects in exchange for tax and royalty exemptions granted to international companies. This approach created several advantages for international companies. First, unlike all previous EPSAs, under EPSA4, international companies are exempted from all taxes and royalties, even those payable against their equity shares (with the NOC being responsible for payment  of all taxes and royalties. Second, EPSA4 opened the door for international companies other than western ones to invest in oil & gas projects in Libya. Third, the EPSA4 rules eased the procedure through which tenders are managed, thus making it easier to execute projects and decreasing corruption risks by preventing state-owned companies from intervening in tendering activities.  

A New Form of EPSA? 

In light of the current circumstances in Libya, some industry observes believe that a new “EPSA5” may be on the way. This is because the State Development Budget for the Oil & Gas Sector will not be sufficient to cover the NOC’s investment needs, meaning that the government may decide to increase incentives for inbound investment, particularly with respect to  some relatively smaller fields that find it difficult to attract the attention of big companies. One possible approach may be to reconsider the exclusion of the Oil & Gas sector from the activities permitted to be invested in by international companies under Investment Law No. 9.  Alternatively, the legislature may decide to reconsider the draft Petroleum Law that was initially prepared in 2008.

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